Scams in GameFi: How to identify toxic NFT gaming projects

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Over the past few years, games using blockchain technology have been actively developing and attracting new players, and the decentralized game market – broadly known as GameFi – has gained immense popularity.

The GameFi industry began back in 2013, and since then, the sector has been slowly evolving, but the popularity of decentralized games exploded in 2021, along with a boom in non-fungible tokens (NFTs). One of the most popular blockchain-based games, Axie Infinity has a net worth of over $550 million, according to the DappRadar analytic service.

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But the GameFi industry has its issues. Multiple projects often “launch” regardless of the development stage of the game.

And while the price movement of Bitcoin (BTC) can enhance or undermine the success of GameFi projects, it does not necessarily have to be directly related.

Despite the bear market, the price of many GameFi tokens is rising today due to their NFT component as investors aim to make money on the resale of in-game heroes and digital items rather than focusing on improving game mechanics.

When choosing a GameFi project, it is worth considering the marketing and technical component: how actively the project is promoted, and what benefits its participants get from the project’s tokens.

However, one needs to be careful about the promises made by the GameFi token project, as there are a lot of scams in this area.

One of the biggest GameFi scandals occurred in the fall of 2021 when Squid was based on cryptocurrency squid game The show fell to almost zero after rising to $2,800.

Token, which was based on but not affiliated with the Netflix series squid gameFirst appeared in October 2021. It was a crypto game in which the plot of the series would consist of six rounds similar to the rounds of the deadly competition.

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

Furthermore, observers became suspicious when it was discovered that there was no official relationship between Token, Netflix, and the series’ authors, so they began warning users about a possible scam. When such warnings became widespread, scammers immediately withdrew all the money. According to multiple reports, the scammers made a total of $3.38 million.

The leaders of the “classic” gaming industry are highly suspicious of GameFi and tend to avoid the industry altogether, which is a sign for users to be cautious. Gabe Newell, CEO of Valve – one of the largest video game developers in the United States – commented on his firm’s decision to move away from the GameFi sector in February 2022.

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

Newell said that there are reportedly widespread instances of fraud in the NFT sector, adding that due to the fluctuating token prices, players do not even understand when and what to buy.

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Epic Games CEO Tim Sweeney along with his partner earlier this month called the Fortnite token a scam and said the company was preparing legal action to shut it down. 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, without a doubt, was trying to join Epic’s mega-hit battle royale game.

How do NFTs fit into gaming?

To understand GameFi, one must be familiar with NFTs and their integration with smart contracts. NFT is an asset whose digital receipt is kept in the blockchain.

The smart contract is tied to NFTs. It sounds serious and professional; However, in reality, it is a small piece of code. And this little piece of code can be anything, including a link that leads to a JPEG file stored on a central server. In fact, currently the lion’s share of NFTs is just that.

A smart contract, which is used to “manipulate” an NFT object between games, is not a multi-functional tool. It does not include a model, texture, detail, sound, animation, etc. so that an item or character can be easily transferred from one title to another. Thus, for integration between two games to work, these games must be built, run and maintained through the same infrastructure or gaming engine. Such integrations do not currently exist in the gaming industry.

Furthermore, an NFT game can only work if it has a large pool of users with its own economy, where players can buy and sell in-game items in the form of NFTs. However, many traditional sports already have such economies.

For example, Eve Online sells and buys ships for real money, while Counter-Strike: Global Offensive is pushing skins for the price of apartments and cars. In general, NFTs themselves have no value, and it is the job of the NFT owner 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 deceive the players, but actually want to develop their project, they need to explain to the users the uniqueness, freshness and point of interest of their project, And this is extremely rare.

How to detect scam games?

NFT scam games are often massive and pre-planned. Most of the investors in such projects are not experts but beginners, and scammers take advantage of and lure inexperienced users with the help of advertisements and beautiful sites. Therefore, users must pay close attention to several details (explained below).

project team

Developers of professional projects always have accumulated experience. His biography is easily accessible on the internet, which has a track record of how successful his previous ideas were.

However, GameFi has several serious projects launched by unnamed teams. Little can be known about them as they are hidden behind nicknames or pseudonyms.

Reviews on Professional Platform

When studying a project, never rely on advertising slogans. It is better to read reviews about them on independent professional platforms. The blockchain community reacts quickly to the emergence of new projects. Any idea will be analyzed from all sides in a few hours.

But scammers have adapted and figured out how to deceive users. Some teams placate projects by writing positive reviews about the company on third-party sites. They pre-register several hundreds of accounts on large forums under the guise of real users. When a command is given, they send a lesson prepared according to the training manual. Therefore, investors cannot rely on reviews alone.

Projects on social networks

Be sure to look at the project’s social networks and pay attention to the number of people involved in their activity in chats and the nature of comments and messages. There is no secret project without users.

smart contract

The easiest way to test a project’s smart contracts is to use resources such as Etherscan or BSCscan. Block Explorer will provide you with information about when the project was created, brought to market, how many users it has, and how many tokens were issued.

future income of the project

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

network marketing

There are many GameFi projects that are built on multilevel marketing (MLM) systems. 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, then it is a scam. Apart from MLM, there should be value added mechanism. Real projects may not unreasonably promise users a huge percentage of profit.

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

“Scam projects like Squid Games often start out with just a white paper, a landing page, and a token listing on a major crypto exchange. They also include fake partnerships, non-existent employees, and/or 3D renderings of stolen or pre-purchased Other possible red flags include typos and broken links. Of course, it’s also worth checking to see if you can actually play the game. If not, it’s pump-and-dump or rubbish There may be a bridge plan.”

Although the NFT gaming market is indeed overvalued, NFTs have not yet reached their potential as an investment. NFTs need to be understood more broadly rather than assuming that they are just objects that you get after countless hours of grinding. The negative bias towards NFT games among skeptics was formed against the background of volatile trading in assets with no 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.

DappRadar. Head of Research in Pedro Herrera, believes that the future of crypto gaming is bright, indicating that it may proceed without NFTs:

“From my perspective, blockchain games will be massive, but we are still a few years away from seeing a real mass adoption event. Traditional gaming is a $60 billion industry where people buy games like wearables, guns and skins. When the first Blockchain AAA game combines a good gaming experience with crypto assets, we will see traditional gamers, purists focus their attention on blockchain games. And also, the Web3 metaverse. This is where MMORPGs will become a major way to socialize and play. Therefore, the future of blockchain games is bullish. As far as scams are concerned, there will probably be a couple, but it is more common to see them in NFTs.