How to identify a project that could be a rugpull or a scam?
Recently many of you have asked us to write an article about rugpulls and to give some hints to identify them.
Through this document, we wanted to give you some analysis keys to help you in your research. Recently there have been more and more rugpulls and one can never be too careful.
There are of course other ways to detect them, and we do not pretend to know everything, but this is a good starting point in our opinion!
Let’s start with the technical part, then we’ll move on to the more social side!
One of the first things to check to make sure that a DEFI project cannot rug pull is to make sure that its code does not contain the Migrator function. Indeed, all projects that were started as a fork of PancakeSwap initially contained the migrator backdoor in their code.
This backdoor offers the possibility to the project developers to steal all the tokens stacked on the platform.
This feature was inherited from SushiSwap on the Ethereum blockchain, where it allowed to migrate Uniswap LPs to their own SushiSwap LP.
Pay attention to the presence of a consistent timeclock in the contract of a DEFI project. Indeed, the presence of a timelock guarantees that developers cannot modify the various smart contracts before a predefined duration which is the timelock duration. This value is expressed in seconds and is visible in the information of the timelock contract on BscScan for example in the “Read Contract” tab.
In our case, we have implemented a timelock with a value of 86400 seconds or 24 hours to guarantee the integrity of our actions and to strengthen the confidence in our development.
In addition, always make sure that this timelock is the owner of the contracts. Indeed, contracts such as the Masterchef or the ones that involve monetary assets must imperatively be owned by the timelock.
Since the arrival of AMM platforms on the Binance Smart Chain, we have observed that many recently released projects steal different features from other platforms and then rug pull a few days after the craze created and start again under another name.
You should always be careful in this case and do some research to see if a feature has not been simply stolen somewhere else, especially on recent projects.
We have for example some projects steal our gambling system with a simple color change by projects that already have rug pull or look suspicious.
For us, it is a priority to develop innovative and differentiating features from our competitors, we were the first to develop a gambling system for yield farming platform and we were the first to develop an NFT system with different specs that will allow to engage in battles in our future dungeons. We look forward to continuing to innovate and bring new propositions to our investors.
We are not trying to self-promote ourselves, but we believe that delivering regularly is the key to success.
Very high APRs combined with very aggressive giveaways are always a bad sign as these platforms usually try to promote a pump and dump for a very short period. This is especially the case with FullSail Finance which went from 2$ to +140$ in record time thanks to very attractive APRs. The developers took advantage of the craze to sell their tokens and make a lot of money, leaving the platform abandoned.
In DEFI projects, audit certification is a significant benefit because it allows us to have a neutral opinion on the code of a project we want to invest in and identify any risks. Its verry important to read carefully audits reports and conclusions. It is also important that the project be audited by reputable firms with experience to ensure that their expertise is credible. The best audit team now is Certik, but to be audited by them requires time and (a lot of) money.
Always be careful with projects that claim to have contacted Certik but have no real proof, often they just want to buy time. A simple email is not a proof, ask for a proof of payment.
As soon as we can afford a Certik audit we will contact them and let you know.
Learn more about the team in charge of the project, check that the developers are active and can answer the questions asked. Do not hesitate to contact them directly with questions related to their code and analyze their answer.
A serious team is also a team that often takes stock of its developments and upcoming features. Regular evolutions and a respected and updated schedule are good signs.
A unique design/UI is always a good addition to a project because it proves that the team has put more effort to offer a unique and personal experience to its investors. Usually, the projects that rugpull do not make this effort, even if we recently saw the opposite happening with Uranium Finance or Monster Slayer Finance.
Now we are working on a new UI to look more serious and involved.
Having good partnerships with known names in the industry is often a very good sign because serious projects (like ApeSwap for example) are more and more careful about the projects they decide to collaborate with because of the many recent rugpulls.
Many not-so-serious projects have a large part of their community made up of bots or people just there for the airdrops/giveaway. Check the activity on their networks and members/followers. If you notice that a large part of these people joined at the same time and are from the same region then there is a good chance that they are really interested in the project but are rather trying to scrap some tokens.
By doing so the team wants to try to give you the illusion of a big active community so that investors FOMO.
A healthy community is one that has grown organically and in which people are really invested and interested in the project.
Also check the activity of the team on its twitter/medium, little activity is never a good sign.
A good project is often supported by serious influencers/sites like BSC Daily or Bsc.news. Indeed, such marketing campaigns are quite costly and require a considerable investment from the project team. Many non-serious projects instead turn to suspicious telegram groups and/or try to shill their project by spamming it on other groups in aggressive ways. This gives a bad image to the project and can damage it in the long run.
We hope you enjoyed this article, please let us know if there are any other specific topics you would like us to discuss 🙂