If you’re reading this, then you’re already familiar with the basics of NFTs. From NFT terms to how to buy them or create them, you already have an idea about how things work. But now that you know your ABC NFT, you’ll want to look for the next blue chip NFT. And throughout your research, you’ll come across some shady-looking projects. And some of them will probably be an NFT rug pull. So what is that? And what are the red flags you should look out for?
What Is an NFT Rug Pull?
A rug pull is a scam that emerged with cryptocurrencies. Just like the name suggests, it means having your assets pulled from under you. And it’s a legit thing where people can lose thousands, and even millions, of dollars over. The term fits the bill since, at some point, someone located a file, and replaced it with the image of a rug. And poof! Digital assets disappeared. There are different types of rug pulls that you can check out here, but today, we’re talking NFTs.
How Does an NFT Rug Pull Happen?
The idea is simple and complex at the same time! An NFT rug pull happens after the minting of an NFT collection. So people buy these NFTs, and money pours in. And just at the peak of it, the runners of that collection shut it down and disappear with the earnings. Unfortunately, there still are no legal consequences to rug pulls. Why? Because the crypto world, especially NFTs, is a brand new ground that we’re treading. So technically speaking, an NFT rug pull isn’t illegal, but definitely unethical.
Red Flags to Look Out for to Avoid NFT Scams
Okay so, even NFT “experts” could fall victim to scams. However, there are always some obvious red flags that will help you in your decision to invest in a collection. Although there’s no instruction manual on how everything works yet, we can try! So, let’s check out the obvious points, you’ll wanna take some notes.
It’s kinda like the stranger danger concept but in the digital world! We don’t take sweets from strangers, and we don’t buy NFTs from undoxxed teams. Shady creators are like a 50/50 gamble, and we don’t wanna do that fam. When creators are well-known, and maybe well-established, in the virtual world, it’s a bit reassuring. And if famous artists are in on it, it’s even better!
Absence of Roadmaps
Or plagiarizing other roadmaps. This one is a bit more advanced red flag, but the more time you spend checking out collections, the easier it gets to see it. Trustworthy NFT collections usually have a clear roadmap for where they’re going after minting. And people planning an NFT rug pull are most likely not gonna put effort into creating a roadmap. Well, unless they’re really desperate.
Fake Followers and Hype
Okay, this is kinda easy to spot. If most of your Twitter followers are faceless, tweetless, and well… fake! You should always check the engagement on posts. If you have 300K followers with 100 likes on your tweets, odds are you’re fakin’ it. The same goes for hype. If you just wake up someday and find an NFT collection booming… Well, we got news for you, and they’re not fun. Some NFT scammers are going to the extent of recruiting influencers to promote their collection. So that’s another thing to look into.
This one’s a bit of a grey area since we know that derivatives get their inspo from original works. I mean BAYC was certainly inspiration enough for lots of other projects. However, plagiarism occurs when everything about a collection looks like another work down to the smallest Meta-detail. This also needs a bit of experience, but you’ll get there!
Now That You Know Your Warning Signs
You should always check, and double-check the authenticity of an NFT collection before doing any move you could regret later. Sometimes, even the sharpest people could fall victim to an NFT rug pull, but we can do our best to avoid it. However, if you wanna invest in a safer business, why not go into sneaker reselling? It has been around for a long time, and scammers are usually much easier to spot. You could also always go for well-known sites to do your transactions. If you wanna know if you should go into the reselling business, check this out. Godspeed 🔥