A Discussion on the Risks and Prevention of Rug Pulls
Challenges of Rug Pulls in Crypto and NFTs
Rug pull is a big a risk in crypto. The general category of risk is Tech risk, Economic Risk and Price volatility risk and Rug pull exists in all these risks.
Rug pull also exists within NFTs especially when it's built on top of web2 systems with web3 architecture or rug pull by artists on Opensea and metadata on centralised servers.
How to prevent rug pull from team's perspective:
1. Use Multi sig wallet initially
3. Release dev in stages
4. Reuse existing contracts that's trialed and tested instead of building from scratch
How to prevent rug pull from investor's perspective:
1. Risk management. Think about tail risk. Think about black swan event. the asymmetric convexity of risks.
2. Careful where you put your money. anon vs non-anon teams
3. Get legal opinions of projects