Watch out investors! These crypto projects have rug pull potential
Centralization issues in DeFi last year led to investors losing over $1 billion of their funds.
Photo by Edwin Hooper on Unsplash
In a series of tweets, the leading blockchain security and data analytics company, PeckShield, has revealed that up to 50 crypto projects domiciled on the Binance Smart Chain could be rug pulled.
PeckShield reveals projects susceptible to rug pull
According to the crypto firm, some of the projects include Amazon, Astrocoin, BabySquid, CryptoGuards, FIFA, DEEPtoken, CryptoHero, FLOKIPLAY, YourTokenName, etc.
The infamous list displayed the contract addresses of each of these projects and the severity of their risks.
It noted that the 50+ projects have certain centralization qualities in common that could lead to an investor being rug pulled.
Per the tweet, admins in each crypto project either have powers to mint unlimited tokens, or the admins can restrict token selling, they also can choose to blacklist any account.
These qualities negate the concept of decentralization, and at the same time, it shows the characteristics of the previous rug pulls in the space.
Rug pulls involve creating fraudulent crypto projects with the intent of getting the users’ funds. In this case, the developer draws unsuspecting investors to its project using promising returns. Once investors buy into the project, they abandon it and do away with their funds.
This crypto scam method was quite popular in 2021, as it accounted for 37% of the total crypto scam revenue during the year.
Over $1 billion was lost centralization issues in DeFi
In another development, a report by blockchain security firm CertiK has stated that centralization issues in DeFi led to a theft of over $1 billion in 44 hacks of 2021.
CertiK noted that DeFi has considerably grown in the past year. However, the growth of niches like NFTs and blockchain gaming has made it important for developers in the space to prioritize blockchain security.
“CertiK auditors came across 286 discrete centralization risks throughout the 1,737 audits performed in 2021. Centralization is antithetical to the ethos of DeFi and poses major security risks. Single points of failure can be exploited by dedicated hackers and malicious insiders alike.”
Crypto scams would lead to more calls for regulations
If crypto scams remain as common as they are at present, it would only lead to an increased call for the authorities to step into the space.
In the United States, the Gary Gensler-led SEC has repeatedly stated the importance of regulating DeFi and the wider crypto space.
The commission, in its submission, believed that the regulation was necessary to better protect investors.
Interestingly, players in the crypto space like Binance’s CZ and Sam Bankman-Fried of FTX exchange have also highlighted the importance of regulating the crypto space.
From their point of view, if crypto adoption is to grow worldwide, financial regulators would play an active role by setting parameters in which crypto businesses and others in the space can operate.