Rug pull
A rug pull is when a project's creators take investors' money and vanish: they drain the liquidity pool, dump their entire token supply, or simply switch the site off. The price collapses to near zero within minutes.
How it works
The classic version runs like this: the team issues a token, seeds a liquidity pool on a DEX, and drives interest on social media. People buy, the price climbs, and the pool fills with real money.
At the chosen moment the creators withdraw their half of the pool, the side denominated in ETH or USDT. The pool empties, and the token can no longer be sold because there is nothing left to sell it into.
A second version leaves the pool alone and dumps the team's own holdings instead: if they control 60% of supply, selling it collapses the price without touching liquidity at all. A third, softer version has nobody vanish, the project simply stops being built and the token dies slowly.
What is visible in advance
A project has issued 100 million tokens. Here is what the distribution and the pool show before you buy.
| Held by team wallets | 62,000,000 (62%) |
| Circulating | 38,000,000 (38%) |
| Liquidity locked | no |
The team can sell more tokens than the market holds, and can pull the liquidity at any second. Both numbers sit in a block explorer and on the pool's page, visible before you buy anything.
What to check before buying
- Is liquidity lockedHonest projects lock pool liquidity in a contract for a fixed term. Without a lock it can leave whenever.
- How supply is spreadA block explorer lists the largest holders. A handful of wallets holding half the supply is the risk itself.
- Whose audit is itThe word "audited" without a named auditor and a report you can open means nothing. The report has to cover the same contract address.
- Can it be sold at allSome contracts allow buying and block selling. A minimal test trade answers it.
- Who is behind itAn anonymous team is not a verdict, but it raises the cost of being wrong: there is nobody to answer for it.