The decentralized finance (DeFi) market has lost a staggering $113 million as of July 2021. Sheep Token’s Rug-Pull Recognition Tool can detect and ascertain the legitimacy of a crypto project and identify real tokens from scams to protect investors from such losses.
There is no doubt that cryptocurrency has opened new windows of opportunities to all categories of people around the world, from developers to investors/traders of all levels. Today, anyone can make a decent income from anywhere around the world by just trading on newly released coins. They jump in early, ride on the hype to the top, and cash out with some tidy profits.
Unfortunately, the crypto world has been plagued with financial fraud, and more so the DeFi sector. Research has shown that while the overall crypto industry is seeing a reduction in fraud and theft, the DeFi sector is experiencing a surge in fraudulent projects. That is, many projects may be having clear and legitimate goals and objectives. However, a significant number of them are scam projects that target early investors and pull away with all the investments without a trace. You’re highly likely to come across stories online of people sharing how they lost money on such projects.
How does a rug pull work?
The common characteristics of rug pulls are the involvement of malicious owners. However, not all rug pulls are the same. The two types of rug-pulls you’re likely to come across are Liquidity scams and technical manipulation.
In liquidity scams, a rug pull launches a new token, attaches a liquidity pool to it, and presents it for people to start buying the token. Once a good number of people invest in the project by purchasing the newly minted token after they have been promised good returns. The scammers then pull the liquidity pool and run off with the money, leaving the holders with worthless tokens.
Technical manipulation, on the other hand, involves the project developers exploiting the “approve” function of ERC20 tokens. These are the standard tokens used to create and issue smart contracts on the Ethereum blockchain. The token issuers can manipulate this feature to restrict holders from spending the token. A user swapping their token on a DEX is simply approving the smart contract to spend the token. However, a malicious developer will modify the “approve” feature to prevent users from spending their cryptocurrency except for buying the token. The user will proceed to buy the token thinking they can easily sell, convert, or spend in other ways. But shock on them, these options are only available for developers.
Sheep Token’s Rug Pull Detection Tool
Sheep Token has now introduced Rug Pull Detection Tool- a powerful fraud detection tool to help new DeFi investors know whether they are entering a legitimate project or not. The rug pull tool does mainly three things:
- Analyzes burn addresses to detect retrievable burns: As earlier stated, retrievable burn is one of the ways fraudulent DeFi developers use to defraud investors
- Assesses the top 5 holders: The tool then measures the top 5 holders and determines the ones that are contracts.
- Checks timelock: The tool finally checks timelocks for the liquidity pool to inform you how long your money will stay with them before you can access it.
The whole approach is to ensure you enter into a project you’re familiar with so that you can make an informed decision on your investment goals.
How it works
A link to a token LP contract is usually found after displaying the details of the pool on a decentralized exchange (DEX). Clicking the link will take you to BscScan where the pool contract will be displayed on the top.
The tool scans the contracts to detect potential scams to warn you of those projects whose main goal is to steal your money. The tool is designed to catch the most notorious and invisible rug pulls roaming the DeFi projects on the Ethereum network, and ensure that you invest your money only on legit projects.
The Upcoming NFT Marketplace
The art industry is beginning to open up to the digital world, and Sheep Token is not being left behind in the booming industry. The platform plans to launch an exclusive art-based non-fungible token (NFT) marketplace to enable both established and upcoming artists/creators to connect with collectors in a secure blockchain network.
As you may be aware, NFTs as digital assets have existed for years. However, it’s the blockchain and cryptocurrency that have opened NFTs to the world. Sheep Token’s NFTs Marketplace will allow stakeholders to buy and sell art with a unique identity while allowing buyers to own these unique pieces of artwork.
What is Sheep Token?
Sheep Token (SHEEP) is a DeFi protocol that aims to build a strong community of DeFi enthusiasts, giving SHEEP holders numerous opportunities to enjoy the benefits of the growing DeFi space. The generous rewards offered by Sheep Token include the 6% of every transaction being split instantly among token holders and the burn wallet. The approach is meant to reduce supply and reward holders. To increase the value of the token to the benefit of the community of token holders, the Sheep Token protocol burns 3% of every transaction forever and redistributes the remaining 3% to token holders as a reward. The frictionless, yield generating, community-owned token allows holders to earn interests just by holding Sheep Token. The project has been running weekly lotteries with a charitable goal. What’s more? Every giveaway contributes to charity to help those in need. More importantly, Sheep Token is completely safe as it has taken security measures into design and operations, including doxxed developers with live AMA, renounced token contract, audited by Techrate, and has its liquidity locked for 1 year to allow you to buy or sell instantly.
The need to curb DeFi scams is long overdue. With the power of community, Sheep Token will bring sanity into the world of DeFi by helping investors identify and recognize scam projects that have dented the image of the industry for many years. The project is already doing a great job in rewarding its SHEEP holders and giving back to the community by supporting projects working to help the underprivileged. As it also plans to launch its NFTs marketplace, Sheep Token is a project to watch as DeFi moves to consolidate its strength in the crypto space.