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Scams in GameFi: How to identify toxic NFT gaming projects



Scams in GameFi: How to identify toxic NFT gaming projects

Over the last couple of years, games using blockchain technology have been actively developing and attracting new players, and the decentralized games market — broadly referred to as GameFi — has gained great popularity. 

The GameFi industry started back in 2013, and since then, the sphere has been slowly developing, but in 2021 the popularity of decentralized games exploded along with the boom in nonfungible tokens (NFT). According to the DappRadar analytical service, the total value of one of the most popular blockchain-based games, Axie Infinity, exceeds $550 million.

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

And while Bitcoin’s (BTC) price trend can enhance or weaken the success of GameFi projects, there isn’t necessarily a direct correlation. 

Despite the bear market, the price of many GameFi tokens is growing today due to their NFT component as investors aim to make money on the resale of in-game heroes and digital items, rather than concentrating on the improvement of 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 project’s token bestows upon its participants.

However, one needs to be wary about pie-in-the-sky promises from GameFi token projects, as scams abound within the space.

One of the biggest GameFi scandals was in the fall of 2021 when the Squid cryptocurrency based on the Squid Game show collapsed to almost zero after rising to $2,800.

The token, which was based on but not affiliated with the Netflix series Squid Game, first appeared in October 2021. It was a crypto game that would consist of six rounds, similar to the rounds of deadly competition in the series’ plot.

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

Furthermore, observers started to grow suspicious when it was discovered that there had been no official connection between the token, Netflix and the authors of the series, so they began to warn users about a possible scam. When such warnings became widespread, the scammers promptly withdrew all the money. According to several reports, the scammers made away with $3.38 million in total.

The leaders of the “classic” gaming industry are highly suspicious 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 biggest video game developers in the United States — in February 2022 commented on his firm’s decision to stay away from the GameFi sector.

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

Newell added that there are purportedly rampant instances of fraud within the NFT sector, stating that due to the volatility of token prices, players don’t even understand when and what to buy.

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Epic Games CEO Tim Sweeney joined his colleague earlier this month by calling the Fortnite Token a scam and stating that the company is 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 tie into Epic’s mega-hit battle royale game.

How do NFTs fit into gaming?

To understand GameFi, one should get acquainted with NFTs and their integration with smart contracts. An NFT is an asset whose digital receipt is placed in the blockchain. 

The smart contract is associated with the NFT. This sounds serious and professional; although, in reality, it is just 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. Indeed, the lion’s share of NFTs presently is just that.

A smart contract, which is used to “manipulate” an NFT object between games, is not a multifunctional tool. It doesn’t include a model, textures, description, sound, animation, etc. so that an item or character can be easily transferred from one title to another. Thus, for the integration between two games to work, these games must be built, run and maintained through a single infrastructure or gaming engine. Such integrations currently don’t exist in the gaming industry.

Furthermore, an NFT game can work only 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, a lot of traditional games 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 task 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 really develop their project, they need to convince users of the uniqueness, freshness and point of interest of their project, and this is extremely rare.

How to spot a scam game?

NFT scam games are often large-scale and premeditated. Most 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. Users should, therefore, pay close attention to several details (explained below).

The project’s team

Developers of professional projects always have accumulated experience. Their biographies can be easily found on the internet, with a track record of how successful their past ideas were.

However, there are many serious projects in GameFi that are launched by anonymous teams. Little information can be found about them because they are hidden behind nicknames or pseudonyms.

Reviews on professional platforms

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

But scammers have adapted and figured out how to deceive users. Some teams shill 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 the text prepared according to the training manual. So, investors can’t rely on reviews alone.

Projects on social networks

Be sure to look through the social networks of the project and pay attention to the number of people involved by their activity in chats and comments and the nature of the messages. There are no secret projects without users.

Smart contract

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

Future income of the project

Every project is created to make money, and it is important to understand where the added value will come from. A person shouldn’t invest until they understand the source of a project’s profit.

Network marketing 

There are many GameFi projects that are built on a multilevel marketing (MLM) system. This is similar to classic network marketing, which isn’t a scam in and of 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 likely a scam. In addition to MLM, there must be value-added mechanisms. Real projects can’t unreasonably promise users huge percentages of profits.

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

“Scam projects like Squid Game often start with just a white paper, a landing page and a token listing on a major crypto exchange. They may tout fake partnerships, non-existent employees, and/or 3D renderings stolen or purchased pre-made. Other potential red flags include typos and broken links. Of course, it’s also worth checking out whether you can actually play the game. If not, it could be a pump-and-dump or rug-pull scheme.”

Although the NFT gaming market is indeed overvalued, NFTs as an investment have yet to reach their potential. NFTs need to be understood more broadly rather than believing they are mere items you receive after countless hours of grinding. The negative bias toward NFT games among skeptics was formed precisely against the backdrop of volatile trading in assets with no clear use case.

NFTs can and should have intrinsic value. In order for the NFT market to mature, a strong link to real assets and services is needed.

Pedro Herrera, head of research at DappRadar, believes the future of crypto gaming is bright, hinting that it might move on without NFTs:

“In my perspective, blockchain games will be massive, but we are still a couple of years away from seeing an actual mass adoption event. Traditional gaming is a $60-billion industry where people spend around $20 billion per year on game purchases like wearables, guns and skins. When the first blockchain AAA game combines a good gaming experience with crypto assets, we’ll see traditional gamers, purists turn their attention to blockchain games. And also, there is the Web3 metaverse where MMORPGs will become a predominant way of socializing and playing. So, the future of blockchain games is bullish. As for scams, there will probably be a couple, but it is more common to see them in NFTs.”

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Alchemy and Infura block access to Tornado Cash as Vitalik Buterin weighs in on debate



Alchemy and Infura block access to Tornado Cash as Vitalik Buterin weighs in on debate

U.S. persons and entities must comply with the Treasury’s sanctions or face possible criminal consequences.

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Alchemy and Infura block access to Tornado Cash as Vitalik Buterin weighs in on debate

According to Twitter user @0xdev0, on Monday, Web3 development platform Alchemy and Infura.io blocked remote procedure call (RPC) requests to cryptocurrency mixer Tornado Cash, preventing users from accessing the applications. The day prior, the U.S. Treasury placed 44 smart contract addresses linked to Tornado Cash in the Specially Designated Nationals and Blocked Persons (SDN) list. U.S. persons and entities are prohibited from blockchain or business interactions with Tornado Cash under t sanctions, with the possibility of criminal liabilities for violations.

The move came after the U.S. Treasury alleged individuals and groups had used the privacy protocol to launder more than $7 billion worth of crypto since 2019, including the $455 million stolen by the North Korea-affiliated Lazarus Group. Almost immediately after the announcement, stablecoin issuer Circle froze USD Coin funds held within Tornado Cash’s smart contracts. Meanwhile, programming repository GitHub took down the project’s main page and blocked developer access.

Vitalik Buterin, the co-founder of Ethereum, claimed that he used Tornado Cash to donate to Ukraine. The intent, as told by Buterin, was to protect the financial privacy of the recipients so that their enemy, the Russian government, would not have full details of the transaction.

I’ll out myself as someone who has used TC to donate to this exact cause.

— vitalik.eth (@VitalikButerin) August 9, 2022

Others have also pointed out the mixer’s privacy applications, such as for an individual getting paid in crypto who doesn’t want an employer to see their financial details, or paying for a service in crypto who doesn’t want the service provider to see the past transactions from their wallet. On the other hand, the tool has, in part, acted as a hotspot for enabling anonymous hackers to launder stolen funds from protocol exploits particularly cross-chain bridges. More than $2 billion worth of funds has been stolen from such applications year to date.

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Reddit partners with FTX to enable ETH gas fees for community points



Reddit partners with FTX to enable ETH gas fees for community points

With the new integration, Reddit users will be able to purchase Ether from supported Reddit apps via FTX’s payment and exchange infrastructure platform FTX Pay.

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Reddit partners with FTX to enable ETH gas fees for community points

After moving away from Bitcoin (BTC) payments years ago, online forum Reddit now seems to be inching closer to embracing cryptocurrency payments via a new partnership with the FTX exchange.

Sam Bankman-Fried’s crypto exchange FTX and Reddit announced in a joint statement on Tuesday that the platform intends to integrate Reddit’s Community Points in the United States, the European Union, Australia and other markets.

The partnership features the integration of FTX Pay as a payment and crypto exchange solution to unlock new crypto-enabled perks for Reddit Community Points. Introduced in May 2020, Reddit Community Points are a measure of reputation in communities or subreddits, allowing users to own a piece of their favorite communities.

“As a unit of ownership, points capture some of the value of their community. They can be spent on premium features and are used as a measure of reputation in the community,” Reddit said when launching the Community Points two years ago. Reddit Community Points are based on Arbitrum, one of the most Ethereum scaling solutions.

With the new integration, users will be able to purchase Ether (ETH) from supported Reddit apps via FTX’s payment and exchange infrastructure platform FTX Pay. The cryptocurrency can be used to pay blockchain gas fees, or network fees for their Community Points transactions on-chain.

“We’re always working to empower communities and introduce new ways to use Reddit, and decentralized, self-sustaining blockchain technology allows us to do that. By working with FTX, we’re able to do this at scale,” Reddit staff software engineer Niraj Sheth said.

Bankman-Fried noted that the partnership with Reddit marks FTX s commitment to empower online communities to harness the power of blockchain. “FTX Pay’s payment and exchange infrastructure integrates with Reddit Community Points, making the customer experience a more seamless process,” he added.

The news comes amid Arbitrum developer Offchain Labs launching the Arbitrum Nova chain on Tuesday. Arbitrum Nova, the second chain launched in the Arbitrum ecosystem, is designed to serve as the premier solution for Web3 gaming and social applications. Apart from Reddit and FTX, other firms like Google Cloud, Consensys, P2P and QuickNode participated in the launch by becoming inaugural members of Nova’s “Data Availability Committee.”

Related: Reddit announces new blockchain-backed ‘Collectible Avatars’

One of the most popular websites in the United States, Reddit has been largely involved in the crypto and blockchain industry for many years. The discussion platform is known for once allowing users to pay for their premium membership in Bitcoin but removing the opportunity in 2018.

Reddit co-founder Alexis Ohanian has been widely involved in crypto, launching a $100 million Web3 investment fund last year. Ohanian subsequently launched another $200 million Web3 and social media fund in collaboration with the Ethereum scaling solution Polygon.

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Is your SOL safe? What we know about the Solana hack | Find out now on The Market Report



Is your SOL safe? What we know about the Solana hack | Find out now on The Market Report

On this week’s episode of “The Market Report,” Cointelegraph’s resident experts discuss whether your SOL is safe or not.

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Is your SOL safe? What we know about the Solana hack | Find out now on The Market Report

On this week’s episode of “The Market Report,” Cointelegraph’s resident experts discuss the latest updates concerning the recent Solana (SOL) hack.

To kick things off, we broke down the latest news in the markets this week:

Bitcoin realized price bands form key resistance as bulls lose $24K, significant whale activity between $22,000 and $24,800 adds to the complexity of the current spot market setup. Bitcoin (BTC) consolidated lower on Aug. 9 after familiar resistance preserved a multi-month trading range. When will we finally break out of this price range and make the move towards $30K?

Institutions flocking to Ethereum for 7 straight weeks as Merge nears: Report, “Greater clarity” around the Merge has driven institutional inflows into Ethereum products, according to a CoinShares report. Is the ETH merge finally around the corner and will it bring new all time highs to ETH or has the price already been factored into the current price?

Circle freezes blacklisted Tornado Cash smart contract addresses, Crypto data aggregator Dune Analytics said that, on Monday, Circle, the issuer of the USD Coin (USDC) stablecoin, froze over 75,000 USDC worth of funds linked to the 44 Tornado Cash addresses sanctioned by the U.S. Office of Foreign Assets Control’s Specially Designated Nationals and Blocked Persons (SDN) list. Could this mark the end for Tornado Cash or is there a way they can redeem themselves?

Next up is a new segment called “Quick Crypto Tips,” which aims to give newcomers to the crypto industry quick and easy tips to get the most out of their experience. This week’s tip: Have some funds ready to buy further downturns.

Market expert Marcel Pechman then carefully examines the Bitcoin and Ether (ETH) markets. Are the current market conditions bullish or bearish? What is the outlook for the next few months? Pechman is here to break it down. The experts also go over some markets news to bring you up to date on the latest regarding the top two cryptocurrencies.

After Marcel’s market analysis, our resident experts discuss whether your SOL is safe and the latest updates on the Solana hack. We also discuss why the network has been victim to so many hacks and downtimes. What exactly do these exploits mean for the Solana platform and if you should be worried.

Lastly, we’ve got insights from Cointelegraph Markets Pro, a platform for crypto traders who want to stay one step ahead of the market. The analysts use Cointelegraph Markets Pro to identify two altcoins that stood out this week: Radicle’s RAD and DigiByte’s DGB.

Do you have a question about a coin or topic not covered here? Don’t worry. Join the YouTube chat room, and write your questions there. The person with the most interesting comment or question will be given a 1 month free subscription to markets Pro worth $100!

The Market Report streams live every Tuesday at 12:00 pm ET (4:00 pm UTC), so be sure to head on over to Cointelegraph’s YouTube page and smash those like and subscribe buttons for all our future videos and updates.

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