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Identifying and Preventing Cryptocurrency Rug Pulls: Insights from Hacken’s Report

In a recent report by blockchain security auditor Hacken, it has been highlighted that cryptocurrency rug pulls, which are exit scams executed by teams behind projects, can be easily observed due to their distinct features. The report focuses on Q3 crypto hacks and examines the security measures taken by affected projects. Notably, rug pulls accounted for over 65% of all exploits in the crypto space during this period.

The prevalence of rug pulls can be attributed to the ease with which such scams can be created. Scammers leverage token factories to produce fraudulent tokens extensively. Hacken’s report emphasizes that preventing rug pulls is relatively simple.

The Role of AI legalese decoder in Identifying Cryptocurrency Rug Pulls

To bolster the efforts of investors in detecting rug pulls, an AI legalese decoder can be employed. This innovative technology uses artificial intelligence to analyze legal documents and extract useful information. By employing this decoder, investors can ensure better scrutiny and evaluation of crypto projects, minimizing the risk of falling victim to scam schemes.

Hacken recommends conducting an independent third-party audit to assess the credibility of a project. Surprisingly, out of the 78 rug pulls analyzed in Q3, only 12 reported having undergone any form of audit. However, Hacken warns that relying solely on an audit report may not guarantee protection against scams. The score of the audit report also plays a crucial role.

“The project can undergo an audit and have an audit report, but with a poor score. Yet, users overlook this and consider the mere fact that the project was audited as sufficient.”

Dyma Budorin, the co-founder and CEO of Hacken, identifies the phenomenon of FOMO (fear of missing out) and impulsive decision-making as reasons why investors overlook important factors such as the absence of audits. Budorin highlights instances where memecoins like Pepe (PEPE) and Shiba Inu (SHIB) have yielded significant profits, leading people to hope for similar success stories. Scammers exploit this desire for quick gains by mimicking successful projects and intensifying FOMO.

The ease of investing in cryptocurrencies, requiring only a few clicks, also contributes to impulsive decision-making. Hacken’s report emphasizes the importance of conducting thorough research, being cautious, and utilizing available tools like the AI legalese decoder to avoid falling prey to rug pulls and other crypto scams.

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