LID Found a Solution to Protect From Rug-Pull Scams
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Throughout 2020, the year challenged by the pandemic and global shutdown, DeFi came to be known as the fetish that strongly rooted itself and became the growing part of the global economy. And one part of it - liquidity pools - became the backbone of it soon after its emergence. By leveraging a smart contract foundation, these decentralized algorithm-driven platforms provide an opportunity for investors to avoid numerous security checks and fees facilitated by centralized exchanges like Coinbase. This may be the key to understanding the key drivers of the DeFi popularity splash: apart from yield protocols, which went tremendously in fashion, decentralized liquidity pools brought into the DeFi space already over $640 million in value.

But, as it goes, there’s no good without a pinch of bad. Although liquidity pools allowed many prospective projects to enter the field and receive the necessary funding to progress and expand, at the end of the day many scammers sensed an opportunity to exploit liquidity pools as the source of quick gains. Let’s only have a look at what’s going on: the number of so-called "rug-pull" scams, oriented on quick gains through listing and delisting tokens and mainly targeted on inexperienced investors, have soared with DeFi ambitious growth, and the withdrawal of Sushi Swap is the most scandalous example of it. This scheme has successfully worked with scams named as many popular projects, which due to open listing policy were able to secure their place on the platform and build their wealth on the confusion created around them.

Prevalence Of Exit Scams

The lack of investor protection already let everybody know about itself, especially as the large-scale exit scams worth $20 million take place up to this day. Facilitated by the COVID-19 and its increased number of malicious attempts, the investors in cryptocurrency are exposed to blackmail, phishing, fake news and fraud attacks, which eventually cuts off any possibility to recover their lost funds. Since there’s still no centralized system created to protect everyone on a massive scale, investors often have to take care of their security themselves. By being not always the most viable option, certain platforms have arrived to bail investors from the risk of the security scam - LID Protocol is one of them.

Created with the purpose to enable only secure and long-term investments, the Liquidity Dividends Protocol – or simply, LID - runs careful checks on each ERC-20 project that files for the place on the exchange. Once the token is approved for listing on the platform, it becomes locked with no further opportunity to pull the liquidity off. This shields investors from rug-pull scams and creates a secure space that fosters growth and innovation of tokens that otherwise would not come to life because of their small scale.

LID succeeded in building its own DAO system, which functions as a replica of a venture capital fund. Its efforts are directed towards members and the community, who are collectively responsible for taking decisions and receive a 5% reward from all token presales. What is more, through its brand-new LIFTOFF feature, the addition to the core platform coming to life from October, LID protocol enables any start-up to participate in the rounds of fundraising to take their project off the ground.

Long Term Benefits

LID has also devised a way to benefit long term token holders, including offering them early access to token presales before they are open to the public. The platform is always looking out for its token holders. It makes sure any project interested in its LID Certified Presales services has to agree to give LID token holders 15-minute early access before the sale is open to everyone. The period one gets access to the presale before its open to the rest depends on how many LID tokens they have staked and reduces in tiers.

As it has been the case since the beginning of time, necessity has been the mother of invention. Bitcoin came along to offer people control over their money, allowing them to transact easily electronically. Since then many cryptocurrencies have been born with a few them adding on what Bitcoin made possible with more functionalities.

These technologies have created more opportunities for many and where there is opportunity bad actors are never far away. Many people have lost a fortune from scams and scammers keep coming with new ways to steal from people. The latest being rug pull scams that have aimed to take advantage of the DeFi boom.

It’s scary to imagine 75% of all new token listings on Uniswap are created for the sake of rug pulling on unsuspecting investors and traders. This is why the LID solution couldn’t come at a better time. The platform is helping projects maintain positive investor sentiment, funds and liquidity. Thus good projects that have unique offerings for the betterment of the world can continue to develop and advance themselves.

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