Bitpumps was a decentralized exchange on the Ethereum blockchain. Functionally, it was similar to SushiSwap with users having the ability to buy and sell cryptocurrency via swaps or provide liquidity to the pools in exchange for rewards paid out in Bitpump Tokens.
Unfortunately, this project was a rug and the founders ran off with the bag and left investors holding a useless token called Bitpump Tokens.
Anyway, this article will cover exactly what happened with Bitpump and how to avoid future rugs like this in the future.
What Happened To Bitpumps?
Basically, Bitpumps was another run of the mill DeFi scam/rug. The anonymous founders wrote up the code (more likely copy and pasted it), launched an ERC-20 token, airdropped it as a marketing trick, and enticed liquidity providers to come in with a promising return of Bitpumps Token.
Of course, the founders had a large amount of Bitpumps Token and sold that to drain the liquidity pools when the pools got fat enough.
It’s a pretty basic scam and one that is extremely common on DeFi. We will say that this is one of the major problems of DeFi at the moment, which simply won’t be resolved because of the decentralized nature of DeFi.
In other words, it takes some due diligence to avoid scams on DeFi. We will cover some due diligence to do before providing liquidity on any random decentralized exchange.
I Have Bitpumps Token (BPT) – What Can I Do?
Nothing. There is nothing you can do if you have Bitpumps Token. Just take it as a paid lesson about avoiding scams on DeFi.
And yes, those Bitpumps Tokens in your wallet will serve as a reminder of a mistake that you made by investing in a random decentralized exchange.
How To Avoid Scams on DeFi
Here are a few quick tips for avoiding scams on DeFi. This list obviously isn’t comprehensive – scammers have a lot of different methods. Also, this list will return some false positives (ie. SushiSwap), but it’s a good starting point.
The first tip off about a potential DeFi scam is an anonymous development team. Now, this is not always the best indicator of a scam on decentralized finance because DeFi, and crypto for that matter, lends itself to anonymity. Bitcoin, Monero, SushiSwap, and many other cryptocurrency projects were founded by anonymous developers.
However, tread carefully when you decide to deposit your money into an anonymous group. It’s usually a red flag for a scam because scammers prefer to remain anonymous for obvious reasons.
This is a huge tip that you’re dealing with a scam. Copy and pasted code usually indicates that there isn’t any value to the cryptocurrency project because, well, it’s just copy and pasted from a more successful project.
Scammers do this because it’s a lot of work writing their own code. It’s way easier and cheaper to just copy and paste code and then spend the rest of the time luring investors into the project with a slick marketing plan.
Now, is it ok if some code is copy and pasted, but there is some unique code to provide a twist?
Sure, that’s acceptable. The extra code should provide a twist that makes it different from anything else on the market, though. If it doesn’t, then it’s just gibberish added to the code repository.
You can think of SushiSwap as an example. It was mostly copy and pasted from Uniswap, but the developers added a twist by rewarding liquidity providers with a native token for providing liquidity.
Talk To The Development Team
Another great tip is to go on Telegram and Discord and talk to the developers. We recommend asking them more difficult questions about the project or the code. Are they happy to answer difficult questions? Or do they provide generic answers just meant to hype the coin? Or are they very closed off?
If they’re happy to answer questions, then that’s a good sign. Generic answers are suspicious and a closed off development team will be a scam 99% of the time.
High Liquidity Providing Rewards
Finally, are the rewards for providing liquidity to the exchange high?
Remember, if it’s too good to be true, then it’s a scam. This is especially true on DeFi where there is no free lunch, but a lot of people looking to steal your lunch.
That covers it for Bitpumps Token and the obvious scam coin it was as it met all of our rug red flags. This was not the first rug nor was it the biggest nor will it be the last rug on DeFi.
Really, avoiding rugs mostly comes down to using some common sense and avoiding any projects that are too good to be true. No one is going to give you a flying rug to wealth – they will simple pull the rug out from under you and run off with the money.