Rug Pull
By CoinGecko | Updated on Aug 12, 2021
In the English lexicon, to pull the rug out (from under someone) means to to suddenly take away important support (from someone). In the context of crypto and Decentralized Finance (DeFi), having been rug pulled means to have liquidity removed from a Decentralized Exchange (DEX) liquidity pool. This results in a sell death spiral as other liquidity provider, holder and traders panic at the loss of available liquidity for trading. Once liquidity has been drained, token holders are usually left with illiquid assets which may not be tradeable anywhere else. It is worth noting that many projects have taken measures to alleviate rug pulling risks by committing certain level of liquidity in a way that can't be removed (ie, LP Token Burn, Liquidity Locking contract..etc). However, it does not fully eliminate rug pulling risks and market participants should conduct due diligence prior to trading.
Related Terms
Testnet
Shorthand for "Test Network", testnets are staging areas for experimenting new blockchain features.
Total Value Locked
Total Value Locked (TVL) represents the number of assets that are currently staked in a protocol or the total quantity of underlying amount of funds that a DeFi protocol has secured.
Dominance
Typically refers to Bitcoins' market capitalization dominance.
Interoperability
Interoperability refers to the property of product/systems that are able to work with products/systems that are different without any restrictions.
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