How to Avoid an NFT Rug-Pull Scam
If you are going into the Non-Fungible Token (NFT) space as an investor or interacting on the internet for the past few years, you know that the NFT space is full of scams.
For those new to the term, rug pulls are NFT projects that promise big and disappear with investors’ money. Whether you believed in the project or just tried to make a quick flip for some small gains, it helps to know the red flags and how to avoid an NFT rug-pull scam.
It can be incredibly frustrating and disappointing to someone who genuinely believed in ta project to find out that all the promises, the community, the road map, and white paper, all that good stuff, were all nothing but a lie. It can be equally frustrating if you potentially lost a good chunk of money buying into the project, especially if you could have used that money on something else.
Let’s start at the beginning, vet your project relentlessly. Use the below checklist to test the project’s legitimacy.
High Royalty Fees
Now, this is not so clear-cut. If the roadmap mentioned royalty fees as a way to give back to the community in one way or another, then it may very well be a high fee. However, if the main mint is supposed to fund future endeavors and yet maintain a high royalty fee, they may be out for the money. Again, this isn’t clear-cut but could be one.
The Roadmap
The NFT project must have a solid plan to keep the profits coming after purchase, or at least continue building if they do not carry any real value for a good time after purchase.
The Hype Train Hijackers
These kinds of projects ride the hype surrounding a trend and tend to focus their entire existence on that trend. That is not to say that all projects with a focus are rug pulls, but it cannot base its entire value model on it. They must have some merit outside of the current trend and offer some kind of uniqueness.
A Doxed Team
The identities of the team behind the project must be revealed and verified. Look them up on social media, and not just Twitter and Discord. Accounts can be bought and refurbished to look legitimate. Look them up on Facebook, Instagram, and LinkedIn, and reach out to them.
There are exceptions where developers may want to keep their identities a secret until the project has progressed, but if their real online presence is revealed, they can be held accountable for rug pulls.
Soft Rugs
Soft pulls are less abrupt and more gradual rug pulls where the team slowly lets go of the project as hype fizzles away so that it does not appear as a rug pull. Social media posting frequency decreases, the discord goes silent, and the developers stop making new announcements and generally die out over time; such projects can blindside even veterans in the NFT space and gurus in rug pull prevention.
When all is said and done, despite a few busts and victim compensations by reputable marketplaces here and there, once a rug is pulled, the money is gone forever. This is why learning how to spot a rug pull is essential before you go spending your hard-earned money.
Major disclaimer, however, none of this guarantees a project is not a rug pull, but the more you cross off the list and the more NFT and crypto news you follow, the more knowledge and intuition you have in how to avoid an NFT rug-pull scam. Stay safe out there.
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