The crypto universe, consisting of a number of technologies including NFTs (Non-Fungible Tokens), runs parallel to the reality we live in, and is certainly an irreversible evolutionary process that is beginning to intersect with everyday life and is becoming increasingly tangible to most people. Take for example some of the main sponsors of football teams or major sporting events. These are now filled with trading companies that base their operations on the crypto universe (1).
The future of these technologies is being debated a lot these days, and we often wonder whether the moment we are observing is just a bubble that is destined to burst. We can certainly say that this is a moment of maximum exasperation for NFTs, which had its moment of maximum media exposure when the first reports of NFT sales at stratospheric figures in crypto-art appeared in early 2021 (2). The ability to attract capital is remarkable considering that to date an estimated $11 billion is invested in NFT-certified digital assets (3).
We find interesting the overview provided by the Gartner (4) study, an analysis of emerging technologies that positions NFTs at the top of the evolutionary curve that distinguishes the entry of new technologies undermined by pitfalls and dangers.
This year’s technologies, selected for their potential transformational benefits and broad potential impact, fall into three main themes:
– Engineering confidence
– Accelerated growth
– Ability to mark change
This is a time of maximum NFT exasperation – there is a lot of focus on the potential development opportunities on offer, a situation that attracts miscreants and hence the dangers that can result from superficial evaluation. A position that indicates, according to the graph shown by Gartner, the moment before a rapid descent into a phase that will mark the disillusionment about the potential of this technology. This phase is typically characterised by negative events that strike and undermine the confidence of the masses.
The Envolved Apes case
Rug pulls, this is the term used when the developers of a project run off with the cash box after promoting a product. It’s a typical old scam, and non-fungible tokens are not immune – quite the contrary!
This is especially well known by the thousands of investors who on 30.09.2021 saw the money they had given to the project called Evolved Apes disappear and dematerialise.
Evolved Apes was a project hosted on the well-known OpenSea marketplace which describes it as “a collection of 10,000 unique NFTs trapped inside a lawless land“. They are “fighting for survival, only the strongest ape will prevail” it says, referring to the project’s much-hyped fighting game, which did not materialise.
All this happened in a very short time. A week after the launch of the project, the anonymous developer known as Evil Ape, who had promised the game, disappeared along with the project’s Twitter account and official website.
Traces on the blockchain show an embezzlement of 798 ether ($2.7 million) from the project’s funds via multiple untraceable transfers. The funds, derived from the initial public sale of NFTs and commissions on the secondary market, were intended for project-related expenses such as marketing.
Incredible empathy was shown by the Evolved Apes community who took a stand in support of those who had been scammed and, rather than see the project fade away, took over the game’s narrative and artwork depicting the various characters featured in NFT and opened a new project called Fight Back Apes. Owners of Evolved Apes would automatically be approved for a Fight Back Apes token linked to the art of the old project.
None of this put a serious damper on the trade of Evolved Apes on OpenSea, where the project continued to be present for quite some time after the shenanigans before being removed. There have been over 574 NFT sales with a total volume of 13.9 ether ($47,230) since the rug-pull went public.
Members of the Evolved Apes community say they want to create a new operating model, including a multi-sig wallet to ensure that the Evil Ape story does not happen again – as it would require the consent of multiple community members to move funds! This is a way of trying to ward off malicious actors, as it would require the involvement of several people to mislead their investors, a sort of additional form of guarantee for the investor.
Considering that Evil Ape still receives 4% of royalties on secondary sales, the current plan is to create a new project that will distribute new NFTs to Evolved Apes owners.
At this time, scams like Evolved Apes are still out of control in a virtual space that feeds off the word of mouth of new projects and activities.
However, at the present time, all people are attracted to NFTs, with the promise of quick money raised, based on fictitious information that is created to create excitement in the market.
As users/buyers become more vigilant and knowledgeable about crypto surely the damage from scams will be limited but, at least until regulation manages to regulate these projects and provide an easier way to verify the project’s leadership and methodology of operation with more certainty, the scams will not stop.
NFTs are still a digital gold rush with all the possibilities of making a fortune with the added thrill comparable to gambling.
But until all the bugs and scam possibilities are solved, the risk is always around the corner, you have to accept the risk of loss of the invested amount. Finally, you should also pay close attention to the consents and information you provide to access your wallet to avoid even more unpleasant surprises such as having more digital assets stolen or your wallet wiped out.
Avv. Niccolò Lasorsa Borgomaneri
(1) There are now several examples of football clubs featuring sponsors from cryptocurrency platforms on their shirts. Internazionale FC, for example, has “$Inter Fan Token” on its jersey. It is sponsored by Socios.com, the platform of Chiliz, an emerging cryptocurrency that is the leading blockchain provider for the global sports and entertainment industry. Napoli SSC also features “$NAP Fan Tokens” on their shirts, collectible digital assets, also minted on the Chiliz Blockchain, which provide the owners of these Tokens with exclusive rights.
(2) NFT, towards 4.0 collecting: the case of Christie’s first “digital” auction, on https://www.agendadigitale.eu/documenti/nft-verso-il-collezionismo-4-0-il-caso-della-prima-asta-digital-di-christies/