LP Draining

Learn more on how LP (Liquidity Pool) draining works.

How It Works:

• Developers create a token and pair it with a well-known cryptocurrency (e.g., ETH, SOL, or USDT) in a decentralized exchange (DEX).

• They hype the project to attract liquidity from investors.

• Once the pool has sufficient funds, the developers use their control over the liquidity to withdraw the paired tokens, effectively draining the pool and rendering the token worthless.

How to Spot It:

• Locked Liquidity: Check if the project has locked its liquidity using services like Unicrypt or Team Finance. Locked liquidity ensures that developers cannot withdraw funds for a specified period.

• Ownership Renouncement: Legitimate projects often renounce contract ownership, making it harder for developers to manipulate the contract. However, be careful, as there are scam contracts in which the owner keeps control of the functions even after "renouncing" them.