Rug Pull

A rug pull is a scam pattern (predominantly in DeFi and altcoin markets) where project founders attract investment into a token, contract, or liquidity pool, then abruptly drain it and disappear. The investors are left holding worthless tokens; the founders abscond with the real value.

The mechanics in classic Ethereum / Solana DeFi rug pulls:

1. Founders deploy a token contract on Ethereum, Solana, BSC, etc.
2. They market the project aggressively: AI hype, meme momentum, celebrity endorsements, fake partnerships.
3. Users buy the token, often through a DEX liquidity pool the founders control.
4. Once enough investment is in, founders use admin privileges (or simply hold most of the supply) to drain the liquidity pool or dump their holdings, crashing the price to near zero.
5. The website goes offline, the Twitter account vanishes, the Discord empties.

Why this is structurally less common in Bitcoin:

• No native smart contracts. Bitcoin doesn't host the kind of tokens that get rug-pulled. Most rug pulls happen on programmable-contract platforms.
• No projects to invest in at the protocol level. You can hold BTC, full stop. There's no "Bitcoin project" issuing tokens that you're funding.
• No founders to abscond. The protocol is decentralized; no team controls the supply or can drain it.

Where rug-pull-like scams DO happen in the Bitcoin context:

• Custodial scams. Mt. Gox, QuadrigaCX, Bitconnect, BitClub Network. Functionally similar pattern: trust the operator, operator drains funds. The Bitcoin is real; the custodian is the scam.
• Bitcoin "yield" products. Companies promising Bitcoin yield often turn out to be running fractional reserves, lending unsecured, or operating Ponzi structures. Celsius, Genesis, BlockFi exposed this pattern in 2022-2023.
• Mining-share scams. Hashlet / GAW Miners' Hashlets are the canonical example: sold fractional ownership of mining hash rate that didn't exist. Pure Ponzi.
• "Bitcoin-related" tokens. Various BRC-20s and inscription-based tokens have followed standard altcoin rug-pull patterns. These technically use Bitcoin's chain but are functionally separate from BTC itself.

The protective framing:

• If a "Bitcoin product" pays yield greater than the risk-free rate, it's either lending your BTC out (counterparty risk), running on fractional reserves (Bitconnect / Celsius risk), or outright fraud.
• If a project asks you to deposit BTC and trust their custody, you're not buying Bitcoin's properties anymore. You're buying their operational integrity.
• Self-custody eliminates the rug-pull attack surface. Hardware wallet + seed phrase + cold storage. No one can pull anything because no one else has access.

The honest term-of-art point: "rug pull" is borrowed from altcoin / DeFi culture. In Bitcoin contexts, it usually refers to either custodial failures (which existed before "rug pull" was a phrase) or token scams operating on Bitcoin's chain (which are technically rugged-pulled but aren't pulling Bitcoin itself). The structural lesson is older and simpler: not your keys, not your coins.