In the age of deepfake cryptocurrency scams, here’s how to avoid being pulled from the rug.

Cryptocurrency scams are becoming increasingly sophisticated. For example, a deepfake of Ripple CEO Brad Garlinghouse is being attempted. trick people out of money. As a result, the wider community will have to become equally sophisticated to avoid the traps set by shady cryptocurrency projects.

One particular type of cryptocurrency scam is on the rise today. This is Rug Pull. This is an exit scam where a cryptocurrency developer abandons their project and runs away with investor funds. Carpet tokens trade at a certain price on the charts before the bottom suddenly drops out. In these cases, the founding team typically disappears, taking most of the liquidity with them, and leaving the community to hold the proverbial bag.

Rug pulls and other scams are on the rise because developers can easily create certain tokens that are generally worthless. Once the token is created, the next thing you need is a website and social media where it can be recognized as a true digital asset product. And on social media, anyone can buy followers and pay for likes and comments to trick them.

Rug pulls are usually carried out by teams who don’t want to show their faces or have little team credibility, which can be established by examining employment history, industry connections and social media profiles.

In some lugpools, teams dump their tokens on the market after the initial pumping, while in other developers, they code malicious backdoors into their projects. Both have proven difficult to investigate and prosecute. That’s why it’s so important to know what to look for when it comes to crypto lug pulls.

In some cases, creator wallets may have clues about the viability of a token launch. If it appears to be a private wallet with a history of small transactions, the token release may be an attempt by the individual to steal funds from prospective investors. The wallet may be new, which could be a red flag. This is especially true if other information about the team behind a particular project is difficult to obtain.

At lug pools, teams often make “straw” purchases immediately after a token is listed. A lug pull often begins as a liquidity raise, followed by the associated wallets making initial purchases to build the pump. The creator and associated wallets will then be sold and liquidity provision will cease.

Reputable projects lock up their founder tokens for a certain period of time before being liquidated. If a project does not have tokens locked in, the founders will likely try to sell early to lock in profits, which could cause the token price to fall and result in a loss of funds. Projects can choose to escrow their liquidity through well-known Launchpads. Either way, if the project team releases tokens allocated to core team members, they should be made public.

When examining a project, find out what use cases the project has and whether the token has any built-in utility. Your project may have a working and audited product on a testnet, or at least a public GitHub where you can track progress.

Reviewing cryptocurrency whitepapers can also give you key insights into what’s going on under the hood. If the white paper is confusing, ambiguous, and unclearly written, it may be considered an exit scam. The whitepaper covers a wide range of topics, including summary, mission, token economics, how the contract works, the team behind the contract, and more. If your whitepaper doesn’t include these important details, it’s best to stop the project for the time being. Each project is subject to an external audit, but these audits do not necessarily examine the long-term viability of the project. Just check the code.

A brief overview of the project’s marketing can provide insight into the integrity of the project. If a project is telegraphing that you will get rich if you buy its tokens, stay away. On the other hand, if a project uses marketing opportunities to educate itself about its offerings and the wider space, that project may be taking its place in the industry seriously with the intention of maintaining it for the long term. If your project looks like it’s getting a lot of media coverage, make sure it’s not a sponsored promotion.

Ultimately, the best way to avoid difficulties is to join digital asset communities with clear, proven use cases. For many people, sticking to the top 10 coins at any given time is probably the best way to start.

Also read: Your cryptocurrencies are doomed and cold wallets can’t store them: Martin Schmidt