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The growth of the NFT Marketplace has given rise to scammers and fraudsters. According to Chainalysis, in 2021, NFT rug pulls resulted in more than $2.8 billion in losses, accounting for 37 percent of all cryptocurrency scam revenue for the year and a 1 percent increase from 2020. Rug pulls, hard and soft, are one type of fraud to identify and avoid.
In a rug pull scam a team promotes their project and then disappears with all the funds. The promoters might promise to donate money to charity, create live events, or create more artwork. By stealing all of the money, the team leaves collectors with valueless assets. The promoters don’t fulfill any of their obligations. Instead, they just fill their pockets and leave.
One way to avoid being a victim of fraud is to do your due diligence. Here are five metrics that you can use to research NFT projects before investing.
  1. Research the Project Team. Investigate who is behind the project? Are the project’s promoters well-established and active in the NFT community? Are the founders’ accounts recently created, or do they have a longer presence? Answering these questions may tell you something about a project.
  1. Social Media Presence. Research the each of the NFT project’s creators and team, individually. They should have social media presences and activity.
  1. Mint Price. Determine the value in advance, and then only elect projects that have long-term value.
  1. Roadmaps. For NFT project teams, roadmaps can show collectors how a project hopes to expand. If executed they can add value to the NFT project.
  1. Community Presence. Most projects advertise that they are community-focused. You should investigate how the founders are trying to build a community.