What Is a Rug Pull in Crypto — and How Does It Work?
Rug pulls remain one of the most damaging scams in the crypto market.
They often follow a familiar pattern: a new project launches, hype spreads rapidly, early price action looks promising, and then — sometimes overnight — the project collapses. Liquidity disappears, communication channels go silent, and investors are left holding tokens that are effectively worthless.
Understanding how rug pulls operate, why they happen, and how to identify early warning signs is essential for protecting capital in fast-moving markets.
What Is a Rug Pull?
A rug pull is a crypto scam where project creators abandon a token or protocol and exit with investor funds. This typically happens through liquidity withdrawal, malicious smart contract design, or control over token supply.
While rug pulls resemble traditional pump-and-dump schemes, they are often enabled by DeFi mechanics, where launching tokens is permissionless and requires minimal oversight. This innovation lowered barriers for builders — but also for bad actors.
Common Rug Pull Methods
Rug pulls generally fall into two categories: technical and non-technical, though many scams use a combination of both.
1. Liquidity Pool Withdrawal
On decentralized exchanges like Uniswap or PancakeSwap, trading relies on liquidity pools rather than order books.
A classic liquidity rug works as follows:
The team launches a token and pairs it with ETH or USDT
Buyers rush in, pushing price higher
The liquidity pool fills with valuable assets
Developers withdraw most or all liquidity
The token becomes untradeable and collapses
This method is fast, effective, and difficult to reverse.
2. Smart Contract Manipulation
Some rug pulls are embedded directly in the code. These contracts may include:
Unlimited minting functions
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