NFT Rug Pulls, and How to Avoid THem

Incredible original artwork by the author! IG: @metasculptor

Beware the “rugpull”! It is common in the NFT space to see projects being quickly abandoned by their developers after they have received the funds of their investors (most likely to be after being sold out). I´ve personally been a part of one of those projects, and with the knowledge acquired after that bad experience, and talking with some friends of Hapebeast, I´m going to explain the red flags to look in a project and how to avoid losing your money.

  • Team behind the project – To begin with, this is the first thing you should look at. All rugpulls have one thing in common: developers masked behind anonymity. Transparency is the key, do not trust that things are being made in the back stages, as investors, you have the right to see and know what is being made and what is being discussed. Fake projects typically create aliases for them and use an avatar to represent their image. In contrast, trustworthy projects will have the identities of their team revealed, since they do not mean harm to the community. In a few cases you might see a legit project with an undoxxed team, but the risk to get scammed is bigger.

Secondly, check the socials of the project: some projects are using bots to gain followers and attention, so a good way to check is to see the activity of the general chat, see if people are active, or the number of the people on the Discord and socials consist mostly of bots.

  • Giveaways – Be careful of NFT projects that use attractive giveaways as their marketing campaign. As an example: Lamborghinis and other expensive luxury cars or great sums of cash. 99% of the time, they are not going to deliver what they promised. Promises in the metaverse are risky as well since they can make false claims or not launch it until two years from now.
  • The roadmap – very important to check, the objectives must be feasible. Try to enter in contact with moderators or developers to ask them how they plan to deliver what they are promising. Expensive yacht parties and contact with big investors, or “whales” as they are called in this space, are not real utilities. An example of some good utilities would be real-life merchandise, charities, opportunities toward upcoming projects, and game development.
  • Phishing attacks – You must be aware of people messaging you false links in discord. That is one of the most common ways that a hacker is going to use to access your wallet, and many people fall for it. With this I mind, trust nobody that you haven’t seen and talked to (and still be suspicious until you completely can trust that person). It is highly advised that you turn off your direct messages to avoid those phishing scams. You can do so by going to Settings> Privacy & Safety > Allow direct messages from server members = OFF.

Moreover, the minting process of a project should be done through the links sent in the channel #trusted-links of a reliable project and if needed to go to webpage, search for it directly on Google.

  • The community – also has a major role in the success of the project. Talk with as many people as you can, make friends and ask them what they think about the project. Look if the project has a solid community, and if the buyers are aiming to support the project in long-term or if everybody is in it just for the quick-flip.

Taking Hape as an example, we have many events done by our members: Karaoke, Rap battles, Crypto talks, Talent shows, Fashion events, Nature Conservation, and many more. People are always going to help and teach however they can, and voice chats are full all day 24/7. This is a perfect example of a strong community. Given these points, before investing in a project, spend some hours researching about it, make sure to trust your instincts and not blindly trust a project because of hype, because the hype goes away just as quickly. And only invest what you can afford to lose, since NFTs prices are speculative and there are many reasons why the floor price of a project may drop. I hope everyone stays safe, stay Hape and invest wisely.

Thiago | @metasculptor