GameFi scams: How to recognize toxic NFT gaming projects

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GameFi scams: How to recognize toxic NFT gaming projects

The GameFi industry developed slowly and gradually from 2013 until 2021, when the popularity of decentralized games exploded along with the growth of NFTs (non-fungible tokens). According to the analytics service DappRadar, the total value of one of the most popular blockchain-based games, Axie Infinity, exceeds $550 million.

However, the GameFi industry still has its problems. Many projects are often "launched" regardless of the stage of game development. Although the Bitcoin price trend can improve or weaken the success of GameFi projects, there is no direct correlation.

Despite the bear market, the price of many GameFi tokens is rising today due to their NFT component. For example, investors and creators want to make money from digital items, 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 token project provides to its participants. However, one should be careful with GameFi Token promises, as this space is full of various scams.

Scandal of the year

One of the biggest GameFi scandals happened in the fall of 2021. At that time, the Squid cryptocurrency, based on the popular Netflix series Squid Game, after rising to $2,800, plummeted to almost zero.

The token, which is based on (though not related to) the Netflix series Squid Game, first appeared in October 2021. It was a six-round crypto game, similar to the deathmatch rounds in the show's plot. The game was supposed to launch in November 2021.

To participate in each round, users had to pay with squid tokens. The developers would get 10% of the funds raised, and the winners of the game would get 90%. At the time of the release of the token, users noticed that it was impossible to sell the purchased currency.
After the participants realized it was a scam, the fraudsters immediately withdrew a total of $3.38 million.

How do NFTs fit into gaming?

To understand GameFi, you need to familiarize yourself with NFTs and their integration with smart contracts. An NFT is an asset whose digital account is placed in the blockchain. A smart contract is associated with an NFT.

This sounds very serious and complicated, although in reality it is only a small piece of code. And this little piece of code can be anything, including a link to a JPEG file stored on a central server. Much of NFT right now is just that.

A smart contract, used to “manipulate” an NFT object between games, is not a multipurpose tool. It does not include model, textures, description, sound, animation, etc., so an item or character can be easily transferred from one title to another.

So for integration between two games to work, those 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 number of users with its own economy, where players can buy and sell in-game items in the form of NFTs.

However, many traditional games already have such an economy. For example, Eve Online 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 the task of NFT owners is to convince users that their assets are worth real money.

Nowadays, game developers need to convince users of the uniqueness, freshness and interest of their project, and this is increasingly difficult to achieve.

How to spot fake games?

Most investors in fake projects are not experts but beginners, and fraudsters exploit and lure inexperienced users with the help of advertisements and visually attractive pages.

To avoid potential scams, pay attention to a few details:

The project team

Developers of professional projects always have rich experience behind them. Their biographies can easily be found online, with a record of the success of their previous ideas.

However, there are a lot of serious projects in GameFi that are started by anonymous teams. Little information can be found about them because they hide behind various nicknames or pseudonyms.

Reviews on professional platforms

When studying a project, you should never rely on advertising slogans.

It is better to read reviews about them on independent professional platforms. The blockchain community is quick to respond to the emergence of new projects. Within a few hours, each idea will be analyzed from all sides. However, fraudsters always find a way to deceive users.

Some teams pre-register several hundred accounts on popular forums under the guise of real users, all with the goal of writing positive reviews about their project.