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How to Spot A Rugpull: Auditors Certik Offer Safeguarding Advice

Following a spate of rug pulls in 2021, the auditing firm Certik has revealed the telltale signs that a project isn’t in it for the long haul.

Telltale Signs of Rug Pulls

The auditing firm Certik has released a guide to help investors spot potential rug pulls. The guide, named ‘What Is a Rugpull? Tips on How To Avoid Them’ names 5 key signs that a project may not be genuine.

Those five signs, as named by Certik are:

  1. Yields are too high

Astronomical yields should trigger suspicion. Sometimes genuine projects do have high yields in the shorter term, but these do not persist for more than a day or two. If yields remain high over a longer period this may indicate that something is wrong.

  1. Creators remain anonymous

Crypto and pseudonyms go hand in hand. That said, projects without named contributors hold higher risk.

  1. Coin prices skyrocket

When the price of a token skyrockets investors should consider why - especially if there have been no major announcements or developments. In the case of the Squid Game, rug pull buyers were unable to sell their tokens after buying them. This was called an “anti-dump mechanism.” Of course, the anti-dump mechanism didn’t stop the founders from dumping on their investors.

  1. Extensive marketing tactics

Relentless marketing is another thing to be wary of. According to Certik, ‘shilling a token that has no meaningful function is not marketing, it’s scamming.’ Of course, by that measure, every memecoin is also a scam.

  1. Liquidity lockup

Checking for a liquidity lockup is another positive way of ensuring that the project is not a scam according to Certik. To check liquidity Certik invites users to use their new “liquidity lookup” feature on their security leaderboard.

Some of the liquidity metrics offered by Certik (Source)
“In 2020 the blockchain space lost around $500 million dollars to exploits and bugs,” the co-founder of CertiK Foundation, Professor Ronghui Gu, told KYT Dotson of SiliconANGLE on Dec. 1st. “That number tripled during 2021 to reach almost $1.3 billion being lost due to software errors. So, we can see that becoming a bottleneck for the industry – especially for those seeking to embrace blockchain technology. That’s why we’re here: to protect and secure crypto assets and networks.”

Certik recently raised over $80 million in funds to grow its services heading into the new year. Certik is responsible for  helping protect over $211 billion worth of digital assets and has detected over 31,000 vulnerabilities in blockchain code for more than 1,800 clients.

For more info on the CertiK Foundation, check out their pages.

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