Crypto exchange Uniswap has taken a hit to its reputation after Spanish researchers reported that 97.7 percent of tokens launched on the New York-based platform were rug pulls.
Uniswap claims on its LinkedIn page to be the largest decentralized trading and automated market-making protocol on Ethereum. It says its users can legally swap crypto tokens in the U.S. and many other countries.
Like other decentralized exchanges, Uniswap has gained attention as a non-custodial and publicly verifiable exchange that allows users to trade digital assets without trusted third parties. However, its simplicity and lack of regulation also make it easy to execute initial coin offering scams by listing non-valuable tokens, aka rug pulls, according to a study by researchers at the University of Barcelona and the University of Pompeu Fabra.
The research paper was written by Bruno Mazorra, Victor Adan, and Vanesa Daza, and titled “Do Not Rug On Me: Zero-Dimensional Scam Detection.”
Most recent crypto rug pulls, particularly NFT rug pulls, have featured Hollywood celebrities, Florence Muchai wrote for Cryptopolitan. “At some point, those celebrities will be held accountable for not being cautious enough in light of the prevalence of scams in the crypto realm, particularly with NFTs.”
In a January 2022 paper, Spanish researchers said they “collected all Uniswap data until 03/09/2021 by directly interacting with the Ethereum blockchain. In total, we labeled 26957 tokens as scams/rug pulls and 631 tokens as non-malicious.”
The researchers developed a mechanism for identifying previously conducted rug pulls and learned that more than 97.7 percent of the tokens were rug pulls.
“Certain characteristics of the DeFi ecosystem, like the ease of producing and listing new tokens, have made it easier than ever to execute rug pulls,” Muchai wrote.
The research was recently shared by crypto influencer drnick on Twitter and received wide criticism. Many questioned the rationale behind the study. Some Twitter users claimed that the study lacks a substantial ground to make such a submission, CryptoSlate reported.
Different techniques were used to trick new investors into buying malicious tokens, according to the researchers, who classified malicious and non-malicious tokens manually to find the malicious tokens traded in UniswapV2, as shown below:
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