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5 Slow Rug Techniques To Watch Out For in DeFi

January 21 at 12:40
Security, Education

Ready to make big bucks from DeFi? Make sure to do your research first! In this article, we explore 5 slow rug techniques to watch out for so you don't get scammed!

Decentralized Finance (DeFi) can be a great way to earn yields, but it's important to be aware of the potential pitfalls. In this article, we’ll be taking a look at 5 slow rug techniques that can lead to disastrous results if you’re not careful. 

Token Locks

Token locks are a popular way to earn yields in DeFi. Protocols like Curve, Frax, and Pickle Finance offer investors the ability to lock tokens for a certain period of time, typically up to 4 years, in order to earn rewards in the form of bribes, revenue, staking rewards, and more.

But this method of investing can be risky. Once the tokens are locked, there is no going back. And in the world of crypto, 4 years is an eternity. In the event of a bull market, tokens can skyrocket in value, and those who locked in early may miss out on significant gains. 

Staking

Staking is a popular method of earning yield. All you have to do is hold a certain token and you’ll get paid more tokens. But it's important to understand where the yield is coming from. Is it from protocol revenue, or is it from inflation? Also, remember to keep some tokens liquid in order to take advantage of abnormal price pumps, as most POS networks have an unbonding period. 

Providing Liquidity

Providing liquidity can be a great source of income, but it also comes with a cost. The best time to LP is when the markets are sideways and not moving in either direction. Otherwise, you may end up subject to impermanent loss or holding a bag of valueless tokens. 

Being a Pool 2 in a Yield Farm

Being a Pool 2 in a yield farm involves pairing one asset with the highly inflationary asset from the farm. But this can be a risky move, as the token price can go down if there are more sellers than buyers. LPing with a token that is trending to zero skews the pool weight to the farm token, leaving farmers with valueless governance tokens. 

FOMO & HODL

A simple strategy. You HODL, I HODL and the price must go up with new investors coming to the project. The combination of HODL and FOMO techniques is proving to be a very effective way for token owners to scam and rug pull investors. Without anyone noticing, the liquidity starts slowly disappearing from the liquidity pools and suddenly it’s impossible to leave.

Read more about popular Crypto Slang in this article. 

Conclusion

These are just a few of the slow rug techniques to look out for. Remember, if you don’t know where the yield is coming from, it's best to hedge your bets and stay away.

It is important for investors to be aware of the risks associated with investing in tokens and to always do their own research before investing.

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