The Web 3 is still rough around the edges, but the growth of value has been immense. Fertile ground for scams. This piece aims to achieve two things:
- How to avoid potential scams, and;
- How to avoid your company looking like a scam.
This is based on years of watching the crypto space, from ICO pump & dumps to the NFTs & DAOs of today, so I’m not talking about any company in particular. However, should you have the feeling what I say applies to your own, then following the advice laid out here can improve your public perception.
No way to check transactions ‘on-chain’
NFTs took off in a way other digital goods didn’t, because they’re verifiable and you can actually own them in your own wallet. When a platform, for example an NFT marketplace, doesn’t make it possible to track this info (for example via Etherscan), you lose all the major benefits of NFTs. There’s no transparency and there’s no guarantee that the NFT will live beyond the lifespan of the platform in case of bankruptcy or an actual scam. This is really important, because projects will fail. Nearly half of all 2017 ICOs had failed by mid-2018.
No roadmap, whitepaper, explanation
Transparency is key. It’s early days. Things are clunky, they might break, and there are scammers around. The crypto space addresses this with loads of transparency through whitepapers and wikis that explain exactly how things work, what they plan to do in the future, and even the smart contracts that power it all. I personally wouldn’t spend money anywhere where this is missing. It’s such a basic thing.
As an example, here’s the Audius whitepaper (PDF).
No clear skin in the game
The crypto space is young, but it’s easy to build a network. When that network is missing, it suggests being new to the space, not understanding it well, or perhaps not having the intention to. What can compensate for it is a network in another domain, like music, sports or art, so that their reputation can be checked.
No team page on the website
This is not a must, but when all else is missing I want to know who are staking their reputation. I want to find these people on Twitter, Discord, LinkedIn and see who they’re connected to. Basically: who’s handling the money I spend?
Fake social media followers
It’s not that hard to figure out when post likes & follower counts just don’t add up. There are also tools to figure out what % of an account’s followers are bots. To me this often feels like someone trying to buy legitimacy instead of earn it. Scammers tend to move fast, because they need to pull the rug before people bail out.
Err on the side of caution
There are plenty of platforms that do things well. Don’t let FOMO get the better of you. Steer clear of platforms that tick the above boxes and give them time to sort things out. Help your friends do the same. It’s estimated that 80% of 2017’s ICOs were scams with $9 million being lost to them daily (2019). Lots of people trying out the promises of Web 3 got burned immediately and the whole space became known for it.
Let’s not let that happen again.