Scammers and Phishers: Rugpulls and airdrop scams
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The decentralized web is exploding with economic activity and has the potential for incredible growth. While this attracts a lot of well-deserved attention, there's another thing it attracts: scammers and thieves.
Rugpulls: Don't let your FOMO get the better of you
A rugpull is the term that has been popularized to describe the Web3 / DeFi equivalent of what we would call, in traditional financial systems, a Ponzi scheme; a related concept is that of "pumping and dumping". Let's dig into this a bit.
There isn't just one token or cryptocurrency per blockchain. In fact, the Ethereum blockchain has on it an incredible number of cryptocurrencies, and creating a new one is a fairly straightforward procedure. Not only are they easy to create, but you can name them whatever you want, which can make identifying legitimate tokens particularly difficult.
Those who speculate in cryptocurrencies will often engage in 'pumping and dumping', i.e. buying lots of a particular token in order to drive the price up, then selling them for a profit. This simple mechanism is taken to a whole other level when an individual or group of individuals creates a token simply for the purpose of extracting value.