Why are NFT holders upset over Rug Pulls?
I have been fascinated by the scamming side of the crypto market and NFT market. And I have tried to first and foremost educate myself. So I can try and minimize my risk and exposure to these types of projects. But I also find the human condition to be a fascinating thing. Where some people actually can do that to others, knowingly. And then even be able to justify it to themselves and others. But let us talk a little about Rug Pulls.
First of I would like to say that if I am getting things wrong here, please enlighten me on how it actually works. And secondly, I am not trying to minimize the affected people. I am just trying to better understand things, and one way I do this is by putting forth an opinion. Sometimes not even my own. Just to get a response. And this can be in order for me to better understand and learn. But it can also be to get people thinking and then better understand their thoughts and reasons. Or it can simply be a way for me to have a discussion with someone. This, however, is the case where I try and learn and better understand how things work.
What is a Rug Pull?
To my understanding a Rug Pull, as far as I understand it. Is a version of an Exit Scam. That is where a company suddenly stops providing its services, shipping orders, or whatever it is they do. But they still continue to sell and take customers' money. And then as people start to notice that they are not getting what they paid for they exit leaving with all the money.
Sir, kindly step aside, I am about to pull this rug.
So I would consider a Rug Pull to be a crypto version of this. Or at least that is what I have understood it to be. The people who managed a project basically take all the liquidity or assets out of the project. Leaving it with no or very little value left.
Personally, I feel that the term is getting thrown about way too liberally. People are using it more as a synonym for a bad project rather than an actual scam. As soon as a project is starting to dip in price messageboards usually get several Rug Pull comments straight away.
NFTs, how do they fit in this?
NFTs have sort of transformed to some degree from what they at least were at the start. Originally they were a way for an artist to be able to sell their digital art, as unique digital art. They would then be able to make an artwork into a series of NFTs, just like if an artist would make a limited series of prints from one of their art pieces. Or they could sell the artwork as an original, where it was only one piece.
While this still is the case. When people talk about NFTs now, I would bet they think of apes and similar series of NFTs. What I would say make these different is that they are automatically generated from a subset of premade variables. In a sense, it is algorithmic art instead of a human artist's artwork.
Does this really matter, no not really a unique piece of art is still a unique piece of art. The only distinction I would make is that they are not unique in the way that a piece of art in a series of artwork is not nice. They belong as part of a collection. Sure they are all unique pieces of art, but they also belong to a collection.
The part I do not understand
I have read about several NFT projects that were so-called "Rug Pulls". Just to name, some there was the one that a famous pornstar made, where she then decided that just taking the money and leaving was a thing when wanted to do. Then there was the dick NFT project made by arguably one of the biggest dicks on the internet. In a similar way, he decided he no longer wanted any part of it, took the money, and went home.
And this is the part I do not get. If an NFT is valuable because it is a unique piece of art. Why are people getting upset when the artist or creator leaves with the money they made?
I do not see anyone getting angry over Beeple for spending the $69 million he made from selling his Everydays: The First 5000 Days NFT. What makes that NFT different from any other? How can people be angry that the creator takes the money and leaves? They still have their NFT or whatever it was they bought.
If the creator takes their money and leaves that should have no bearing on the NFT whatsoever. That's the difference between crypto and NFTs, if you look at crypto they are technically only worth the money tied up in liquidity. Because that is the only money you can get if you collected all the tokens and wanted to trade them in at the same time.
What would you be willing to pay to own this part of history?
But an NFT, gets its value from what people want to pay for it if you want to sell it. Just like with any type of artwork. And there is a famous example of how this bit an investor in the bum. The person who bought the NFT of the first-ever tweet for 2,9M recently tried to flip it to cash out. But the NFT ended up selling for only 0.09 ETH, or about $277.
I do not see him complaining that they got rugged and now his NFT is worthless.
So why is Rugging a thing that happens to NFT projects and why do the NFTs become worthless after the rug pull, they should still be worth whatever people are willing to pay for them, right? Or am I missing something? Sure if a project gets bad headlines people would probably be inclined to pay less for an NFT from that collection. But the same could be argued would be true if an artist gets negative headlines, their work would most likely sell for less than before.
It is looking more and more to me that what people actually are paying for is the "cool" factor, or being able to sit at the cool kids' table at lunch. And what they are upset about is when the "cool by association" part goes away.
Please tell me the part I think I might be missing, or am I not missing anything? Or share your other thoughts on the whole Rug Pull usage in the crypto community, has the phrase started to change its meaning? Please comment in the comment section down below.
I hope that you have found this post to be interesting and thought-provoking. =) If you did please consider following me, or reading my other posts or why not do both?
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