Rugpull
Web3 / defi
A rugpull is an exit scam where cryptocurrency project developers or insiders abandon a project and steal investor funds, typically by removing liquidity from decentralized exchanges or blocking token transfers. The term originates from the metaphor of pulling a rug out from under someone, leaving them stranded. Rugpulls are particularly prevalent in decentralized finance (DeFi) where smart contracts may grant developers unilateral control over funds or token supply. These scams range from obvious fraud to sophisticated schemes disguised as legitimate projects with whitepapers, roadmaps, and active community engagement until the moment of exit. Example: The Squid Game token (SQUID) in 2021 was a high-profile rugpull that promised blockchain gaming features inspired by the Netflix series. Within weeks of launch, developers locked investor funds and removed liquidity from exchanges, causing the token price to plummet from $2,861 to near-zero, resulting in estimated losses exceeding $3.38 million for trapped investors. Why it matters for DeFi: Rugpulls represent existential risks to DeFi adoption by destroying investor confidence and demonstrating the importance of audited code, transparent governance, and liquidity lock mechanisms in protocol design.
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