5 ways to recognize legitimate NFT projects

So you probably noticed, that NFTs are all the rage now, and the hype is probably slowly animating you to research the space, even maybe invest in a couple of NFTs.

But how do you know, if I am buying, is a solid investment, or a scam.

Ok upfront: Yes most NFT projects are scams, or at best overambitious projects, that realistically, probably will never amount to anything else, then the JPEG you are looking at.

Does it mean that you should give up on investing in NFTs altogether? No not at all! Just be wary, and look at some key indicators that will tell you, where the NFT project you are interested in, is heading somewhere.

Active Community

It's a major red flag, if the project you are following, is only followed by you. So make sure that there is an infrastructure built around the NFT project that can serve a community.

What you are looking for are channels like Discord, Twitter, Instagram, or even Facebook. The idea is that every club needs a clubhouse for the feeling of tribalism to set in.

Ok, so there is a Discord set up, even a Twitter handle with a decent amount of following.

That still does not mean that you are ready to pour your life savings into the "Space-Pixel-Crypto-Monkey" project you recently discovered. Instead, spend some on these channels. Are there recent posts? are the people posting human beings? (I will address the topic of Discord and Twitter bots in a different blog post). If so what is the general sentiment? Do the Project heads engage their community by doing AMAs (Ask me Anything Sessions) does the development team offer updates on roadmap progress?

All in all the question for you to answer is: Is there a general feeling of an optimistic active community, that is being tended to by the project team?

One more thing to mention here. The amount of users is not always key, as you might be an early adopter of the particular NFT project. But if the infrastructure for a larger community is set up, and there is enough activity on the Project-Team side, you might be on to a winner.

Utility

NFTs can be pretty much anything, as these are made by deploying a Smart Contract on a Blockchain. Truth be told, the project, that only offers you a jpeg with a pretty picture, probably will never gain more worth than its scarcity. But did you know, that many projects offer you way more in a sense of utility? That having specific NFTs can give you access to everything from exclusive events, special merchandise, and ownership of physical items? The ways you can utilize NFTs are only limited by the imagination of the project initiators and their community. So before buying an NFT, find out what the project offers you, beyond the media file you are being offered.

Online Presence

This one is not rocket science, every NFT project, that hopes to become a sustainable business model, is going to put some effort into building a recognizable brand.

So you are looking for a website and an active social media presence. Look for online mentions and general chatter. Has there been media coverage of the project? (learn to recognize the difference between paid articles, which are advertisements, and unbias analyses of a project authored by a media outlet known for being unbiased).

Be wary of fake awards! It is literally possible to buy awards from dubious organizations and/or publications. So make sure to research recommendations by third parties.

Realistic Roadmap

If you are looking into Crypto projects, roadmaps are going to be a part of the things you are going to look through. When it comes to Roadmaps, there is little that will beat your sense of realism. While researching a project for a client, I was asked to look into an NFT Project, that had just launched two weeks before, and although I spoke to a couple of the key people involved in the project, these seemed like a couple of intelligent young individuals, their Roadmap seemed to be lacking all sense of realism. They planned to launch, within 2 Quarters, their online Animation series based on the Cartoon figures they had launched only two weeks ago. Within three quarters they were expecting global merchandising deals, even a cinematic premiere of a full-fledged animated movie.

So let's even ignore the fact, that these things take months to produce, deals take weeks to close, and that the team NFT Team today are 3 guys and a bunch of Fiverr developers, the project had through my research on the Ethereum Blockchain had only been able to raise 300K worth of Capital, and seeing the founders buying cars and other bling and then posting these on Instagram, did not leave me with much faith in there being a sound strategy in building a community infrastructure for holders.

So when it comes to Roadmaps, there is little that will beat a bit of critical thinking and common sense.

Do not FOMO into NFT projects!

NFT projects are very good at creating this brutal sense of urgency when it comes to new drops. To a point where the Fear of missing out, takes control of all rational decision-making. Sure there are times when you need to act swiftly, but even that does not mean you can not do some basic research. So before you throw your hard own money into other people's hyped-up NFT projects, take these quick steps. Sure these will not replace any real research, but they will eliminate 80% of the risk.

1. Mission - Is it just somebody trying to make a buck, or is there a coherent mission statement to be seen.
2. Online presence (Website, Social Media)
3. Roadmap - does it make sense?
4. Utility - What will make your JPEG increase in value over the coming weeks and months?

If you don′t find any red flags in any of the above, you might be on to a winner! Is it guaranteed? oh god no!

Here is maybe the most important thing: An NFT project, should give you a sense of community and belonging. It should give you the chance to connect with other holders, if only for the chance to exchange ideas, and share your excitement with fellow investors.