Rug pull is a growing trend in the crypto market and it is every trader’s nightmare as it has cost them their investments. It is for this reason that investors are advised to always do extensive research before investing in crypto projects.
Last week, Squid Game which is a cryptocurrency that is based on the popular South Korean Netflix series, Squid Game, traded on the decentralized exchange platform, PancakeSwap.
No sooner had it begun trading than the DeFi project quickly gained ground, mainly because users assumed it was affiliated with the Netflix series.
However, red flags began to pop up when many users who had bought the project could not sell it. On top of that, it wasn’t linked with the Squid Game series.
This didn’t stop users from purchasing the crypto project which led in a surge in its price before the anonymous developers behind the project did a rug pull on users by taking off with their funds.
Speculators are wondering why blockchains can’t do something about scam projects like SQUID.
Well, it is important to note that blockchains do not have control or influence over projects that are built on the network because they are open-source.
Since they are completely community-driven, the community is saddled with the responsibility of coordinating every governance-related decision.
How then can investors avoid falling victims of such scams?
For most crypto investors, getting rich immediately is the goal for them and because the crypto market is in its peak speculation period, many people are likely to fall into the hands of these scam projects.
New investors can begin with centralized finance (CeFi) exchanges. Though CeFi platforms have their own risks, they offer protection to users through their protection mechanisms as a result of their centralized nature which means there’s a chance that any issue on the platforms can be resolved.
DeFi on the other hand can be explored by experienced investors because of its many advantages. For example, users do not need to wait for intermediaries before accessing crypto products and services.
Despite the benefits, a major drawback about DeFi is that you are in charge of your keys which means you lose your funds if they get lost.
Coupled with that, there isn’t any vetting process preventing you from interacting with malicious projects because of the vulnerabilities with the smart contracts that facilitate transactions.
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