There’s a Defi dark side that no one is talking about as millions of USD worth of ethereum coins were lost to Uniswap rug pulls practices are we are reading more in the Ethereum news today.
The DeFi tokens are flooding the market as the developers are minting new coins and listing them on Uniswap every single day. While this could seem as an earning opportunity for some, the number of the so-called rug-pulls is on the rise. Investors have to be very careful and selective when it comes to the tokens that they put their money on.
Someone was shilling "TRUAMPLE" yesterday, and 3 hours later the developers pulled the rug, stealing 1800 ETH.
Be careful guys. Rug pulls are getting more and more frequent.
— Boxmining (@boxmining) August 26, 2020
The DeFi dark side can be seen as millions of dollars are lost in these rug-pull practices. Uniswap is a protocol that allows the buyers and sellers to swap their ERC20 tokens without the use of exchange by using an algorithm equation that will determine the swap rate automatically based on the balance of both tokens as well as their actual demand for the pair. One of the main challenges of Uniswap is the plagued field which ends up in the so-called rug-pull. This is a scam that starts by minting new tokens creating Telegram groups to boost the project which ends up in listing and injecting liquidity.
The original malicious liquidity provider will have to wait for people to swap their ETH coins for the newly minted coin after which the creators of the coin will drain the liquidity pool and will leave the holders with a worthless coin. New coins are getting listed on Uniswap every day and that’s to be expected to some extent. Some retail investors with no experience in the field are happy to send their ETH to other coins that will give them a 10x increase in the 24 hours. Crypto Twitter however sees major accounts talking about new coins every day.
Before you decide to swap your ETH or other assets on a “Uniswap Gem” make sure to check whether or not the liquidity is locked. The most common way that teams use to lock their pooled liquidity and to also gain user confidence is by using Unicrypt. It’s also very easy to verify whether or not liquidity for a particular pair is locked and the date as well. This can be done on the Unicrypt website so you just have to find the browser and locate the desired pair.
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