The majority of cryptocurrency rug pulls exhibit clear and recognizable characteristics, making them fairly detectable to investors, a recent study suggests.
On Oct. 25, Hacken, a blockchain security audit firm, published its latest security findings. The report, focused on Q3 crypto-related hacks, analyzed how affected crypto projects responded to security concerns and emphasized the phenomenon of rug pulls. These are exit scams where project teams inflate the value of their token and then suddenly remove its liquidity. The report highlighted that such scams constituted a whopping 65% of all crypto breaches in the third quarter of 2023.
Rug pulls are rampant because they’re relatively easy to execute. As the report points out, recurrent scammers use “token factories” to churn out deceptive tokens en masse.
However, Hacken asserts that such scams are amongst the easiest to avoid. Their Q3 analysis offered some protective measures for investors. A pivotal step in assessing a project’s legitimacy is seeking an independent external audit. Among the 78 rug pulls Hacken studied, a mere 12 claimed to have undergone any audit.
Yet, having an audit doesn’t inherently ensure security. Hacken emphasized that while a project might have an audit report, it could still score poorly. But many users mistakenly view the mere existence of an audit as a seal of safety.
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