Rug Pulls x Scams x Failed Projects
What's the difference between each and why it's important to understand before spreading FUD about creators
Oh, our dear newborn Cardano NFT bubble
Have you seen any ridiculous discussions on Twitter recently, especially in the past month, regarding influencers stealing from investors, projects that produced NFTs but are still operating being referred to as rug pulls, or simply utilizing the term scam without actually committing any type of theft?
That is the level of knowledge that Cardano's orcs possess, and since they believe they contain it, they repeatedly say the same thing incorrectly, just like imperfect humans do.
Let's start with Rug Pull. I suppose everyone experiences it, and if you haven't, it's only a matter of time before you do.
Here's a straightforward concept: imagine that a bad actor, who never leaves his room, finds a way to start an NFT project, scam a community by making untrue claims, and earn 400k ada in less than 6 weeks of work. He simply ends the project since he never planned to finish it, cannot keep his word, and certainly does not want to be held accountable for his actions. Twitter, Discord, and website are all gone.
This situation clearly qualifies as a rug pull because all communication between the community and project management has been cut off, more than 400k ADA worth of liquidity has been removed from our blockchain, and a group of people with useless products now have the choice between taking action to save the project even though they lack the necessary resources or just accepting that they were duped by someone or some group
Rug pulls are not easily prevented, but it is possible to hold individuals who engage in the activity accountable in a very straightforward way: know your customer.
If companies that provide services that may or may not financially harm their own users took the appropriate initiatives to request KYC from creators, we would be able to recover these problems; nmkr, jpg.store launchpad, peppermints, anvil and any other company that provides collections minting, verifying creators' identity, using a trustable third party KYC checker, and, proving their identity via video calls is the least we expect from platforms that can provide tools for minting
Obviously, this doesn't stop one member or another from compromising the project, but we know that if it's harder to start a project anonymously, we'll have fewer rug pulls.
If you're a creator, well-meaning, and obviously enjoy interacting with your community, I'll bet there's no reason to want to stay hidden at least for the tooling and partners you make, there's no reason to hide, and the privacy discourse, in your case as a seller, is really meaningless.
This doesn't mean that projects that don't dox even for their minters automatically become rug pulls, but this is a red flag and a set of red flags is obviously a signal to stay away from the project.
Ah, as a community, we should ask for open-source tools from developers or fund them; creating an open source smart contract or a way to easily create multi-sig wallets or provided from minters/open tools (hello wallet teams), is a second step to ensure that in DAOs and regular projects, teams have joint control over project funds.
Rug pulls aren't necessarily scams or failed projects, they're just rug pulls. You get the product (NFT), but your product is not going to have continuity or value, and this has been orchestrated from the beginning, usually systematically by a group doing the same thing over and over again.
So, if rug pull is projects that manage to sell a good amount and are deleted, influencer projects that die or projects that sold little, or when developers gave up on continuing over time are what?
Imagine that you own a shoe store, for example, but your shoe store stopped selling well a while ago and you need to close the doors because you don't have the funds to maintain the place, team, and keep bringing new products, in that case, you are just an entrepreneur who failed.
According to the BLS (Bureau of Labor Statistics) approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more. And we still need to keep in mind that we are not a regular business where customers find us at a store on the avenue, mall, or street. Many projects are simply overshadowed over time by the community's constant need to make a profit, and not all projects get enough transaction volume to live off royalties.
In cases of projects that have not sold all or that have a low ticket (30ADA or less) it is necessary to understand those creators have the full right to simply give up their projects if they become a burden to them or leave, in the long term, to bring in some kind of profit to maintain the project due to lack of attention in the community, they can talk and pass the administration on to new management that feels comfortable moving forward, or, leave it open for the community to decide. This is not a rug pull, nor a scam, it's just a failed project with no funds to move on.
Being outside of a project, as a buyer, makes the idea that creating, managing, managing the team, and innovating is always easy, or that marketing in this community is a matter of commitment and connecting on discord or posting GM on Twitter each day when actually it is not. Networking is a powerful tool built with time and effort, and quality networking has become a semi-open door that not everyone can afford or can get in on, and like everything else in life, it depends a lot on how SOMEONE talks about you. and not about how you explain yourself.
So failed projects are just dreams that are usually frustrated, or really projects that have come to an end, not every project needs to become a metaverse, have tokens, become a play 2 earn, or shape up to please those who bought it, neither have forever updates, or fight to stay alive performing Infinite drops of new collections every 4 months, most of the time art is just art and you bought in it because you liked it, or because you were afraid, your emotions is your own responsibility.
One way to collaborate with projects that you believe in and invest in is by sharing and inviting people to informally get to know what is being built and what the team is like. What makes the projects a “success” is the community that owns the NFTs, if the community itself is not active and just wants to be there hoping for some profit, or if you are only active in projects that have brought you some profit, it's not the creators fault.
Creators have a responsibility to use the attention their community makes them receive and turn it into a diamond, but without the community itself, the one-sided effort is just a poorly cut stone and it is natural that at some point it will no longer be possible to continue. In short, for most creators, the dream of having a successful project is to have time and dedicate themselves exclusively to the project, and when this is not possible, you have to choose between your dream of a venture or putting food on your own table.
Successful or quality projects, as you are learning to get used to, will try to raise millions of ADA in launches and will revert these values to teams where the individual salary reaches 200k annually, imagine having a team of 8 or more members and selling 10k of NFTs 2 times a year for 40 ADA?, or worse, imagine not being able to sell 1k of NFTs with an entire team to pay?
It is necessary to find, in common sense, where it is acceptable to understand that a team acted in bad faith in a project, even raising a lot of money with it, or, where a team had no option but to give up, and in both cases, the resolution does not come through FUD.
So if you understand that rug pulls are releases that generally sold well or sold at all and are deleted after release and that some projects may simply fail because they fail to achieve goals or have an active community, now you can specifically understand how the scam works and what is the purpose of a bad actor behind a scam.
In the two previous examples you RECEIVED a product, whether or not it has value in the future, it is still an asset that you own, so you got what you paid for, and the difference between the two situations and a scam is exactly that, buying NFTs is never paying for a tool or service, you’re paying for the NFT itself
In a scam, you don't get anything, and when you do, it's probably a fake NFT with the wrong policy id, probably made in a unitary way and specifically to harm you, when you offer to buy an NFT on a discord, eventually bad actors will identify your purchase need and replicate the asset you want, trying to trick you.
It's that simple, the scam is designed to completely harm you, there is no great effort on the part of the applicator and it is designed to deceive you without giving you anything. It can be a fake escrow, a website with a fake wallet connection, an exchange between original NFT and non-original NFTs, among many other models, scam is a scam that doesn't give you anything in exchange.
To avoid SCAM, we separate a specific article with useful tips for you to avoid getting caught, no matter how smart you think you are, there is always the possibility that the other will turn your intelligence into weakness and deceive you, no one is immune to this. If you want to read the article, you can read it here, we explain more about hot wallets, cold wallets, and secure tools like security bot and trading tent.
Finally, there are several projects that have been in the community for more than a year and continue to develop, even with a small community or without a lot of funds, tools and applications that work for the final objective of the project, it is important to recognize small victories and understand that these communities are probably dead because of investors who usually follow a specific mass or opinion, if this mass passes away from good projects, you lose.
Look for small projects that are developing good content and support them, we often invest everything we have in rug pulls and leave out really important creations for the community to slip through our fingers, this is where we stop serving the purpose of making this a degen space to make fast profits and start helping build out what we need to thrive.
Wrapping it Up:
Rug pulls are projects that usually sell everything and are turned off, from the beginning, there is no intention on the part of one or more members to continue with the project, but even if they are turned off, you and all buyers still own the product and can take charge of the continuity of the project you believed in;
Failed projects are the normal consequences of a fast market and essentially flipping mentality, or failing to sell everything; there is a very big difference between projects that have the revenue to continue and team members move on with the money and start new stuff non-stop (cof cof) and fail and projects that cannot sustain themselves financially, and it is necessary to understand that in these cases, as we explained in another article, you are just the buyer of a product that you did not have success and the owners owe you absolutely nothing.
Unlike the two options above where you receive a product, the SCAM is the result of directly malicious work by one or a group of people whose sole objective is to TAKE AWAY your goods without giving you anything in return and this can be done. in multiple ways, with escrow and dApp connections being the most common.
It is inevitable sometimes to become a dumb orc, and knowledge is an ideal tool to convert stupid opinions into good manners in the community, so at least be a dumb and cute orc.