NFTs are attracting more and more investor attention. They have exciting uses that have revolutionized the art world and many other industries. In fact, the value of a few can increase even more over time, and unfortunately, the growing world of NFT can attract the attention of malicious people.
While the scams are not exclusive to NFT domains, the number of scams targeting users and investors, especially beginners, is increasing. To ensure the safety of your journey in the NFT world, it is essential that you learn how to protect yourself from common scams like rug pull. You can learn from our article what you should pay attention to in order not to be a victim of these scams.
What is Rug Pull?
Rug Pull means that an altcoin or NFT team disappears, leaving the project with the money collected from the investors. In other words, the person or group behind the NFT project does not deliver on their promises after the investors have collected their funds. The founders often launch a small collection of NFTs to attract investors to a larger project by offering attractive benefits such as exclusive access to events, blockchain games or specials.
In addition, many NFT manufacturers pay, promote their collections to influencers, or distribute expensive gifts to create a stir for their projects.
Rug Pull cases usually happen over a short period of time, but there are also cases where Rug Pull scams progress slowly, the project receives few updates, little or no development, and is quietly abandoned. It is more common for Rug Pull scams to be carried out by anonymous individuals or groups because it is easier to disappear without a trace.
How to Protect Yourself from a Rug Pull Scam?
Research the Community and Team
The best way to avoid Rug Pull scams is to do thorough research before investing. Thorough review of an NFT project involves learning more about the community and researching the team well. You can check out social media channels such as Twitter, Discord and Telegram to have more ideas about the development process of the project.
Do they keep their promises?
Does the website look professional?
You should research the project from reputable sources and try to understand whether the team is professional and reliable. Legitimate projects that offer long-term value often have a successful track record and are backed by a well-known name/company. A large and active community can also be a good sign, but it is important to note that this community is not created by fake accounts and automated programs.
Examine the roadmap
An NFT roadmap details the NFT project's goals and strategies to create value in the long term. An NFT roadmap usually includes:
Short and long term goals
Marketing and growth plans
If the roadmap looks too good to be true or is unrealistic, it may indicate that the project should be questioned. Rug Pull scams often create an ambitious roadmap to get the community excited, but the promises are not kept.
Not only does the project not intend to meet the goals it shares, it is also difficult to achieve these goals.
It will be safer to choose NFT roadmaps with realistic goals and scalable strategies to reduce risks. In fact, it would be a better decision to turn to reputable NFT projects that have already offered something remarkable.
However, it should not be forgotten that all projects can fail, regardless of whether they are big or small. As in all other markets, there is always a risk in NFTs. Therefore, you should consider the risks and not invest more than you can afford to lose.
A low-liquidity NFT project means you may have a hard time converting your tokens into cash or another asset. Trading volume is a metric that can allow you to evaluate the liquidity of a project. The high trading volume indicates that many users are buying and selling this collection. NFT projects with low volume, low liquidity, and a small community of over-excited buyers may indicate a possible rug pull scam.
With more and more NFT projects launching every day, it's important to be wary of common scams like Rug Pull. Understanding how such scams work is the first step to avoiding them. NFTs will always involve risk, but learning to spot the danger signals that could indicate a fraud will allow you to significantly reduce your risk and keep your funds and NFTs safe.