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Non-fungible tokens (NFTs) are arguably the hottest, relatively new trend in the crypto world, attracting entirely new audiences, creators, users, investors and collectors to the crypto ecosystem. From anonymous cryptonauts selling “homemade” tokenized memes to Burger King giving away NFTs as part of a marketing campaign, NFTs are seemingly everywhere.
But with so many NFTs circulating, how can you tell if an NFT project is legit?
In this guide to evaluating NFTs, you’ll learn what to look for to find out whether an NFT project is legal or not.
What are NFTs?
Non-fungible tokens are unique cryptographic tokens on a blockchain that represent a unique asset in the physical or digital world.
NFTs can represent artwork, music, digital identities, tickets to games and shows, tokens, and even famous tweets from famous people.
Unlike defensible cryptocurrencies like Monero (XMR), where each XMR can be exchanged for another XMR, NFTs are not defensible, which means you can exchange one NFT for another, as each is demonstrably unique.
NFTs can be found on various NFT marketplaces where parties can buy, sell, display, and even mint NFTs. Popular marketplaces include OpenSea, Rarible, Super Rare, and Foundation.
As the value of and interest in NFTs continues to rise, so do nefarious actors seeking to exploit NFT newcomers. Read on to learn what to look for to find out if an NFT project is legit or not.
How to assess the legitimacy of an NFT project
As more NFTs are published and traded, it becomes easier to observe behavioral and financial patterns based on data, community feedback, and experience.
Here are the most important factors to look for when analyzing an NFT project to determine if the NFTs are legit or not.
Probably the most important factor to consider when evaluating the validity of an NFT project is its brand awareness.
If an NFT collection has been actively traded in the past and the value of the individual NFTs in the collection has steadily increased, you have probably stumbled upon a reputable NFT project.
In addition, if you can find regular media coverage and active conversations of serious crypto community members about the NFT token, you are probably dealing with a project that has value.
Size of the community
The most reputable NFT collections usually have a vibrant community of collectors and fans.
If an NFT brand you are considering has little to no community and it is hard to find online communities to discuss the NFTs (e.G. An almost empty Discord channel), you might want to leave it alone.
Identity of the creator
If an NFT collection has been officially launched or approved by a major brand, celebrity, athlete or well-known artist, you are most likely dealing with a legitimate NFT project.
The beauty of NFTs – and one of the things that makes them attractive to artists, brands and creatives – is their traceability. You can see who the original creator of the NFT was, when it was minted, how many people traded it, and even how much it sold for in each trade. This will help you avoid buying fake NFTs from scammers who simply right-click JPEGs and sell them as “originals” to unsuspecting buyers.
The better known the creator, the more likely it is that it is a legitimate NFT project, even if the collection was not published by an influencer or celebrity.
The underlying blockchain
Ethereum (ETH) is the preferred chain for the NFT market and has established itself as the most popular blockchain for NFT creators and brands. However, given Ethereum’s “mooning” fees, other chains, such as Solana (SOL), are entering the market and capturing their share of the NFT market.
Looking at the blockchain network on which an NFT project runs will help you understand how secure your NFT will be in the long run.
With an established blockchain like Ethereum, it’s easy to understand why collectors trust that their artwork will exist “forever,” since the chain has a relatively high level of stability and continuity.
Conversely, some emerging blockchains may be more affordable for NFT creators, but only in the short term. If a blockchain does not survive, the NFTs stored on it will likely end up worthless.
Before buying an NFT, learn about the blockchain it works with and decide if you think the chain will still be around in 50+ years.
Intellectual property rights
Make sure an NFT brand has the intellectual rights to what it is selling.
If an anonymous NFT creator uses images of a celebrity or major brand, there is a good chance that the creator is infringing on intellectual property rights. In this case, the owner of the intellectual property can sue the creator, and the value of the NFT will plummet as a result.
Stay away from NFT projects that appear to be someone else’s intellectual property.
When celebrities or brands release NFTs, you hear about it. So if someone is selling “NFT art” with pictures of Kim Kardashian on it, you should stay away from it.
Probably the easiest way to tell that an NFT project is a scam is if you receive it “for free” or if you are asked to participate in a “contest” or “promotion.”
In most cases, these are attempts to get your crypto wallet logins in order to steal your existing NFTs and any other digital currencies or tokens you hold in them.
We hope this checklist will help you avoid NFT scams and find some nice crypto artifacts and collectibles for your collection.