The sheer number of new projects entering the NFT space is absurd and leading to a state of saturation. Almost every project now has thousands of social media followers with a strong community, which is what we see. So it becomes extremely difficult to choose quality projects that are going to sustain long-term. Many new market participants are getting caught in bad projects that seem legit at first but turn out to be rug-pulls or other scams. Recently, we have seen many projects on the Solana marketplace go south, leaving thousands of buyers in anger and distress.
People fall for such scams because they do not engage in doing proper background research and fail to notice all the red flags. If we are minting any NFT, it is natural that most of us focus on flipping them for high returns. In the process, we completely forgot about the possibility that this project could be a scam. To help you avoid such mistakes, I will show you a few recent examples, highlighting how they performed the rug pull and what you should keep in mind to never become a victim.
How can you identify NFT Rug Pulls?
There is a huge difference between tokens and NFTs being rug pulled. We can identify tokens by checking the liquidity, tokenomics, and the team’s marketing tactics in the case of tokens. If the liquidity is low and the price is skyrocketing in a matter of hours, then there is something shady going on behind that project. But when we come to NFTs, it gets even more challenging to identify a rug pull. Here are few things you can check to understand the legitimacy of the project:
If someone is a well-known artist in a top industry, then it is highly unlikely they will pull the rug and disappear forever. You need to check if the artist has a good background and see if he/she worked with many prominent brands in the past. For example, we all know Bosslogic as one of the best graphic design artists, and he worked with brands like Marvel, Sony, and DC. Such signs will give you reasons to believe in the project long-term. If the artist’s identity is not known and is not active in the community, then that is a red flag.
Marketing plays a huge role in creating interest and building a good community. But if a project relies too much on marketing and doesn’t actually provide value, then it is a bad sign. We see so many projects leverage influencer marketing to gain followers, get likes, and reach a much bigger audience to sell. If an influencer has a million followers, it is easy for them to promote an NFT project with a single Tweet or Instagram post. But if they are not really partnering with the project and just in it for the money, then it is a big red flag you should try to avoid.
Community & Team
A simple way to determine whether a team is sincere or not— is to check if they ever conducted an AMA session. Because the founding team is ready to spend hours talking to the community and hearing their suggestions, we can trust they will deliver everything they promised. If they only talk about prices and never highlight plans, you should avoid buying or minting from that project. I also recommend you to talk to as many members as possible. It helps you understand whether everyone is on the same page or not.
Project Launch & Minting
Most NFT projects launch in a similar way. They plan everything beforehand and keep the community well informed. But on the day of the launch, they might try to insert alternative links to mint their NFTs. This is a big red flag. Because minting should take place on the official website, if they send another link or come up with some excuse, you need to immediately stop minting. They can use phishing links to take seed phrases, which will leave you with nothing in your wallet. Few projects intentionally create a separate site that accepts your money but keeps showing “failed transactions” to take away all your money.
Recent NFT Solana Rug Pulls
Iconics Pre sale
A 17-year old digital artist took 1000 SOL from the pre-sale. He promised to produce 8,000 3D NFTs with many attributes. But when the NFTs were revealed, they turned out to be a bunch of random emoji sets. Minters, who got early access, lost a lot of money. Even the famous NFT collector SOLBigBrain got caught in this scandal.
The presale was over quickly, and the artist immediately transferred all the amount to different accounts. He deleted his Twitter account and terminated the discord server. This is a classic example of artist rug pull. You don’t know who the artist is, and their background is also unknown.
Baller Ape Club
We see so many projects take inspiration from Bored Ape Yacht Club and make some kind of derivative artwork. For a few projects, this worked pretty well because the demand was high, and the team delivered. But in the case of Baller Apes, the team intentionally tricked everyone into stealing more than $2.5 million. The mint price for this project was 2 SOL.
On the day of the launch, the team mentioned they were experiencing some “technical problem” with the website, and they will give another link to mint. As mentioned earlier, this is a big red flag. With thousands of people online and ready to mint, they didn’t notice or check this alternate link given in the discord server. One of the victims of this rug pulls mentioned that— the team designed the minting site in such a way that it kept showing “failed transactions” even after successfully sending 2 SOLs. Someone on Twitter released a detailed video on this, and he shows how it all happened. Do check it out:
Yes, NFTs can make you money in a short period of time, but that is if you do your due diligence on a project. If you fall for marking tactics and social media numbers, you cannot find a good, sustainable NFT project. The three main aspects of a good project will always remain the same— artist background, strong community, and high utility value. Some projects may skyrocket in value without having any fundamentals, but it is likely not going to be around long-term. So keep in mind all the red flags before buying any NFT. Because in the secondary market, you will have more data and can make better decisions.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
Subscribe to get notified on latest posts.