Non-fungible tokens (NFTs), which are the newest trend in crypto, have attracted new users, creators, investors and collectors to the crypto community. NFTs can be found everywhere, from anonymous cryptonauts selling tokenized memes to Burger King distributing NFTs in a marketing campaign.
There are so many NFTs out there, how do you know if one is legitimate?
This guide will help you determine whether an NFT venture can be trusted.
What are NFTs?
Non-fungible tokens are unique cryptographic tokens on a blockchain that represent a one-of-a-kind asset in the physical or digital world.
NFTs can represent artworks, music, digital identities, tickets to games and shows, gaming tokens and even, illustrious tweets by famous people.
Unlike fungible cryptocurrencies like monero (XMR), where each XMR can be interchanged with another XMR, NFTs are non-fungible, which means you interchange one NFT for another as each is verifiably unique.
How to evaluate the legitimacy of an NFT project
NFTs can be traded more often, which makes it easier to spot financial and behavioral patterns through data, community feedback and experience.
These are the top factors to consider when analysing an NFT project in order to determine if the NFTs have legitimacy.
The most important factor in evaluating the viability of an NFT project’s validity is its brand recognition.
You are most likely to be looking at a project with value if there is regular media coverage and active discussions by respected crypto community members about NFT brand.
You are most likely dealing with an NFT project if a NFT collection was officially launched or approved by a celebrity, athlete, brand, or other established artist.
NFTs are beautiful and attractive because they can be traced. It is possible to see the originator of the NFT, the date it was created, the number of people who have traded it and how much each trade has sold the NFT for. This will allow you to avoid purchasing fake NFTs. Scammers may just right-click to save JPEGs and then sell them to unsuspecting buyers as the “originals”.
The underlying blockchain
Ethereum has been the preferred NFT chain, becoming the most used blockchain by NFT creators and companies. However, Ethereum’s “mooning gas fees” have led to other chains like Solana gaining a share of the NFT market.
It’s easy to understand why collectors have faith in Ethereum’s stable and consistent track record.
However, there are some blockchains that may prove more affordable than others for NFT creators in the short-term. The NFTs that are stored on a blockchain will probably be lost if it doesn’t survive.
Research the blockchain that it runs on before you buy any NFT. Then, decide if you believe the chain will still exist in 50 years.
Intellectual protection rights
Make sure that the NFT brand is protected by intellectual rights.
An anonymous NFT creator may use images of celebrities or brands to illustrate his/her work. This could be a violation of intellectual property rights. The creator could be sued by the owner of the intellectual properties and the NFT’s value will plummet.
You hear about NFTs when celebrities or brands issue them. You might want to steer clear of someone selling NFT art with images Kim Kardashian on it.
Airdrops and giveaways
The easiest way to tell if an NFT project has been scammed is if it is given to you “for nothing” or if there is a competition or giveaway.
This checklist is intended to help you avoid NFT scams, and help you find some cool pieces of crypto art and collectibles that will be great additions to your collection.