Following the outbreak of the COVID-19 pandemic, Crypto has captivated the world's attention, and infamous fraudsters have taken note. With the growing popularity of Cryptocurrencies and meme tokens, there will be an increase in the number of new Crypto frauds.   

As a result of the massive inflow of cash and enormous promise in Cryptocurrencies, a slew of scam schemes has started appearing, attempting to deceive investors of their hard-earned money through a variety of methods. The usage of rug pull is one such method.  Amongst Cryptocurrency lovers, the phrase “do your own research” (DYOR) is very well-known. Nevertheless, there is a lack of clarity regarding what this entails since one must consider how one can conduct research when they are unsure of what information is genuine and what is not. So don’t stress much about it as this Crypto blog will give you the main points you should watch out for.  

Rug pulls are created by seasoned fraudsters, but they are easy to recognize if the investor pays great attention to the following indicators. 

1. There is little or no information available about the developers: 

Because you’ll be investing in the business, it’s a good idea to do your investigation and get to know the founders and developers. If there is no clear information on the creators, this is a red indicator, and the Crypto developer may pull the rug out under you shortly. Furthermore, if there’s information on the token’s creators, you must examine to see if all members of the team have a positive reputation or if they have ever been involved in any kind of shady business.   Watch out for any mention of a developer or a team? Searching for the DeFi project’s group is one of the most straightforward ways to discover red flags. If the team is nameless, or if the founder isn’t disclosed, this should raise red flags. Also, keep an eye out for aliases or false founders’ names, such as Vitalik Buterin.  

2. Examine their websites as well as their social media accounts: 

Social media is used by platforms to advertise their businesses. Examining their profiles on various sites such as Twitter, Telegram, Discord, and Reddit will help you learn and understand more about the platform and how they connect with their consumers. You’ll be able to tell whether one is a scam if you do this because fraudsters frequently put in less effort than actual projects to create appealing websites with a lot of information. Furthermore, websites with only one page of smart contract and a telegram link should be avoided. You may also utilize services like CoinSniper.net to check out all of the platform’s legitimate web pages. 

3. There are no Audits: 

As long as the project is legitimate, it will have its actions inspected by a respectable third-party service provider who can vouch for its legitimacy. If the Crypto project does not have an audit, it's conceivable that the creators have anything to conceal, such as inserting a defect that may subsequently be utilized to rob your funds. The team may not want these illegal codes discovered during auditing by third-party companies. Even though audits are costly for small Crypto enterprises, the project must be audited. Once the project's audit report is released, it is advised that you study the audit thoroughly to understand its contents.  

4. Blockchain explorer: 

For fraud detection, a Blockchain explorer such as Etherscan or Binance Smart Chain is required. You can locate the token tracker page, the complete supply, the total number of holders, the total amount of transactions, and which wallets possess the most tokens when you search a Crypto token address.   Also, look out for any sudden swings in the token prices. Investors are lured in by sudden spikes in the price of a token over the course of a few hours, and the lack of a lock on the token pool might mean trouble. 

5. Is the project's marketing excessively lavish? 

A token that spends an excessive lot of money on flashy and fancy marketing might be a ticking time bomb. While this isn’t always the case, the utilization of intrusive marketing practices should be considered a warning sign. Investors should go above and beyond to look at the social media profiles of companies they are considering investing in. Bots and false accounts are frequently used by shady projects to increase followers' count and participate in intrusive marketing. They may also take advantage of airdrops and referrals. 

6. Do your own research (DYOR): 

DYOR is very important not only on rug pull but also in other Crypto-related businesses. Although there’s no way to guarantee that a rug pull will not occur, the techniques described above can assist you by providing a basic sense of what to watch out for. Unless you discover a project that interests you, dextools pair explorer provides you with some useful information about the projects metrics, as well as a “DEXT Score”, which is based on an algorithm that analyzes the information provided, the number of holders/transactions, the contract creation process, and the liquidity pool’s security score.  Make sure to read the documentation thoroughly. A Whitepaper should be included with every project to give investors with information such as the business’s concept, objective, and technology. A well-written Whitepaper adds credibility and professionalism to the enterprise. A Whitepaper that is badly written or duplicated is repulsive and should be avoided. This is one of the major red flags.   

Examine the Whitepaper, check out the smart contract, and discover more about the team and developers' history. Examine the route map and discuss your findings with others. We can't emphasize the importance of DYOR enough; it is a good habit to have and should never be abandoned.  

Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.