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A rug pull – AKA a “hard rug” – is a malicious manoeuvre where the developers of a project drain their liquidity pools in order to take profits at the expense of the investors. Investors will usually be left with a worthless token or even completely empty-handed if they were farming a non-native token pool that was drained.
Soft rugs are harder to identify than a regular rug pull. They often happen after a solid form of trust has been built between the developers and the investors: liquidity pools have a timelock or the developers send their LP tokens to a burn address. Typically, the developers have a large amount of tokens in different wallets that they can sell for a profit after the price increases, resulting in major losses for investors.
Rug pulls are not to be confused with exploits (where an external entity takes advantage of a loophole to steal value from a project) and failfarms or failtokens (where a project simply fails to gain or retain value for non-malicious reasons).
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