Why 90% of NFTs Fail
Breaking down the details of your rugs, and my rugs.
You thought you were a top-notch trader, so you swept some NFTs for the “art and culture” and caught yourself in a pinch. The volume just dissipated and your investment is non-existent. The race to the bottom is apparent and listings are at an all-time high. Your gut told you to sell but your peak euphoria and dopamine hit said HODL.
“Down Bad” is an understatement and you hate every letter in the words digital assets. While sadly this is a common thread, there are also a few reasons for the madness. Whether investor, trader, gambler, or collector, there is no doubt that spending a few years around the NFT space will give your net worth a ride on a roller coaster, so buckle up and learn from your mistakes!
What is a rug pull?
Learn What To Look Out For
Understanding these types of scams is crucial for safety as they feed on the psychology of gambling euphoria that most new people get when they enter the space, and see the perception of high risk quick and easy profits. The more people that join crypto to “get rich” the better odds scammers will have at attracting a potential buyer to unfortunately invest in their scam project. Whether crypto token or NFT, the deception runs deep and the best thing you can do is educate yourself on what to look out for and how to prevent the situations from happening to you.
Hard Rug
When the liquidity for a project gets removed, leaving the holders and investors with a worthless token asset. This is especially problematic for non-native tokens as the ability to cash out for loss is relatively nonexistent. This is usually malicious intent, pre-planned, and sometimes organized by internal project members, hence why it is important to only invest in a project you have found true conviction in.
Soft Rug
A soft rug is a deceptively slow and emotional drain of liquidity. The miss conception of success is played against the investor’s hope for a rebound. Project flounders manipulate announcements and create fake partnerships to lure in the facade of progress by creating a staking contract, and token emissions to lock in the community, yet the project is getting abandoned and there is no clear-cut leadership, access to funds, or growth projections.
Other failures and how they differ.
Centralized Exchange Attempts:
$LUNA, $FTX and Voyager were not rugs. These collapses were results of poor banking security measures, fraudulent moving of customer funds, lack of expeience and proper investment guidence, breached terms and conditions, failed audits, and failure to establish clear cut crypto regulations causing a landslide in market cap due to poor risk management behind the doors of select centralized exchanges.
To learn more about what happened with
- Luna
- FTX
- Three Arrow Capital / Voyager+
- Celcius
- Mt Gox
Check the links above for more info.
Learning From Failed NFT Projects.
Look no further than the misconception of utility, and what drives that facade of success. What are the types of hurdles faced when building behind that thesis? Who and how is funding the development of the project going to be sustained? If mint funds are not secured that is one thing, but progress can be stunted in the blink of an eye if the seems to be a roadblock in development or floor price, or worse lack of multi-signature wallets allow a malicious insider to take the funds and disappear.
Learning from the RPS Problem: While supporting anonymity, the unfortunate part of an“Anonymous developer” stopping development for whatever right after an ambitious airdrop adds to the uncertainty. These types of issues prove the value of having a responsible CTO or project developer if your project is going to rely on technical assistance.
Without it, utility-based projects will rarely ever be able to overcome the hurdles of UX/UI upgrades, debugs, and streamlining the necessary code base to keep up with performance and scalability. Projects with in-house devs that care about the project they are building while staying incentivized are second to none. Build with transparency at your own pace. Slow consistent progress is better than volatile ups and down.
Unfortunately, there are a lot of bad actors pretending to be loyal blockchain developers and they take funds without fulfilling tasks, creating a misleading roadmap for the community to build off of, swaying investors, and shattering community and public trust in blockchain.
Aside from that, even the legendary Cardinal Labs will be depreciating protocols due to hard macroeconomic times leading to an influx of crypto maximalists being the only product market to their protocol and services.
Opinion:
As someone studying the many sides of blockchain technology, I wholeheartedly feel the same way. Numerous case studies showcase the diversity of what blockchain is capable of and how it can better humanity but get little to no attention. Instead, it gets overlooked by crypto trading and venture capitalists market making and looking for the next pump.
Until we see an influx of people who have educated themself enough to know how blockchain can benefit businesses and enterprises behind the scenes, the current norm will continue to breed skeptics. While many top 100 businesses have already adopted blockchain on the back end (81 — top 100), we have yet to see progressive climbs from big tech to help sustain these types of growths in fields outside of traditional finance, and when they do: legislature and public consensus reject it.
I personally think that blockchain will start to gain mainstream adoption when more exposure can be pushed toward the value of consortia and how there have been huge initiatives towards reshaping industry standards like Seafood & Produce tracking by Hyperledger, Diamond Blood traceability & Ethical Diamond Sourcing — Everledger, Streamlining Medical Records and Pharmaceuticals by Chronicled / Mediledger plus many more.
Ethical compliance and privacy by design should be standard, not “enhanced digitization.”
Learning from the Infinity Frogs problem:
DFINITY built some innovative bridges between ICP, Polygon, and Ethereum, but the lack of community behind its discerning. Maybe the tech isn’t compatible yet, or maybe it just isn’t in the hands of the right people, but the proof behind ensuring a community has hands around the project.
While claiming my Infinity Flies (Free claim on Polygon for Frog holders) it became clear that people joining NFT communities were not at all as hyped about the success of the technology. Many were only concerned about their “investment” or trading capital and less about the growth and sustainability of how their chosen project will actually benefit the blockchains and aid interoperability in the long term.
Don’t bite off more than you can chew. Too much tech too early with no community is tough to pull off.
Learning from the SolFennex problems:
You could have, top notch art, live non escrow staking with raffles, and a full group of professional VFX artists working full time and they still all ghost the project.
Doxed teams on a Magic Eden launchpad mean nothing to long term sustainability of a project.
Solfennex launched on Magic Eden, with promises of escrow-less staking, and raffles (which did provide rewards), but fell short of the completion in metaverse creation and game development, character integrations, and comics. For whatever reason, the team fell apart from the inside out, and ghosted after a really cool mythical art airdrop that was supposed to solidify the top holders. Whether this was planned to leave or coincidental, the legendary Sol Fennex hash list never made it to Magic Eden to open up secondary trading and we are now left with really cool art, but from a potentially hidden, incomplete, and/or untradeable collection.
Whatever the internal discrepancies may be for a team, lack of clear consistent communication is the red flag to look out for here. Stay Vilgilant
How early is too early?
Learning from the Meta Homes problems:
Sometimes you are just too early for your own good.
As someone who minted in November of 2021 and was extremely excited about this project, I was able to witness the progress and demise of the project. Understanding that most of the funds were directed into a development team who released an arsenal of AR capabilities that were token gated a downloaded app off the Google Play Store!
The KEY Problem — Phantom Mobile (Solana Mobile Wallets) didn’t exist yet, let alone the deep link capability needed to allow the Meta-Homes project to flourish through GPS and mobile browsers.
When it is all said and done, we are left with a multi-sig cashmere wallet of unswappable SPL tokens, but no funds to develop a heavy-lift project, this is the reality of start-ups and the low success rate behind Web 3 digital assets. While I could write an entire Medium article about this and showcase the capabilities of what the founders were ideating, that thread is going to be a round two pitch deck for a relaunch when the time is written as the concept is still genius to this day.
Key Takeaway: Make sure the tech exists and your ideas are possible before launching. You may only get one chance…
So the community is important?
The most important. While also being a big enjoyer and believer in the art behind Flying Monkeys and Glitched Gorillas, the aggressive and persistent bickering from the community members can become toxic and repelling to founders and creators. You can not force someone to return or create in this space if they are unwilling. Even if they had the best intentions, their motivation to build must hold past the facade of holder acceptance. Just a handful of people alone is not enough to revive project morale, so treat your builders with respect or they might not want to build for you anymore.
Why would anyone want to build and create for people who won’t appreciate their craft?
I thought people cared about art.
Investors care about money and how to make more. Not all investors are good people, and traders are not collectors.
Pixsols was one of the first GIF-loaded projects to drop on Solana from the initial V1 Candy machine days behind the fully on-chain Solarians
Unfortunately:
- The founders rugged and stole the mint funds.
- Didn’t even pay the artist in full.
- Didn’t launch the art on-chain and the art started to disappear after the 6 months of public image storage time was up and never repaid to keep the art hosted for the NFT metadata URI.
- They deleted the community discord and prevented the community from rebuilding and relaunching even after we had all opened up a new discord to try and get the founders to give us the credentials to the project.
Many of us tried to help revive and support the artist, but in the end, you need to make sure who you launch projects with is loyal and trustworthy to your project goals. Rebuilding project morale is already hard enough.
Lesson: Whoever holds the update authority to the collection owns the project.
Why DAOs matter.
When founders have misguided judgment or unrealistic expectations, it is hard to progress a project in a healthy direction towards achievable goals. While the Aces card sharks launched during a decline marked at $222 USD, the founder failed to adapt and drop the mint price to encourage more volume traded, essentially deterring anyone with less funds than asked to participate. Currently, the value of the art is holding at just shy of $10 USD in Solana, but the project should have been minted out and traded a long time ago.
Even though there was a full first collection of NFT tradeable cards that I even had a set royalty for art on, a functioning poker room, games, and competitions for tournaments, the stubbornness to fully mint out the collection ruined the project progression and outside perception. There were a number of suggestions given to try and revise how the mint was going but ultimately, no advice was taken nor didn’t the founder want to hand over the project.
While I offered some assistance in that regard, this founder then proceeded to switch gears and completely give up on Web 3, in general, to focus on personal growth and other activities. While generally, I am supportive of people's personal decisions, I find it contradicting to launch a project and build it on the blockchain, where people all over the world will have potentially lifetime access to it, then fail to include the necessary people and make the tough decisions to keep it sustainable beyond the project founder alone.
Without proper governance in place project founders are prone to poor decisions, and have zero accountability to their failures when there is no solution at hand.
Successful NFT Project Examples: On-Chain Token Emission Winners
Cyber Kongz
Quite possibly the innovator of on-chain token emission deriving from an NFT collection. 1 Banana is 1 Banana
Super Shadow Coder DAO
$SHDW still is of the best examples of utility. The SSC NFT had to be staked to earn the set amount of attached utility token rewards. The token is used for storage and self-sovereign ownership of data
DeGods
Having a deflationary tactic to double the emissions for $DUST worked well into the supply vs demand of DeGods vs Dead Gods.
Aurory
The Aurory Project was one of the first successful NFT launches on Solana that gained traction for passive income rewards, built and stapled around the gaming community. A truly underestimated collection.
Famous Fox Federation — TransdimentionalFF
True innovators in the space developing some of the first sets of tools for Solana NFTs to be mass transferred in bulk, private message (Ping) through anonymous NFTs, non-escrow staking for the $FOXY utility token as well as gamified rev share.
Stoned Ape Crew
SAC is breaking down the barriers between cannabis and cryptocurrency with the $PUFF token. Regardless of also contributing to the Solana ecosystem with raffles and development work, their big highlight is the pay leaf integration they are building and working towards gaining adoption within the cannabis communities. If successful, the $PUFF token emitted by the Stoned and Nuked Apes, along with other select tokens will be used to purchase cannabis and other goods from registered vendors.
Ghost Kids
Ghost Kids are the best example of a community that came from a low mint and stuck together to build. With the $BOO token being a foundation within the community and being acquired through staking rewards and SaaS gifts, its use case comes in the time of action when raffles for BTC ordinals or other blue chip NFTs get raffled away.
Successful NFT Project Examples: Metaverse
Portals — The Metaverse on Solana. Explore downtown, invite friends, chat, build, and show off your NFTs — right in the browser.
Solaris — Aether Labs — Solaris consists of 5,000 properties situated around a dense city core forming a living image of the Solana NFT community. Discover experiences that take just seconds to load and seconds to create
Moonshine Labs — Unlock limitless possibilities with Moonshine Labs Pass. Experience premium subscriptions to all of our offerings and receive exclusive upgrades and free perks in various zones. And that’s not all — a stunning Condo in the metaverse awaits you, ready to be transformed into your own personal oasis
Yaku — Cyberpunk Metaverse across the whole Solana ecosystem.
Sovanna — Sovana is an interoperable metaverse where we bring utility to NFTs. Our vision is to integrate and drive value to existing NFTs and communities.
Airia — World’s premium, photorealistic & customizable metaverse space.
Successful Communities PFP Projects
While Bored Apes, Azuki, DeGods, Doodles, Pudgy Penguins, Moonbirds are all top PFP projects here are some other’s in a more affordable price range
Solana Monkey Business / Monke DAO — SMB Gen2 is a collection on the Solana blockchain of 5000 randomly generated 24×24 pixel Monke NFTs. These charming Monkes are easily recognizable at any size and hold great status within the Solana community. Return to Monke.
Mad Lads — Fock It
Degen Ape Academy — Our mission here at the academy is simple: Take 10,000 of the smoothest-brained apes, put them all in one location and let the mayhem ensue. The academy was founded on the principles of friendship-making, crayon eating, and absolute, unregulated, deplorable, degenerate behavior. Welcome fellow apes, to the Degenerate Ape Academy.
Thugbirds — A collection of 3,333 uniquely generated, tough, and collectible Thugbirdz. Please go to https://swap.thugbirdz.com/ to reload your bird if not verified. Rebirth of an OG (Minting BTC Birdz right now)
SolGods (The Fracture) — Inspired by metaphysical artist Giorgio de Chirico. The Gods are the legacy 6666 collections within ‘The Fracture’. A Brand Born in Blockchain.
Primates — Primates is a project built for the community, by the community. The goal of Primates is to create a brand that facilitates a seamless adoption of the web3 space through our community-fueled ventures and collaborations.
Datboi — Welcome, and sorry… in every life we’re given a path. The Datbois project is a journey off-trail. We are not one product. We are a culture shift. Doing more… and barking less. The story of the underdogs.
Mindfolk — A collection of 10,000 unique explorations of well-traveled Mindfolk. 100% of royalties go to DAOMind.
