What Is the Risk of a “Rug Pull” in the Context of a DAO Providing Liquidity to a New Token Pair?

A rug pull risk occurs when the developers of the new, paired token suddenly withdraw all the underlying liquidity from the pool, often leaving the DAO with a large holding of a now-worthless token. The DAO's native token or stablecoin, which was paired with the new token, is stolen.

For a DAO treasury, this risk is highest when entering into a partnership or grant to bootstrap a new project's liquidity pool.