Web3: How to Spot Good NFT Projects
Protect yourselves from the dreaded rug pull!
(Disclaimer: This article is written based on projects within the Solana Blockchain. However, the advice is applicable to all blockchains!)
As the Web3 space becomes more well-known to the masses— people will inevitably begin looking to join like-minded communities that share similar goals and interests. Although there are a multitude of ways this can be done — the most common way within Web3 today would be by joining a project and/or community associated with a non fungible token (NFT).
And therein lies a problem…
With so many NFT projects and communities to choose from — how can you be sure you’re joining a good one? Naturally, there are some obvious signs of a good project such as: active owners and moderators; a well thought out roadmap; and a professional whitepaper to name a few. But don't be fooled! Sometimes red flags hide in plain sight. If you are unsure of what to look for — you could be in for a really bad time!
In this article you will learn the basics of what good projects, with solid foundations, look like and how to identify them. You’ll also learn some of the most common red flags in the NFT space so you can hopefully avoid “getting rugged!”
Sections:
- The Basis of a Good NFT Project and Community
- “Red Flags” in the NFT Space
- The “Green Flags” you Should Be Looking For
- Summary
1. The Basis of a Good NFT Project and Community
One thing you’ll quickly realise about projects within the Web3 space (specifically those relating to NFTs) is that not all of them are created equal. Aside from doing your own research into the team behind the scenes, one of the earliest signs to look for in projects that could be worth your time is if they solve existing problems or have identified areas within the space that has practical applications but lacks viable solutions.
For example — Wise Whales is a project on the Solana Blockchain that aims to give investors in the space the best possible chance at making profits by using analytics to track, in real-time, the buying, selling and trading patterns of the biggest investors in the space. This essentially lowers the amount of risk the average investor is exposed to and cuts out the process of spending months learning about the space while allowing individuals to view the flow of money between projects. Not only does this solve an existing problem — but this information could play a pivotal role in where (and when) you should be looking to invest!
Projects that also fall into this category include:
- Education within Web3 (such as DegenU)
- The Creation of Analytical Tools (such as Sensei Labs and Moonly)
- Maintaining Anonymity (such as Aardvark Technologies and Vula Labs)
- Web3 Jobs & Resume Creation Platforms (such as Solful and Rethinkable)
There are other categories within the space that I have not mentioned here so be sure to have a look around and see what narratives grab your attention! I’d highly recommend for you to join all of the above communities and follow their social media as they are going to be some of the biggest projects in the Solana Ecosystem in the future! If you really want to see what good roadmaps, whitepapers and community engagement looks like — these should be your go-to places to visit!
2. “Red Flags” in the Web3 NFT Space
Now you have more of an understanding of what Web3 NFT projects should be aspiring for in terms of what they should look like and how they operate — it’s time to define some parameters surrounding things you should be avoiding when it comes to projects.
As a quick word from myself (someone who has been rugged many times) directly to you (the reader) I’d like to give a word of caution: This is not an exhaustive list of things to avoid! Some of these practices are being implemented by very big projects in the space. However, it works for them due to having large communities, great teams and proven structures that smaller projects attempting to imitate them just don’t have!
With that being said, let’s list off a few common red flags:
- No Roadmap or Whitepaper (or very generic versions of either)
- A Lack of Social Media (no Twitter, Instagram, Discord, etc.)
- Inconsistent Engagement (e.g. some posts having thousands of likes and comments while other posts having little interaction. This usually suggests botted activity)
- Generic Utility for NFTs (such as staking and airdrops with no real meaning) which suggests a low effort project looking to make quick money
- Teams that Refuse to Dox (private doxing is fine — but a completely anonymous team should set off some alarm bells!)
- A Derivative Project (this is a BIG one! Projects that claim to be derivatives of popular projects are often scams and rugs)
While there are other suspicious factors to consider (such as high mint prices, free mints and sudden fluctuations in the amount of available NFTs) it is up to you to do your own research and determine if the risks are worth the benefits when considering investing your time and money into any potential project.
3. The “Green Flags” You Should Be Looking For
To summarise the above very briefly — here is what you need to know!
- Look for teams that are established and doxed (either publicly or privately)
- Check the levels of engagement across the projects social media (especially within the comments sections)
- Ensure that the project has a detailed whitepaper and/or roadmap
- Identify if the projects NFT has clear utility
- Determine if their project is original and/or fulfils a genuine need within the space
Summary
The Web3 NFT space is growing rapidly — and people will realise very soon that it’s here to stay! As more people decide to explore the space the amount of “bad actors” with also invariably go up. Some projects are genuinely trying to change the world of Web3 for the better. Others are simply out to make money while providing you with no real value in return. As long as you follow the advice outlined in this article — you should be relatively safe. Ultimately, it comes down to you to do your own research and protect yourself when investing in any projects!
