Is This NFT Project a Rug Pull? A Few Things to Look For! by@cryptoshegz

Is This NFT Project a Rug Pull? A Few Things to Look For!

NFT ecosystem is the digital wild, wild West... and I have my scars to show for it. I'm a survivor of 6 NFT projects that were rug pulls. The answers will signal to you if any NFT project that is about to launch is a likely rug pull or not. A rug pull happens when the following things happen: The project founders are anonymous and to be doxed is to reveal your identity. They also fear human engagement. They always try to avoid being in the chats, they will claim they're "busy" on the project.
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Olusegun Adedokun

Blockchain assets educator

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Image Credits: Courtesy Robert Carter

The current NFT ecosystem is the digital wild, wild West... and I have my scars to show for it. I'm a survivor of 6 NFT projects that were rug pulls.


Fortunately, one of them was "derugged" by the community. We took over, hired a de-rugging expert who drew a 6-month strategy, redesigned the artwork, airdropped better artwork to every verified owner, made a comeback, and became profitable.


But first what’s rug pull?


What is a Rug Pull?

In the NFT Space, a rug pull happens when the following things happen:

  • Hype is built around an NFT project

  • It sells out

  • Gets abandoned by the project founders

  • They disappear with the money.


Now that you know where the inspiration for this article comes from and what a rug pull is, these are some questions you need to ask.


The answers will signal to you if any NFT project that is about to launch is a likely rug pull or not.


Are the Founders Doxxed and Engaging with the Community Well?

All rug pullers are anonymous and to be doxed is to reveal your identity. They also fear human engagement. They always try to avoid being in the chats. Doing this means they are accessible and making themselves too available will lead to questions, demands for AMAs (Ask Me Anything), voice chats in discord etc.


They recognize two things:

One, there is a high risk of vulnerability in asking them questions.

Two, they don't want to be seen as dodging these questions - so, they stay away.


When project founders are visibly inactive in general chats, they will claim they're in the announcements that they're "busy" on the project. Don't fall for that.


Every legitimate NFT project founder-owner has a detailed plan and structure in place that is highly developed around the community. So, they know they must make time to hop into chats on discord, do AMAs on Twitter, and so on.


They know the community is the key to the success of the project and the community always has questions... many of them.


Have the Founders Invested Some Personal Funds into the NFT Project?


  • Do they have a quality website dedicated to the project?
  • Is it a quality website?
  • Is the copy professionally written in correct English?


Websites are important to a project. Projects without a website prior to minting, are very likely to rug. Projects with a poorly designed website and crappy copy are a sign of a rush to quickly grab money. From my experience on NFT projects (on Cardano, Solana, and Ethereum), I have come to find the hard way that creating websites for projects is a thoughtful investment of time and financial resources. It demands a lot of mental energy and focus, copywriting.


It's also the easiest way for any outsider to see whether the founders know what they're doing or

not. Every worthwhile company on this planet has a website, especially as we're heading into Web 3.0.


So, remember, every PFP NFT project is like a start-up and when you're DYOR-ing (Do Your Own Research) on these projects understand that they’re looking to generate hundreds of thousands to millions of dollars.


Therefore, a website is a MUST.  And it must be professionally designed with good copy and links to all their socials.


I will always pick a new project with a well-designed website without an artwork collection yet, over one without a website and a complete collection.


Does the NFT Project Have a Proof of Concept?

This is almost self-explanatory.


Every project promises to do something. First, if you see promises like to “To provide utilities that will benefit the community as we grow”, get ready to run. Are you saying you’re coming to potentially raise a few hundred thousand to several million dollars and you don’t know what “utility to provide?”


Ask about their vision, read their roadmap and whitepaper and ask questions!


If they say they're going to do certain things after mint on their roadmap, ask for receipts they have ready as proof of making payments for those things.


For instance, if they say, "we're building a game"?


Ask for the cost, name of the game development company they're hiring, and why.


If they mention “tokenomics”?


Ask about the liquidity pool, the percentage of funds to be allocated to all stakeholders, the community wallet, the amount going in, the utilities, etc.


If they say, "we're making merch". Great


Ask for the name of the merchandiser they've agreed to use and why.


If they say, "we're going to build a community"?


Ask them what their plans are to make their community different.


Simple?


Maybe not but know that once they get hold of that money, they make the rules.


Have They Stated The Supply & Price Upfront?

Credible NFT projects about to launch state their supply and their price, simple. Any project that does not after a few weeks should keep you on high alert. Why should the supply and price of a project say "TBA" (To Be Announced) for a prolonged time? Some even go to say "TBD" (To Be Decided)


Either of these options is a massive sign that the project founders are most likely in it for the money alone. A clear sign a rug pull is coming.


Why, you may wonder?


Well, they are basically sampling how much hype the project can garner before they set their supply and price. See it this way, once price and supply are out there, they have limited themselves to how much they could easily have made.


Here's what I mean by this: a shady project won't announce they have a 5,000 supply with a 1.0 SOL mint price early, for example.


This is because they know that if they wait long enough and can sell a massive hype, many people will flock to their community. And based on the number of people, they can potentially list at a higher supply and or price.


Long-term projects always have their supply and price decided before ever going public. This lets them get to work on the community size required to raise the funding needed for the future.


Supply and Price are numbers the community needs to know right from the scratch.


Is their Branding Original?

Imitation is the ultimate form of flattery, not outright cloning!


For instance, Cets on Creck are a successful NFT project on Solana.


In the last few weeks, at least 7 NFT projects have copied the style of their logo to the point that you know exactly who they’re trying to make you think they will be. When a project visibly makes its logo/headers/designs look almost like that of a successful project, run.


Do They Have Legit Brand Partnerships Within The NFT Ecosystem?

Genuine projects understand that in the NFT ecosystem are other projects that may have launched or getting ready to launch.


They also understand that brand partnerships with already successful projects leverage their goodwill and get easy access to their communities.


So, they reach out, build relationships, and see if their brands and values align well enough to strike a collaboration or partnership.


Potential rug pulls don't have time for this. They also know that partnerships with other founders will require IRL meetings and the signing of documentation.


So, when you see a new project affiliating continuously, visibly but unofficially "collaborating" with bigger projects, run. They are sending you subliminal messages that will make you assume that they're collaborating with these guys.


It is a major signal that they're going to rug pull.


Here is an imaginary example:


You see a new, unknown NFT project called Slimey Snails with images of Slimey with a Bored Ape or an Okay Bear and other IPs of successful projects on their Twitter banner.


This is a clear sign that they are creating that illusion of collaborating with these successful brands. It is designed to create an emotional attraction in the minds of the community members of these projects so they can support the Slimey Snail project.


No such collaboration exists officially or unofficially. They're just using the success of other projects for their own benefit. They don't care that they are destroying future collaborations because frankly, there is no future because once they “grab the bags”, they're gone.


I hope you can see through this market manipulation.


Another red flag is that they hardly associate with the smaller not as successful projects. Once they can get people to believe the illusion that Slimey Snail is the "the next BAYC", or "the next Okay Bears", they know they stand a chance of rug pulling a lot more people.


To easily see genius of this tactic, combine it with the delayed announcement supply & price and it becomes clearer.


Don't fall for it.



Is There Room for Follower/Community Growth?

If a project has an insane number of followers on Twitter and in discord in a short period of time, pre-mint, get ready to run. It can mean they are using bots, or they are purely using their marketing budget for selling hype.


This shows no long-term vision whatsoever.


If Slimey Snail has 250,000+ followers on Twitter and another 100,000+ on discord pre-mint, what room are they leaving themselves to grow after they sell out?


None.


And that's because they don't plan to be here post-mint.


Growth is important, YES!


But reaching heights that normally ought to be gotten to gradually through community engagement, hard work, gradually execution of the roadmap and marketing in a few weeks is a red flag and a sign of doing spammy giveaways and using bots.


Collaborative giveaways are great, but they should also be strategically done if you're here for the long term.


They are more effective with established communities and bigger, sold-out projects than with those who haven't minted yet.


Others

Not every failed NFT project is a rug pull. Sometimes, projects don’t sell out and need to cut supply.


Cutting supply means less funds and that means the roadmap will be difficult to implement.

  • What happens after that?

  • If the project does not sell out, what's their plan to refund the community?


Concerning revealing their identity:

  • If the founders are UNDOXXED, what legitimate reason did they give?


Concerning minting:

  • What plans have they for a seamless minting experience?

  • Are they planning to mint using a launchpad service, and if not, why not?

  • How many tokens can be minted per wallet?

  • What is the ratio of the number of whitelists given to the total supply of tokens?

  • Are they only focusing on present-day trends that won't be relevant in a year from now?


Concerning their social media:

  • Are their tweets consistent?
  • Is the engagement rate high relative to the number of followers?
  • If they do not have a website, why not?
  • Is their discord account new, and if so, why not?


I really hope these points help you avoid getting the rug pulled.


Have a great NFT experience.


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