Users must submit projects to a verification process before investing in them. Experts have detected NFT market manipulation practices since 2018.
A growing number of new projects emerge in the non-fungible token (NFT) market. Although that makes it hard to identify fraud hidden among so many initiatives, there are some techniques to find out.
Investors can take into account several elements to avoid the traps set by scammers. The objective is to encourage good practices to distinguish promising projects from those that are not.
For that reason, specialists recommend following several verification points before buying, regardless of the NFT.
Why Users Consider the NFT that Interests Them as Valuable
Experts recommend that investors know why they consider the NFT they want to buy to be valuable. That will allow them to assess why they should have it and pay a certain amount of money for it.
They also suggest checking the usefulness of digital assets as many sell crafts and physical sculptures in digital galleries with them.
Another factor to consider is a projection to determine if the price of the NFT may increase or decrease over time. The purpose is to calculate whether the asset will revalue or devalue.
When Assets Really Belong to Investors
Specialists believe that investors should understand when their assets belong to them. They recall the saying that goes if they are not your keys, they are not your coins.
They warn users not to forget to save their crypto assets for themselves. They highlight that if someone else takes custody of them, then they do not belong to them.
Another practice that experts recommend is considering whether the developers can suspend users’ accounts. Likewise, they suggest asking whether they have access to funds stored in investors’ wallets.
How Users Check that an NFT Project is a Scarce Asset
Specialists’ recommendations include checking if there is any risk that developers will launch many of the same projects. If that happens, the asset loses value as a unique product, which characterizes collectible non-fungible tokens.
For example, the first NFT project, the CryptoPunks, consisted of 10,000 24-by-24-pixel images of various punk characters. When they appeared, it was possible to get one only by paying the fee of an Ethereum transaction.
However, upon reaching 10,000 CryptoPunks, there would be no more issuances of those digital characters. In other words, the smart contract restricted the supply to what it was from the beginning, establishing how many punks there could be.
What Users Should Know about the Tornado Technique
Some NFT creators pretend they have a lot of sales using the tornado technique. User 0xA sells an asset at 0xB, but then the sale of the same asset occurs between different wallets. After that, the NFT returns to 0xA once he buys it.
More complex patterns of market manipulation characterize themselves for trading the same NFT between multiple people. However, analysts doubt that those operations happen between various actors by coincidence. However, that does not by itself mean that there is market manipulation.
Other elements like the participation of many wallets do not always mean that there is the same number of people behind them. In any case, safe practices help protect users while operating in the NFT market.
By Alexander Salazar
