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The War on Rugs Telegram party despises rug pulls. So, of course, it’s…trying to get the rug out from under Ethereum.
The watchdog organisation, which claims to be made up of developers and auditors, developed the Rug Ethereum (RETH) token in response to Ethereum co-founder Vitalik Buterin’s plan to donate millions of Shiba Inu (SHIB) tokens to charity while also collapsing the demand for the token.
“Vitalik rug pulled Shiba, innocent investors have been hurt,” War on Rugs told Decrypt via direct message the day before the token’s launch. “He should never be shown as a hero for this.”
SHIB has been labelled “Innovation Zone,” by Binance CEO Changpeng Zhao, who decided to list the token on Binance’s “super high risk.” And War on Rugs, which examined the smart contract earlier this year, observed that Buterin had a significant stake in the token, implying that it was insecure.
A rug pull is a form of fraud in which developers abandon a project and take the money of investors with them. They’re popular in the Wild West of decentralised finance (DeFi), where citizens can get crypto loans, collect interest, and sell properties without the assistance of a financial intermediary—or the protection that certain intermediaries offer.
Buterin, on the other hand, did not create the token; however, he got it. The meme token’s developers sent trillions of the sub-penny commodity to Buterin, who is esteemed by Ethereum acolytes for his scholarly prowess and apparent disregard for the stuff money can afford. There are no Lamborghinis here. Sending the funds to Buterin’s wallet provided credibility to the initiative while also potentially reducing availability because Buterin would not access the funds.
Theoretically, indeed. Buterin did exactly that on Wednesday, withdrawing the tokens from a liquidity pool in Uniswap and leading to a drop in token interest. SHIB was trading at $0.00003394 as recently as Tuesday. It had dropped by more than half by Thursday, to $0.00001563.
“If you consider a ‘rug pull’ to be quickly, without notice, removing a damaging amount of liquidity from a pool, then I guess that’s what Vitalik did,” DeFi researcher Chris Blec told Decrypt. “However, the fact that he never requested the liquidity in the first place definitely changes things.”
Blec went on to say: “The SHIB token project was launched with a specific range of threats and a slew of inherent issues. Vitalik made no changes to all of this. He actually revealed the token’s true nature.”
Meanwhile, Buterin was hailed as a hero in some quarters for abandoning a scheme he didn’t want to be involved with and donating the proceeds to charity. SHIB operates on the Ethereum blockchain, where its growing success has resulted in high transaction costs and network congestion, all of which are now a challenge for the network. Buterin is declined to openly discuss his motives.
To War on Rugs, Buterin is the villain.
The RETH token, which is available on PancakeSwap, is its satirical retaliation. Any trade involving the token incurs a 4% fee, half of which goes to investors and the other half to ETH borrowing.
This ETH is then withdrawn from the DeFi crypto lending marketplace Venus Protocol in favour of Binance Coin. (Unlike many other DeFi lending sites, Venus is based on Binance Smart Chain rather than Ethereum.) According to War on Rugs in a Medium message, this would eventually “create constant sell pressure on ETH pairs on BSC,” implying that the price of ETH will fall. (In an unexpected surprise, it has sent Vitalik half of the 100 quadrillion stock, but it has barred him from using it.)
According to blockchain tracker BscScan, RETH has more than 2,100 holders since it went live this morning.
The step adds to the intrigue around a brewing cold war between Ethereum and Binance Smart Chain, a competing network for DeFi applications established by cryptocurrency exchange Binance. Some contend that Binance profits from Ethereum congestion, which motivates it to list bulky speculative tokens like SHIB on its own exchange.
And it will now literally reap the rewards of RETH purchases, whether it is interested in this rug pull or not.