Jumping into NFTs feet first? Well, there are certainly plenty testing the water with you.
NFT projects are springing up in astonishing numbers. It generally only takes a few minutes to set up an account, learn quickly and be up and running with buying and selling those exclusive digital gems. If you want to be successful playing the NFT game, it’s super important to understand the landscape & prevalence of fraud.
Wherever there’s innovation you’ll find people trying to find a way to beat the system.
Plagiarism, washing and rugs… oh my!
OpenSea recently tweeted that over 80% of the NFTs created for free on the platform are "plagiarized works, fake collections, and spam". Punchy move. They then implemented a fifty item limit to their free minting tool, then reversed the decision, due to community backlash.
Aside from plagiarism, there are some other red flags to look out for. Wash trading - fraud where the sellers are both sides of the sale, is used not just for driving up artificial prices but also for criminal money laundering - is common; creating (at best) an unfair marketplace for those who purchase artificially inflated tokens, and worse, undermines trust in the NFT ecosystem, inhibiting what we’re all working towards - future growth.
The 2022 Crypto Crime Report by Chainalysis (Feb ‘22) says ‘We encourage NFT marketplaces to discourage this activity as much as possible. Blockchain data and analysis makes it easy to spot users who sell NFTs to addresses they’ve self-financed, so marketplaces may want to consider bans or other penalties for the worst offenders.’
Rug pulls maybe hit the worst of all as the shock and anger reverberates around the community yet again, whilst investment disappears in a puff of smoke. Yet – they are becoming a major form of crypto fraud, making up nearly 40% of crypto scams and costing users about $2.8 billion last year, up from just 1% the previous year!
So, let’s all hide away from NFT Crypto Criminals?
Well, that’s one approach – but if you wanted to do that, you wouldn’t be reading this. Conducting due diligence on an NFT purchase is vital.
Our top tips for spotting a legitimate and well-meaning NFT project?
Well-run socials with real commitment from the team and a developing, building community. Don’t rate quantity over quality, but do check out WHO is regularly engaging on Discord/ Twitter (i.e. not the same 10 users). On socials you should find links to roadmaps like project milestones, goals, and plans for marketing and growth.
As well as engaging on socials – the team should be playing an active and visible role in the project. We’re not saying fully doxxed …we’re saying transparent and traceable team, with publicly defined roles. With NFTs the people are the project – they make the brand and that’s what draws people to it and keeps the demand high.
It’s never been more important to verify who you are dealing with. At minimum, ensure the NFT you are considering has been KYC ASSURED✨✅™️ before proceeding. Of course, there is no project with zero risk attached – as with traditional art sales, trends and your own taste are massive risk factors in making profits from NFTs. BUT you can limit exposure to NFT financial crime risk by choosing projects with the Verification Gold Standard from Assure DeFi.
Projects that are verified have a real accountability path in case of wrongdoing. As seen in a recent NFT rugpull case, prosecution is only possible if the responsible parties can be identified (Click here to download the file). The Assure DeFi process more easily enables this type of criminal pursuit, giving investors more assurance that NFT project leaders will face consequences if they choose to commit a malicious act.
Chapo says: ‘Those who think that NFT’s are just a fad or trend are disconnected with reality.. I think we haven’t even scratched the surface yet, we have many years of explosive growth in this sector as NFT applications & use cases expand. However it plays out – it makes sense to invest in verified projects. Why not tilt the odds in your favor?’
Assure DeFi is the Verification Gold Standard for project owners in crypto and the pioneers of KYC compliance NFTs in DeFi. Check out ZoneArt, the latest KYC Assured™ NFT Launchpad and Marketplace on Near Blockchain.