When LLMs Go on a “Rug Pull” Quest

Picture this: I posed a single question—“What is a ‘rug pull’ in the crypto space?”—to four different language models: ChatGPT, Gemini, Copilot, and Perplexity. To my surprise, only ChatGPT delivered a sensible answer. The others simply blinked in digital confusion, as if they'd never heard of such a thing.

It felt a bit like assembling four seasoned treasure hunters and watching three of them scratch their heads at the big “X” on the map. Where was their knowledge of one of the nastiest pitfalls in crypto?

So, what is a rug pull, and how can you do better research than those three stumped LLMs? 

The Rug Pull Revealed: A Quick Definition

A rug pull is a scam in the cryptocurrency world where developers hype a new token or DeFi project, drive up excitement (and the token price), then vanish with the funds—like yanking a rug out from under unsuspecting investors’ feet.

• Typical Scenario: A new token hits the scene. It looks promising. The dev team is anonymous or has minimal track record. Suddenly, after a surge in the token’s price, the liquidity is drained or tokens are dumped, leaving investors with worthless assets.
• Why It Matters: Rug pulls erode trust in new projects, can cost victims huge financial losses, and highlight the importance of diligent research.

This brief video by CoinMarketCap also explains what a Rug Pull is: 
 

Four LLMs in a Boat—But Only One Had a Paddle

1. ChatGPT: The hero of our story, confidently explaining that a rug pull is a crypto scam where project creators take the money and run.
2. Gemini: Blinked like a deer in headlights. (No mention of rugs, pulls, or any shady dev behavior.)
3. Copilot: Came up with creative 'Rock Balls', but no mention of crypto scams.
4. Perplexity: True to its name, it looked perplexed. No direct knowledge of the term.

It’s a stark reminder that not all AI models have equal breadth—or updates—of knowledge in niche fields like cryptocurrency. Some of them might be trained on older data or may not have integrated sources on crypto’s darker side.

Step-by-Step Research Tips (So You Don’t Get Rugged)

Want to outdo even the best AI in your quest for crypto knowledge? Here are some practical steps:

1. Start with Reputable Crypto News Outlets

   • CoinDesk (https://www.coindesk.com/) and Decrypt (https://decrypt.co/) often break scams and regulatory updates early.
   • Cross-reference major headlines with multiple sources to ensure consistent information.

2. Dive into the Project’s Whitepaper & Website

   • If a token or DeFi project has no whitepaper—or an extremely vague one—that’s a red flag.
   • Check the team section: Are the developers real and transparent about their experience?

3. Examine Liquidity & Token Distribution

   • Use blockchain explorers like Etherscan for Ethereum-based tokens to see if a few wallets hold a large share of tokens.
   • Sudden liquidity withdrawals signal potential rug pulls.

4. Investigate Community & Social Media

   • Join Telegram or Discord channels. Are the moderators open about project updates?
   • A new project with tens of thousands of “fans” overnight could be a sign of bot-boosted hype.

5. Watch for Lock-Up Periods

   • Reputable projects often lock up developers’ tokens for a set period. If devs can dump tokens immediately, that’s a big risk.

6. Leverage On-Chain Analytics & Crypto Tools

   • Tools like Dune Analytics or Glassnode provide deeper insights into token flows, helping you catch suspicious movements early.

7. Stay Updated with Regulatory Warnings

   • Regulatory bodies like the SEC or FCA frequently issue warnings about scam tokens or unregistered projects.

8. Connect with Crypto Communities

   • Reddit’s r/CryptoCurrency or r/DeFi can be a goldmine of user experiences and warnings.

9. Evaluate the Hype vs. Fundamentals

   • If the marketing is “all hype” without a tangible product or solution, tread carefully.
   • A legitimate project typically has clear use cases, a road map, and transparent team communication.

10. Use Custom GPTs for Ongoing Monitoring

• Consider setting up a Custom GPT to aggregate and filter real-time data from multiple crypto news sources, social media channels, and on-chain analytics. This can help you stay ahead of emerging scams.

Bringing It All Together

It’s both amusing and instructive to see how differently AI models respond to something as well-known (to seasoned crypto folks) as a rug pull. This experience shows that:

• Training data cutoffs and domain-specific knowledge heavily influence LLM responses.
• Relying on a single AI or source can be a recipe for misinformation, especially in the fast-changing crypto landscape.

Whether you’re a budding crypto enthusiast or a seasoned trader, adopting robust research methods helps you spot dodgy projects early—and keep your digital wallet safe.

So, the next time someone asks you, “What’s a rug pull?” feel free to borrow ChatGPT’s definition—and then wow them with your expanded step-by-step research approach. Because in the wild west of crypto, knowledge really is power—and the difference between hodling and getting left holding the bag.

Sources & Further Reading

• Investopedia: Rug Pull in Crypto
• CoinMarketCap: What Is a Rug Pull?
• CoinDesk – for daily crypto news
• Etherscan – to check token transactions and holder distribution
• Glassnode – for on-chain analytics
• Dune Analytics – community-driven analytics platform
• Reddit r/CryptoCurrency – vibrant discussion and user warnings

Stay curious, stay safe, and don’t let anyone pull the rug from under you.