Reports emerged earlier today indicating that the team behind MetaSwap – a protocol enabling NFT swaps over Ethereum, Binance, and Polygon – has stolen 1,100 BNB. Shortly after, the native token tanked.
It remains to be seen whether this is a true rug pull but PeckShield, the data analytics firm looks to be confident.
- The blockchain security and data analytics resource – PeckShield – detected suspicious behavior coming from the MetaSwap team and suggested a soft-rug pull.
- More precisely, the company said the team behind the NFT swapping platform had stolen 1,100 BNB (worth appr. $605,000) and transferred it to TornadoCash – an Ethereum-based tool developed to break the on-chain link between the recipient and destination addresses.
- PeckShield also said the MetaSwap’s native token – MGAS – had dumped by nearly 50%.
- While PeckShield’s allegations are not yet confirmed, MetaSwap’s team went on to delete all social media channels related to the protocol, which raises suspicions even more.
- Thus, December continues to witness malicious activities in the digital asset space and DeFi particularly.
According to Coinmarketcap, a rug pull is a malicious maneuver in cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds. Rug pulls usually happen in the decentralized finance (DeFi) ecosystem, especially on decentralized exchanges (DEXs), where malicious individuals create a token and list it on a DEX, then pair it with a leading cryptocurrency like Ethereum.
Once a significant amount of unsuspecting investors swap their ETH for the listed token, the creators then withdraw everything from the liquidity pool, driving the coin’s price to zero. The coin’s creators may even create a temporary hype around Telegram, Twitter, and other social media platforms and initially inject a substantial amount of liquidity into their pool to cultivate investor confidence.Rug pulls thrive on DEXs because these types of exchanges allow users to list tokens for free and without audit, unlike in centralized cryptocurrency exchanges. Furthermore, creating tokens on open source blockchainprotocols like Ethereum is easy and free. Malicious actors use these two factors to their advantage. Note that decentralized exchanges such as Uniswap algorithmically determine the prices of tokens in a pool depending on the available balances. To ensure you don’t fall victim to a rug pull, check the liquidity in a pool. However, this is only the first step. You must also check if there is a lock on the token’s pool. Most reputable projects lock pooled liquidity for a certain period.
Another major characteristic of a possible rug pull is a coin skyrocketing in price within hours. For example, a rug pull coin can move from 0 to 50X within 24 hours. This trick is meant to drive FOMO that leads more people to invest in the token.
In order for a project to be deemed “unruggable,” it means that there aren’t a significant amount of tokens help by the development team. Without the signature large amount of team-held tokens that could be taken in a rug pull or exit scam, a project could be considered unruggable.
Another way to think about an unruggable project is if the team renounces ownership of any tokens, like tokens they would have acquired during a presale.