NFT Hoos

“Rug pulls” are a common scam in the NFT space and are no fun at all to be involved in. Here’s what they are and some tips on how you can avoid them.

There are bad actors in any industry and the crypto/nft space is no different. Fraught with scams, one of the best ways you can make money in the NFT space is by learning how to not lose money. Here are some helpful tidbits on what rug pulls are, some ideas on how to identify them, and how to hopefully avoid them all together.  

What is a Rug Pull?

Essentially, a rug pull is a crypto project (be it a coin or an NFT) where the founding team sells a decent amount of tokens and are then either unwilling or unable to fulfill the promises of the project. They essentially “quit while they’re ahead”. This inability to deliver can be intentional or unintentional, but in most true rug pulls, founders know exactly what they’re doing and then disappear with the cash, leaving would-be investors without an investment.

In the coin world, this often looks like the coin becoming worthless and holders being unable to get out due to liquidity issues, the founders selling their (majority) share of the coin causing it to plummet in value, or the creators simply locking the coin and making it impossible to sell.

In the NFT world, there are lots of projects with big promises (often bigger than they can deliver on). NFT commerce is fueled on hype, which can sometimes sell out a project that doesn’t have solid deliverables. Founders of a rug pull project then either disappear without delivering ANY NFTs, or they deliver something low-quality and shut down all avenues of the project (including Twitter, Discord, and any other outlets).

Imagine minting what you thought was a really cool NFT, going to bed content, and waking up to find the “community” that you’d just become a part of vanished: the “rug” literally pulled out from under you. Since NFTs are commonly viewed as digital “investments”, there tends to be an expectation of appreciation potential associated with them. When the rug is pulled, a project’s NFT assets usually fall to close to zero due to the fact that any promises made by the team become null and void.

Another version of a rug pull is where “an alligator mouth overloads a hummingbird back” so to speak. Some projects talk a huge game, but lack the technical ability to execute. A great example of this is the Pixelmon NFT Project that recently built up excellent hype and then let investors down with comically terrible art. Promising to be one of the best games ever (essentially a version of NFT Pokémon), their team was unable to deliver a visually appealing NFT asset, which shook confidence in their ability to deliver on the final promised video game production. They were able to raise an astonishing $70 million on their promises alone, but have been suspiciously quiet since their disappointing reveal.

How To Avoid Getting Rugged

Here are a few bullet points on how you can start to notice rug pulls in the wild and avoid them.

• IF IT SOUNDS TOO GOOD TO BE TRUE, IT PROBABLY IS
  • Remember… Crazy things do happen, but they’re usually not because of a wild promise.
• ALWAYS DO YOUR OWN RESEARCH, DON’T BUY OFF HYPE
  • Take some time to dig in and fact-check. Consider the source, and use your own common sense.
• VET THE TEAM
  • Anonymous teams are common in the crypto world, but many times people provide SOME indication on whether they’re capable of delivering on their promises or not. Don’t be afraid to check ‘em out and ask questions.

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Knowing what a rug-pull is half the battle. Now you know to keep your eyes peeled and ask questions. Don’t fall for the hype and get left holding the (empty) bag. Good luck!

What’s funny about NFTs is that they’re a joke to everyone except the die-hards, the visionaries, and the risk takers; until someday soon they’re not. Mainstream acceptance is coming, and these are just the forerunners. Everyone laughed at an “online bookseller”: who would buy a book online when they could just go down to their corner store? Fast forward and Amazon has become one of the most powerful powerhouse companies in the world. What we’re seeing now is some mainstream companies waking up to the way the world is progressing and starting to make moves in that direction. We’re still early and corporations move slowly, so the whispers and rumors indicate that further widespread acceptance of NFT technology and communities is on the horizon, but it’s hard to tell how close. Here are a few ideas on why these companies are making forays into NFTs.

BARBIE + BALMAIN

Barbie and Balmain’s moves seem the most straightforward: toys have been viewed as collectibles for decades and NFTs serve as a digital counterpart to physical collectibles. It’s a natural transition and an opportunity for a symbiosis in traditional business due to Barbie’s collaboration with fashion company Balmain. Barbie and Balmain go together like peanut butter and jelly. Dolls and fashion are a ready-made combination and by doing an NFT collaboration, they’re creating a low risk-high reward situation for both companies: neither one fronts the cost of the NFTs alone and they can both generate some headlines. The perfect way to dip their toes in the volatile NFT waters, without being in over their heads.

YOUTUBE

Youtube finds itself in an interesting predicament. It enjoys a centralized control of its creators and the decentralized nature of blockchain and NFT technology could be perceived as a threat. There are rumors of Youtube exploring an integration of NFT tech into their existing platform/business model, but they’re hazy at best. In any case, Youtube cannot afford to sit on the sidelines.

As the space develops more fully, it’ll be interesting to see how these giants like Youtube play out their adoption of NFTs. Should they blow it off, a creator-driven platform like Youtube risks letting a competitor get ahead with the technology, which could let them steal top creators and cause Youtube to lose market share. Should the video company fully adopt it, they could lose revenue (Web 3 has a tendency to cut out intermediaries and middle men). The key for Youtube is finding a healthy balance in order to retain creators, who bring in users, who bring in money from advertisers.

TWITTER

Twitter has been a hub of NFT culture, creation, and shilling for a while now and their foray into the NFT space with a new profile picture surround is a very clever move. It requires a Twitter Blue subscription (around $2.99 a month) and allows NFT holders to connect their wallet and verify ownership of their NFT. They’re then able to use that NFT as a profile picture and prove their ownership in a very visible, very public way: the border of their picture becomes a soft hexagonal shape rather than a perfect circle.

This actually solves a common problem in the NFT community: where it used to take a little digging to see if someone was the actual owner of the token they were fronting on social media, it’s now instantly apparent if they’re the real real. It’s also smart on Twitter’s part because it generates extra revenue for their base business model: Twitter Blue offers other perks that interest non-NFT owners, but also has its fair share of subscribers solely for the NFT clout.

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NFT technology started as a fun little experiment. That fun little experiment has grown into a fun BIG experiment, with even bigger implications. Larger, mainstream companies have taken notice and are starting to flow towards acceptance and integration. How will this integration end up? What will it look like? Grab a cold beverage, kick back, and enjoy the show with us.

An Opensea loophole has resulted in the cheap sale of a few BAYC and Crypto Kitties NFTs and shaken confidence in NFTs themselves, but here’s how you can protect yourself. Hint: always pay the gas fee and close your listings when you no longer want to sell.

NFTs have taken the world as one of the most fun and engaging investments available the past few years, but hearing these headlines about blue-chip NFTs being “hacked” might make you nervous about interacting with the crypto world. Just in case you’re not familiar, tokens known as the Bored Ape Yacht Club (or BAYC) routinely sell for well over $100,000 into the multi-million dollar range. Recently, several of these blue-chip NFTs have sold for a fraction of their worth to “hackers” and were then resold at market value for a ridiculous profit. In some cases, the initial sale (where the hackers took advantage of the loophole) has been less than 1 ETH for a BAYC token that would typically have a market value of no less than 91 ETH (at time of writing).

The good news is that it was a loophole that caused these unfortunate sales, not necessarily a true “security breach”, so we can take a deep breath. We’re going to go over exactly how this happened and a few best practices you can employ to protect your crypto assets. Let’s get to it.

Loophole?

So what exactly was this loophole? Imagine you bought a BAYC NFT and held it for a month or two. Prices skyrocket, so much so that you consider selling it. You even list it for sale, which most often doesn’t incur a gas fee (you can read Opensea’s listing policy here). But the price keeps going up, faster than you thought.

Luckily it doesn’t sell immediately so you go to delist it, but delisting requires a gas fee to officially close the listing. Instead of paying to cancel the transaction, you simply transfer the NFT to a different wallet of yours. Presto, problem solved and gas fee avoided. Why pay for something that didn’t make you money, right? WRONG!

That’s what several people did. Unfortunately when it’s done this way, the blockchain doesn’t actually close the transaction. Fast forward to today, when the BAYC floor price fluctuates between 80 and 90 ETH, and these people have set themselves up for a problem. Some forget that they had listed to sell at one point long ago and that the below market value listing has remained active (because they’d never paid the gas fee to close it). When the NFT returns to the wallet it was originally in when listed for sale, that listing becomes viable again. Boom. That’s how a few sneaky individuals were able to snipe these blue chip NFTs at a huge discount and then sell them at market value for a gnarly profit.

The Response

In response to this loophole, Opensea has reportedly (according to this post) been reimbursing victims of this problem. In addition to attempting to assuage the damage done, they’ve created a new interface that shows all active listings to help people avoid this issue. Because Opensea is simply a marketplace that intermediates and facilitates interactions between the parties of the blockchain and the users, they can’t close transactions for users. But they can make them more visible and organize them all in one place to minimize the risk of this happening more in the future.

The moral of the story? In a world where we’re used to changing our minds on a whim and have grown accustomed to expecting immediate results, it’s best to interact with the blockchain carefully. Transactions are written in permanent pen, not pencil, so it’s best to be careful and methodical with your NFT purchases and sales. Always close your transactions and listings, even if it means paying a little extra gas. Cheers!

A brief look at the BAYC and Crypto Punks NFT projects and why they might be worth what people are paying.

A quick search online for NFTs will reveal lots of new terminology for a first-timer and is almost guaranteed to include two of the most pivotal projects in the NFT landscape: the Bored Ape Yacht Club (affectionately abbreviated to BAYC) and Crypto Punks. You’ll also find a slew of other projects that seem strikingly similar, yet are not anywhere near as valuable. So what makes these two projects so notable and pricey? Just like most things in the NFT world, it’s all about the right combination of a few traits.

Value is a subjective thing, especially in art. With NFT projects it fluctuates due to a project’s timing within the market, its community, and how it continues to provide value to its holders. These projects have a unique place in NFT history, as you’ll see, and provide many underlying benefits that are hard to discern at first.

Flagship Projects

Both Crypto Punks and BAYC derive a healthy portion of their value from being early projects in the NFT space. Crypto Punks is widely viewed as being one of the first NFT projects as we know them, making its debut in 2017. Being in the scene so long, Punks have become foundational to NFT projects and many are modeled after them. 

While the BAYC project is newer (late April, early May 2021), it pioneered a different style of art and came with a new form of utility. Both projects have an element of “first-ness” associated with them.

This doesn’t necessarily mean that they were the very first NFT projects ever, but they pioneered the NFT movement and got enough exposure to cement that perception. When people buy an Ape or a Punk, they’re able to own a little piece of history. Much like the affluent can purchase old relics and house them in museums, these projects have come to symbolize the birth and development of the NFT movement. This adds significantly to the value but still isn’t the whole picture. Historical significance certainly accounts for a portion of the latest Ape sale (as of writing) which was over half a million dollars but isn’t the entire story. 

Community

Owning history is fun, but having an exclusive membership adds to the asset as well. Being capped at 10,000 tokens means that, in the scheme of the world, there are very few membership opportunities.

Both Punks and the BAYC bring together like-minded people and provide a distinct image that publicly communicates community membership. Because both projects have achieved such notoriety, the images associated with them have become status symbols (much like cars or watches). NFT’s in this sense are commonly compared to Rolexes as an expensive way to communicate status. Why not just screenshot an image and claim that you own one? The blockchain provides an indisputable public record of ownership. Doing so would be like taking a picture in front of a mansion and claiming it’s yours, but everyone knows that your name isn’t on the deed.

With this community comes networking opportunities in addition to a feeling of inclusion. If one BAYC holder does something notable, all BAYC holders have the potential to benefit from that publicity. As more celebrities join the BAYC or represent a Punk as their profile picture, more people want a chance to say they’re in a club with famous people. A sense of inclusion and status are both driving factors in the value of these projects. 

Utility

These projects aren’t just about status and art though. They come with side benefits often referred to as “utility”. Sometimes that utility is exclusive access to future NFT drops. For instance, owning a BAYC token allowed holders to participate in the “kennel club” where they received the ability to mint a free doggy companion NFT for their apes (minus gas fees). Other times it’s the ability to create, buy, and sell project-related merchandise. There have even been real-life meetups and parties where being a BAYC member was a requirement for admission. These parties have included famous people and even a performance by The Strokes!

As the Metaverse becomes more mainstream, more and more utilities for NFTs will pop up. Arguably the most valuable utility yet, however, is the type of community that the BAYC is cultivating. They have a reputation for reciprocity, meaning if an Ape holder has a business or runs into a problem, other BAYC members will go out of their way to support them. Helping each other out where they can and creating more opportunities for their members is a core aspect of being a BAYC holder.

Value is a complex equation and is influenced by many different factors. While at first glance it can be hard to see why these two projects are so popular and expensive, it becomes clear that they are more than just JPEG images. They represent the ability to own a piece of history, provide access to a growing and vibrant community, and have utility that goes beyond the blockchain.

NFT’s are Non-Fungible Tokens; which basically means they are unique and cannot be replaced or non-interchangeable.

NFTs, a quite common term in the digital community, have got their “true value” under stakeholders that have actually made a change in the community with their presence. NFTs came across the front pages after a few expensive sales that actually shook the whole world. The cost and worth of digital art have changed ever since Beeple’s $69 Million NFT sales. However, there is another asset that was sold that day. A 24×24 pixel portrait of aliens wearing little hats was sold for 4200 ETH each, equaling a value of $7.5 Million. It was CryptoPunks who were the proud owners of these sold assets, creating an everlasting sensation. CryptoPunks is one of the earliest examples of NFTs on Ethereum that eventually inspired the wide-scale adoption of the ERC-721 standard that powers most of the digital art and collectibles we see today. 

CryptoPunks was created four years ago, in 2017, following the crypto boom, by the Larva Labs enthusiasts, John Watkinson and Matt Hall, the people behind the project. CryptoPunks had an effective aftermath of their introduction within the digital world, which became the “alpha and omega” of the NFT movement that followed the inception of digital art and its expansive utility in the digital ecosystem. This was how the 10,000 CryptoPunks NFTs made an everlasting impact in the digital market.