NFTs: What to Look for and How to Protect Yourself from Scams
Rug pulls and copyright issues have become synonymous with NFTs but there are always ways to protect yourself to mitigate the possibility of it happening to you.
NFTs are the most interesting space in cryptocurrency at the moment. They give people a way to, at least somewhat, tangibly see what they are buying or investing in. Unlike with Bitcoin or Ethereum for example you can not actually physically see the tokens or hang them on your wall.
When buying BTC you are essentially buying lines of code for lack of a better term. What has made people so interested in NFTs is that they love what they look like or they have some kind of connection with the artwork. This breaks down the barrier of “what am I really investing in” when it comes to cryptocurrencies. While this is a great thing for broader adoption, NFTs still face challenges that we have seen plague the traditional art world as well.
The best thing about NFTs is that they are an immutable way of identifying ownership. They are even programmed to send royalties back to the original creator every time there is a secondary sale which is something that does not always happen with traditional art. A lot of artists never receive those secondary sale royalties. This sounds great and it is but there also comes the issue of copyright infringements that have become widespread throughout the space.
As investors in NFTs, we need to make sure that the people behind the project we are investing in actually own the rights to the artwork. Especially since a lot of people are creating NFTs as a way to “get rich quick,” it is an issue but again it is the early days of the space and people don’t know what to look for yet.
The term rug pull has been made popular by projects like Squiggles and Frosties where the team goes dark and takes all the money they made on the mint with them. This has put a black mark on the space as a whole. This along with derivative projects basically steal the same type of artwork and call it something different.
For example, the Bored Apes have been ripped off by the Desperate Ape Wives or the Superlative Apes. Even Nike is already filing suites to protect their intellectual property. The market is saturated with more bad projects than good ones that are actually trying to build in Web3. So what can investors do to protect themselves from getting burnt by a rug pull?
The first thing that we can do is look at the team behind the project. Do they have an actual history in the art community or any type of tech background that you can actually verify when looking into them? Are they who they say they are and do you trust them to pull off what they say they are going to do. This leads to looking at the roadmap. If it sounds too good to be true then it probably is.
A lot of projects use buzzwords like “Metaverse,” “DAO,” and “Passive income,” but do not lay out the framework as to how they are going to do those things legally. This is why the team is the most important thing to look at. In a world where most people are anonymous behind a computer, it is hard to know whom to trust. The answer is to never trust anyone but yourself and do your own due diligence before buying anything.
There is a lot of good and bad with NFTs just like there is a lot of good and bad in the traditional art space. It is simply just a new space that is currently highly unregulated making it very easy for advanced players to rip off their victims. All we can really do is protect ourselves by doing our own research before investing. To take it a step further, we should put our NFTs on a cold storage wallet, Ledger or Trezor, to further protect ourselves from scams. Trust no one when it comes to your money. As the space continues to grow and eventually gets some type of regulation, these scams and worries should become a thing of the past.
