How to identify toxic NFT game projects

Over the last couple of years, games that use blockchain technology have actively developed and are attracting new players, and the decentralized gaming market – broadly referred to as GameFi – has gained great popularity.

The GameFi industry started back in 2013, and since then the sphere has developed slowly, but in 2021, the popularity of decentralized games exploded along with the boom in non-fungible tokens (NFT). According to analytics service DappRadar, the total value of one of the most popular blockchain-based games, Axie Infinity, exceeds $ 550 million.

But the GameFi industry has its problems. Many projects often “start” regardless of the game’s development stage.

And while Bitcoins (BTC) price trend may improve or weaken the success of GameFi projects, it is not necessarily a direct correlation.

Despite the bear market, the price of many GameFi tokens is growing today due to their NFT component, as investors aim to monetize the resale of heroes and digital items in the game, instead of concentrating on improving game mechanics. .

When choosing a GameFi project, it is worth considering the marketing and technological component: How actively the project is promoted, and what benefits the project token provides to the participants.

However, one must be wary of pie-in-the-sky promises from GameFi token projects, as scams abound in space.

One of the biggest GameFi scandals was in the fall of 2021 when the Squid cryptocurrency was based on Octopus games the show collapsed to almost zero after rising to $ 2800.

The token, which was based on but not affiliated with the Netflix series Octopus gamesfirst appeared in October 2021. It was a crypto game that was to consist of six rounds, similar to the rounds of deadly competition in the series’ plot.

To participate in each round, users had to pay with Squid Tokens. The game was scheduled to be launched in November. Developers will receive 10% of funds raised, and the winners of the game 90%. At the time of the issuance of the token, users noted that it was impossible to sell the purchased currency.

Furthermore, observers began to become suspicious when it was discovered that there had been no official connection between the token, Netflix and the authors of the series, so they began to warn users about a possible fraud. When such warnings became widespread, the fraudsters immediately withdrew all the money. According to several reports, the fraudsters earned $ 3.38 million in total.

The leaders of the “classic” gaming industry are very suspicious of GameFi and tend to avoid the industry altogether, which is a sign that users should be careful. In February 2022, Gabe Newell, CEO of Valve – one of the largest video game developers in the United States – commented on the company’s decision to stay away from the GameFi sector.

Newell claimed that games with NFT and blockchain mechanics are “superficial and sketchy” and that NFT creators and projects “are not people you really want to do business with.”

Newell added that there are reportedly widespread cases of fraud in the NFT sector, and stated that due to the volatility of token prices, players do not even understand when and what to buy.

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Epic Games CEO Tim Sweeney joined his colleague earlier this month by calling Fortnite Token a scam and stating that the company is preparing legal action to close it. However, the creators of Fortnite Token responded by describing it as a fan-made project with no specific owner or company behind it. Fortnite Token first appeared in late 2021 and no doubt tried to tie in with Epic’s megahit Battle Royale game.

How do NFTs fit into games?

To understand GameFi, one should get acquainted with NFTs and their integration with smart contracts. An NFT is an asset whose digital receipt is located in the blockchain.

The smart contract is linked to NFT. This sounds serious and professional; even if it’s really just a small piece of code. And this little piece of code can be anything, including a link leading to a JPEG file stored on a central server. In fact, the majority of NFTs are just that at the moment.

A smart contract, used to “manipulate” an NFT object between games, is not a multifunctional tool. It does not include a model, textures, description, sound, animation, etc. so that an element or character can be easily transferred from one title to another. For the integration between two games to work, these games must be built, run and maintained through a single infrastructure or game engine. Such integrations do not currently exist in the gaming industry.

Furthermore, an NFT game can only work if it has a large group of users with their own finances, where players can buy and sell items in the game in the form of NFTs. However, many traditional games already have such economies.

Eve Online, for example, sells and buys ships for real money, while Counter Strike: Global Offensive pushes skins for the price of apartments and cars. In general, NFTs themselves have no value, and it is the NFT owner’s job to convince users that their assets are worth real money.

It turns out that even if the developers of a particular game do not want to fool the players, but really develop their project, they have to convince users of the uniqueness, freshness and point of interest of their project, and this is extremely rare.

How to detect a scam?

NFT scams are often large and deliberate. Most investors in such projects are not experts, but beginners, and scammers take advantage of and attract inexperienced users through ads and beautiful pages. Users should therefore be careful with more details (explained below).

Project team

Developers of professional projects have always gathered experience. Their biographies can be easily found on the internet, with an overview of how successful their previous ideas were.

However, there are many serious projects in GameFi launched by anonymous teams. Little information can be found about them because they are hidden behind nicknames or pseudonyms.

Reviews on professional platforms

When studying a project, one should never rely on advertising slogans. It is better to read reviews about them on independent professional platforms. The blockchain community responds quickly to the emergence of new projects. In a few hours, any idea will be analyzed from all angles.

But scammers have adapted and figured out how to trick users. Some teams shill projects by writing positive reviews about the company on third-party websites. They pre-register hundreds of accounts on major forums under the guise of real users. When a command is given, they send the text prepared according to the training manual. So investors can not rely on reviews alone.

Projects on social networks

Be sure to look through the social networks of the project and take into account the number of people involved in their activity in chats and comments and the type of messages. There are no secret projects without users.

Smart contract

The easiest way to check the project’s smart contracts is to use such resources as Etherscan or BscScan. The block explorers will give you information about when the project was created, brought to market, how many users it has, and how many tokens were issued.

Future income for the project

Every project is created to make money, and it is important to understand where the added value will come from. A person should not invest until they understand the source of a project’s profit.

Network marketing

There are many GameFi projects built on a multilevel marketing (MLM) system. This is similar to classic network marketing, which is not a scam in itself. A large number of good projects have used MLM to attract new users, but if the project has no source of income other than network marketing, it is probably a scam. In addition to MLM, there must be value-creating mechanisms. Real projects can not unreasonably promise users huge percentages of profits.

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Ethan McMahon, an economist at Chainalysis, told Cointelegraph that one should pay attention to the links displayed on a project’s website:

“Scam projects like Squid Game often start with just a white paper, a landing page, and a token entry on a major cryptocurrency exchange. They may refer to counterfeit partnerships, non-existent employees and / or 3D renderings stolen or pre-purchased. Other potential red flags include typos and broken links. Of course, it’s also worth checking out if you can actually play the game. If not, it could be a pump-and-dump or rye-pull scheme. “

Although the NFT gaming market is actually overvalued, NFTs as an investment have not yet reached their potential. NFTs need to be understood more broadly instead of believing that they are just objects you receive after countless hours of grinding. The negative bias against NFT games among skeptics was formed precisely on the basis of volatile trading in assets without a clear use case.

NFTs can and should have intrinsic value. For the NFT market to mature, a strong link to real assets and services is needed.

Pedro Herrera, head of research at DappRadar, believes the future of crypto gaming is bright, and suggests that it can move forward without NFTs:

“In my perspective, blockchain games will be massive, but we’re still a couple of years away from seeing an actual mass adoption event. Traditional gaming is a $ 60 billion industry where people spend around $ 20 billion a year on game purchases such as wearables, weapons and skins. When the first blockchain AAA game combines a good gaming experience with cryptocurrencies, we’ll see traditional gamers, purists turn their attention to blockchain games, and also, it’s the Web3 meta-verse where MMORPGs will be a dominant way to socialize and play. “The future of blockchain games is bullish. When it comes to scams, there will probably be a few, but it’s more common to see them in NFTs.”