DeFi Protocols are liable to design smart and innovative products to solve the “Rug Pull” problem.
DeFi is all the rage at the moment. It crossed vital thresholds surpassing over $25 billion in market capitalization. With the increased number of permissionless protocols being explored, launched, and driven in the decentralized ecosystem, the nascent yet growing industry has exceeded the bounds of open finance. What just started as a movement to bailout central banks has created a massive revolution globally. In the coming years, there are immense possibilities of decentralized primitives overpowering the traditional financial markets due to ease of use, anonymity, and decentralization of authority. However, the DeFi potential is yet to unleash in its truest form. As the DeFi industry stages towards maturity, certain grave issues need to be addressed to drive modern finance attributes to the masses.
DeFi Protocols have amassed millions of dollars plundering investors.
As the decentralized finance industry has favored users globally, it is imperative to draw attention to the challenges that the prevailing landscape faces due to malicious entities. Due to a lack of solid technology stack and ambiguity, novice users have drained millions in malicious DeFi attacks. Therefore, a concrete framework is the most required to instill confidence and encourage new entrants to participate in the space actively. Earlier, we witnessed how with various security audits and smart contract audits, projects failed to safeguard user interests from potential threats, exposing them to several hacks questioning the protocols’ integrity. Apart from these, the rug pulls have facilitated immoral and deceitful companies to hoard tons of millions of dollars ransacking innocent investors. The instance of Chef Nomi from Sushiswap is the most ideal in the above context. The creator chef and anonymous dev cashed out $SUSHI worth $14 million from an automated market maker, sparking outrage within the community. This led to a massive backlash from the project supports and extensive allegations of exit scams.
Liquidity Dividends Protocol: A Possible Solution?
The above-discussed shortcomings have triggered the growing community to derive a possible solution for rug pulls. Amidst several projects launching in the DeFi space, one such project has deeply strived to solve this. The Liquidity Dividends Protocol embarked on the DeFi journey with the motive of employing technological innovation to solve the “rug pull” issue. It leverages the non-custodial liquidity locking mechanism for ERC-20 tokens on Uniswap to safeguard investor interests, thus protecting them from exit scams. While rationalizing this approach, the LID Protocol is based on the licensing and certification model, which serves as a secondary protection layer as malicious project founders are incapable of exploiting uninformed token investors. The LID Protocol’s technological infrastructure is such that the smart contract cannot execute any sell actions, reducing the project’s future uncertainties.
LID Protocol’s latest offering focuses on dominating the presale market in its entirety. It releases LIFTOFF that aims at redefining the prevailing self-service fundraising for crypto projects. Addressing the prevailing issues and providing an enhanced protection layer, LIFTOFF aims to redefine security for prospective DeFi investors. It is a self-accelerated launchpad that allows project developers to launch new tokens without any inherent costs. By providing greater protection, it flows the entire fundraising process seamlessly. With a Crash insurance mechanism, it provides a money-back guarantee to investors at minimal costs.
The ongoing DeFi hype has empowered innovation in the financial landscape. However, rug pulls, malicious attacks and exit scams are inevitable due to the industry’s nascency. Moreover, the inception of DeFi insurance projects such as the LID Protocol has lowered the magnitude of risks for prospective investors. It has also opened a pool of investment possibilities for investors without the fear of exit scams. There are certain malicious entities that might crumble the market, but projects like LID Protocol uphold the project’s integrity, protecting investor interests. The integration of the incentivization mechanism has also led to power in the community, thus encouraging massive participation.
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