In any industry vertical, bad actors may be present. Unfortunately, the Web3 space is no different. Scammers, hackers, and cash-grabbers continue to plague the NFT space, discovering new ways to capitalize on the assets of other Web3 goers. In an effort to seek out strong projects, we urge you to stay patient and only invest your funds in brands that have a strong team/community, appealing art, and legitimate utility. If you’re ever questioning or doubting something along the way, we always recommend reaching out to friends, trusted community members, or respected collectors for additional insight.
As you grow throughout your journey in the Web3 space, you will begin to shape your own due diligence methodology and best practices. Through our experience in this space, the Toons team has assembled a guide outlining red flags to identify when approaching a new or appealing project (A more specific guide on best safety practices and scams in the space will be coming soon!). Here’s a list of red flags look for when evaluating NFT projects:
1.) Does the core team have past relevant experience with what they are setting out to accomplish?
Is the team doxxed or undoxxed? If undoxxed, is the core team known well and trusted in the Web3/NFT space by several respected communities?
2.) Does the mint feel rushed?
How long did the team market the project for pre-mint? Was it really enough time for the community to understand what exactly the project is and why it was started? Be cautious investing your funds into a project with a shorter timeline leading up to launch. Be wary of projects that are engagement farming, and never trust projects that have stealth mints. Any reputable project will announce important information well in advance of when it materializes.
How does the community feel about the mint? Are they supportive or are there legitimate concerns to be addressed?
3.) Is the mint price exceptionally high for no reason? Do you feel the price you’re paying justifies the value you’ll be receiving in return?
Can you trust the project’s team to deliver on your expected post-mint value?
4.) Is the artwork low-quality and/or done by someone paid off of Fiverr/Upwork? When art is one of if not the main aspects behind a project, you better make sure you like it before purchasing the project’s NFT.
Are you able to find out who the artist behind the project’s art is? If not, that’s a big red flag as the artist plays an important role in most projects. Make sure you can verify this as you don’t want to be minting a project with stolen art.
5.) Has the core team consistently been active on Twitter for the last several months? Don’t trust “founders” with little-to-no activity. You want to make sure the founder you’re trusting your funds with is in touch with the community and has the necessary connections to develop the brand into the future.
Is the core team able to answer questions about the project to the best of their ability? Communication is important in Web3 and teams that fail to communicate well tend to have trouble finding success.
Does the project’s Twitter page have a real, supportive community or is it mostly botted followers? Verify this before investing in a project.
6.) When mint day comes for a project you plan on minting, have many other people been able to mint successfully before you?
In a private sale situation or longer mint process, we suggest waiting a few minutes after a mint’s scheduled time to confirm others have minted successfully without any issues. Tip: If you feel comfortable enough to mint directly from a project’s smart contract, it could be better as you will avoid the mint website altogether through this route.
There’s nothing worse than being one of the first to mint a project and then realizing it’s a wallet drainer. Our best advice is to thoroughly vet the project, team, and contract through your due diligence and consider waiting a few minutes after a scheduled mint time as mentioned above. Also, create a minting wallet, burner wallet, or hot wallet for anything you don’t totally trust or are familiar with. Keep your cold wallets disconnected!
7.) Is a project’s secondary market sales volume organic or heavily inflated by the founders? Does the team constantly talk about the floor price and listing NFT’s of the project in the discord? If yes, stay away.
Aside from real secondary sales data, you should want to see a project’s team working hard post-mint to continue delivering value to holders no matter the circumstances.
If things are not going well post-mint, are the founders communicating with their community and continuing to do their best/stay positive? Will they listen to the community’s feedback and pivot if necessary? These are questions you’ll need to answer before continuing to hold an NFT.