5 Major Red Flags To Watch Out For In An NFT Collection
We're still very early in the NFT space. While there seems to be a lot going on, and many new things happening every day, the reality is that most of the world either doesn't know about NFTs or doesn't want to be a part of it... yet.
Thousands of new collections are dropping every month.
While a majority don't make it, there are a handful of these projects that turn out to be complete scams/rug pulls.
While the NFT market's penetration is still low, it'll become more and more difficult to reach a larger audience if we continue to fall victim to these NFT scams.
To continue growing the NFT community, we must start by avoiding all the scams we can, and cleansing the space for those that follow.
Here are 5 major red flags to watch out for in an NFT collection.
Keeping an eye out for these red flags can help you avoid any potential scam projects.
Keep in mind, however, that not all projects with these red flags are scams.
Do your own research to learn more about each project you look into.
A year ago, or even a few months back, an NFT collection could come out of nowhere and sell out - even when the team behind the project was completely unknown.
As the community continues to evolve and mature, NFT collectors are starting to pay more attention to the teams behind the projects they invest in, and for good reason.
In many cases, NFT collections without a doxxed team turn out to be complete scams. These people can be normal, everyday people with no prior art or business experience entering the NFT space to make a quick buck.
Although there is much higher upside potential to building out your NFT collection into a long-term brand, many people are wired in a way to make short-term successes more favourable than long-term wealth.
The NFT and web 3.0 space started off as a community where people can be anyone they want, without the stress of being judged, yet it's starting to become harder and harder to avoid scams in this state.
A doxxed team gives you, the collector or investor, an idea of who you're putting your trust into and tells you more about their prior experience in the space.
Being a doxxed NFT founder, my community can rest assured knowing that they will not get rug pulled.
Large following, low engagement
To imitate the idea of an active, hyped, and engaged community, many collections turn to deceitful methods of marketing to attract potential buyers and collectors.
One of the biggest red flags to watch out for in an NFT collection is the engagement level on social media and Discord.
In general, good metrics look something like this:
- On Discord, a 10% online member ration
- On Twitter, a 0.5%+ engagement rate
When these figures are lower than these base metrics above, it could be a sign that the collection has bought or gained its followers/members through dishonest means.
Other collections hyperinflate their numbers to show potential collectors that they're active and engaged.
In reality, these strategies could work, but it's easy to see through the facade - having 1000 followers but 4000 likes, comments, and retweets is simply unrealistic.
Use the metrics above as a starting point - ensure that the communities you look into are engaged and active, but not to the extent that the collection might be buying fake engagement.
From a collection owner's point of view, big numbers might seem great, but when it comes to minting, you'll be disappointed to see that these large numbers don't convert to active collectors of your collection.
With the massive success many collections are seeing, such as the:
- Bored Ape Yacht Club
- Invisible Friends
there are many derivative projects being released looking to replicate the success that these top NFT collections are seeing.
The problem is that many of the teams behind these derivative NFT projects are looking for quick wins, and have found a model that works.
Building an idea that's never been done before is much harder than taking an idea that already works and spinning it up slightly to make a new collection.
Creating copy and paste collections is easy and is extremely low level. Ensure that the projects you are investing in are high-quality projects with a lot of time put into them.
However, there's a problem, a regression to this point. There are still many 'low-effort', yet successful NFT collections.
Note: Low-effort is refering to collections without quality artwork
A very successful collection that popped up recently, Mfers, is not the most artistically stunning NFT collection - there are hundreds, thousands of other collections with better art.
However, the Mfers collection ended up becoming extremely successful, largely due to the founder of the project and his reputation in the NFT space.
This has never before been seen in the NFT space and shows potential investors or collectors that The Crypto Apes Club is a serious collection with high potential.
High mint price
Minting price is all relative.
For example, Azuki, one of the fastest-growing NFT collections out currently minted for 1 ETH each with 10,000 pieces.
Although you can argue that Azuki was a new concept in the NFT space, nothing justifies such a high mint price - yet the collection sold out very quickly, and went on to become the fastest-growing collection later on.
Another collection that had a relatively negative launch, Pixelmon, launched their Pokemon-style NFTs for 3 ETH. Although there were high hopes and a lot of hype, the reveal was extremely low quality, leading to many memes being made about the project thereafter.
When looking into a project, look at other factors before deciding whether the mint price is too high, or easily justifiable.
If the team plans to build amazing utility into their collection, a higher mint price may be more understandable.
However, if a collection, like Squiggles, for example, comes out with a mint price of 1 ETH at the Dutch auction, one must take extra care before committing to any mints.
In general, a mint price of 0.3 ETH, although very high, is the max you should be looking at.
Collections like Cyborg 86 or Shiba Social Club have launched with a 0.3 ETH mint price and sold out successfully, yet there are not many other collections with such high minting prices and same or similar success.
In fact, it's very difficult to build a successful NFT collection when founders set the price of their NFTs any higher.
The Crypto Apes Club, the collection I am running, has a mint price of 0.2 ETH. While I do understand the price is higher than some other NFT collections, I have complete faith in the vision and mission our NFT collection aims to achieve.
(Check the roadmap on Discord for more info on what The Crypto Apes Club aims to build)
The roadmap is the team's chance to sell a unique vision to their community, getting people on board and interested in the NFT collection.
Roadmaps can have anything, from merch, giveaways, games, Metaverse events, real-life events, and more! It's a way for the NFT collection to sell itself and tell collectors why it's worth joining and investing in.
However, anyone with a laptop can type up a roadmap and post it online - not all collections have managed to bring their vision to life.
One of the first, and biggest NFT collections, Cryptokitties, died down because they failed to fulfil their NFT roadmap.
Cryptokitties was a collection with a very unique spin on the normal 10K NFT collection. Instead, Cryptokitties introduced the idea of breeding, and gave people a new and interactive way of using their NFTs.
It was a very promising collection until they failed to fulfil their roadmap. Right after a project mints out, collectors want to see the team actively working on bringing their promises to life.
If a collection has a weak roadmap, think about whether the art makes up for it - are you interested in minting NFTs simply for the art alone?
If you're someone who is interested in utility, make sure that the project's ambitions match up to the experiences of the team.
Although The Crypto Apes Club has a very ambitious roadmap, I am confident we can fulfil this vision after minting out our collection. My experience, documented through my blog on mohamadalasadi.com reassures community members of this!
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Till next time,