In-depth Analysis of Rug Pull Eyewash: Unveiling the Most Common Scamming Techniques in the Decentralized Finance World

Rug Pull( is one of the most common types of scams in the cryptocurrency industry. Although many cases have been exposed, there are still a large number of potential scams that remain undiscovered. According to data analysis, there are at least 188,000 suspected Rug Pull projects on major public chains such as Ethereum and BNB Chain.

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Distribution of Rug Pull Projects on Major Public Chains

Data shows that about 12% of BEP-20 tokens on the BNB Chain exhibit fraud characteristics, while approximately 8% of ERC-20 tokens on the Ethereum network show suspicious signs. At the same time, around $910 million in ETH related to fraud has been processed through regulated centralized exchanges. Additionally, data indicates that in October 2022, a total of 11 DeFi protocols were attacked, affecting up to $718 million in crypto assets, setting the highest record for monthly crypto asset losses that year.

As one of the largest trading platforms in the blockchain ecosystem, a well-known exchange continuously adds new features and expands its user base, which may be the main reason why scammers and hackers target it. The platform seems to have realized the prevalence of smart contract scams on its network and has now integrated risk monitoring tools to detect potential risk projects in real-time and notify users in a timely manner, including scams such as Rug Pull.

Common Tactics of Rug Pull Projects

Rug Pull is also known as "eyewash token" or "Decentralized Finance scam". Related projects often design code carefully in smart contracts to steal funds from retail investors. The design goals of these codes typically include:

1. Prohibit secondary sales
2. Allow project developers to mint new tokens at will.
3. Charge buyers high sales fees

Scammers hide these scripts in tokens, and once unsuspecting investors purchase them, they face huge risks. In most cases, Rug Pull tokens appear to be no different from other normal cryptocurrencies and follow the homogenization token standards of the blockchain, but the real problems are hidden deeper in the source code of the smart contracts.

As the cryptocurrency industry develops, scammers are becoming increasingly familiar with the underlying technology, enabling them to make extensive modifications to smart contracts. To execute a Rug Pull, they often hard-code malicious rules into the smart contracts, not only gaining extra power for themselves but also depriving buyers of their basic rights.

After the token is deployed, fraudsters will create a liquidity pool on the decentralized exchange )DEX(, establishing trading pairs between this token and other "legitimate" cryptocurrencies. Subsequently, they will artificially create a large number of trades, driving up the token's value to attract retail investors.

In addition, Rug Pull projects may also disguise their legitimacy in the following ways:

1. Create fake websites and project development roadmaps
2. Promote false partnerships and display fake information about well-known developers.
3. Advertising on social media

When a sufficient number of users purchase the tokens, the scammers will begin to sell off in large quantities, exchanging the tokens for ETH, USDT, and other cryptocurrencies. A concentrated sell-off in a short period of time will cause the token price to rapidly drop to zero, completing the Rug Pull eyewash.

Rug Pull Token Fraud Type

Currently, there are three main types of Rug Pull in the market:

1. Hidden Honey Pot Vulnerability
2. Hide custom token feature
3. Implanting Balance Modification Backdoor

Honey pot vulnerabilities usually prevent token buyers from reselling, allowing only developers to sell the held cryptocurrency. Ordinary investors often receive error messages when trading, making it impossible to withdraw. These types of eyewash often lead to rapid short-term price increases of tokens, enticing more unsuspecting users to buy. As of October 25, 2022, there are about 96,008 token projects on the market that harbor honey pot vulnerabilities.

The ability to create tokens privately is one of the common tactics used by fraudsters. They grant specific accounts permissions to use hidden functions in the token contract to mint new tokens. Once the fraudsters successfully call the minting function, they will sell off large amounts of tokens, causing the value of the tokens held by others to plummet. As of October 25, 2022, there are approximately 40,569 token projects in the market that have hidden the ability to create tokens privately.

The balance modification backdoor is similar to the private token creation function, where scammers grant specific accounts the authority to modify the token holders' balances. When these accounts set the holders' balance to zero, the victims are unable to sell or withdraw, while the scammers can remove liquidity or mint/sell tokens for profit.

Conclusion

Cryptocurrency eyewash is on the rise, and many remain undiscovered. Investors need to carefully assess the fraud risk when selecting crypto projects. At the same time, regulators should increase their efforts to combat this issue, protect consumer rights, and enhance the integrity, transparency, and consumer protection standards of the market.