The Non-Fungible Token (NFT) space can be an exhilarating place, but it is full of danger. Frequently, one of the top fears NFT investors face is the dreaded “rug pull.” Under this dystopian fiction, the bad developers walk away from the project and disappear into the night with investors’ cash. Luckily, new tools including CoinGecko’s Bubblemaps are becoming a powerful weapon in the fight against NFT scams. Author Li Wei is a blockchain content strategist. She demonstrates how this groundbreaking tool equips investors to explore the burgeoning NFT market more confidently.

Bubblemaps is another amazing visual tool from Public Lab. It lets users understand the relationship between different wallets that own a particular crypto asset or NFT. Bubblemaps makes it easy to visualize those connections at a glance. This method allows for quick visualization of potential red flags, such as an oligopoly of wallets holding a high percentage of the token supply. This should be a significant red flag for possible manipulation or an increased likelihood of a rug pull.

This tool is embedded deeply into the Web3 infrastructure. It works directly with downstream platforms, including Pumpfun, Photon, and Etherscan, to provide smooth, integrated access to its robust analytical tools. Bubblemaps already partners with leading blockchain ecosystems such as Solana, Arbitrum, Polygon, Avalanche, Sonic, and Base. Working together increases their capacity and improves their accuracy. Bubblemaps employs a team of on-chain “sleuths” who go down the rabbit hole on popular meme coins and Decentralized Autonomous Organizations (DAOs). They offer essential transparency that exposes the state of good health—or at risk—status of these pet projects.

How Bubblemaps Helps Identify Red Flags

Bubblemaps’ intuitive, simple, yet elegant interface turns complex on-chain data into easy-to-understand visuals that anyone can grasp. The tool employs intuitive visualizations like wallets with connected bubbles to illustrate how they are linked, either directly or through multiple hops. Each bubble is a unique wallet, colored by the team that controls it. The larger each bubble, the more tokens that wallet holds. Connecting lines between the bubbles represent interactions between wallets and allow anyone to follow the trail of tokens.

By reviewing these data visualizations, investors can easily spot trends that may be red flags for predatory activity. For instance, a cluster of large wallets connected to a single, central wallet could suggest that a small group of individuals controls a significant portion of the token supply. That might be a sign that the project is really a boondoggle in disguise. Alternatively, it could be a sign that the developers are preparing to execute a rug pull.

We’ve found Bubblemaps to be incredibly powerful in our investigations into other shady projects like HAWK, NEIRO, MOTHER and more. These detections truly showcase this tool’s power to discover otherwise invisible links and upcoming threats that we may have missed completely. Bubblemaps (BMT) is currently ranked as the # market capitalization of BTC 355.1809. It is currently ranked #809 on CoinGecko, demonstrating its growing importance and awareness within the crypto community.

Spotting the Red Flags

Bubblemaps is an incredibly powerful tool, but understanding how to discern information can mean the difference between understanding and misinterpretation. Here are some common red flags that should raise suspicion:

  • Concentrated Token Ownership: If a small number of wallets control a large percentage of the token supply, it indicates a high risk of manipulation.
  • Suspicious Wallet Connections: Complex webs of transactions between wallets, especially if they lead back to a single entity, can be a sign of coordinated activity.
  • Unusual Transaction Patterns: Sudden and large transfers of tokens between wallets, especially if they occur shortly before a price drop, could indicate insider activity or an impending rug pull.

Beyond Bubblemaps, investors should be wary of other common scam tactics:

  • Fake Celebrity Endorsements: Be skeptical of projects that claim to have celebrity endorsements but can't provide verifiable proof.
  • Unrealistic Returns: Promises of unusually high returns or guaranteed profits are almost always a sign of a scam.
  • Lack of Transparency: Projects with unclear or missing information about their team, goals, or financials should be approached with caution.
  • Anti-Sell Mechanisms: Be wary of projects that have coded in anti-sell mechanisms, which prevent investors from selling their assets.

Indicators of Healthy Projects

There are some very good and meritorious projects among those projects under the radar. Here are some indicators of a healthy project:

  • Code Audits: Look for projects that have undergone security audits by reputable third-party firms to minimize the risk of code vulnerabilities.
  • Vesting Schedules: Vesting schedules that prevent early dumping and ensure tokens are distributed over time.
  • Clear Token Utility Definition: A clear utility definition and transparent allocation models.
  • Strategic Vesting Periods: Strategic vesting periods that align with project milestones.
  • Regular Community Updates: Regular community updates to maintain transparency.
  • Active Community: A large and active community is a good sign. Look for projects with a Discord community of 5000+ members, ideally with at least 2 NFTs per person. A sizable Twitter following (5000+) is also a positive indicator.
  • Clear Roadmap: A clear and detailed roadmap with specific deadlines increases confidence and reduces ambiguity.
  • Project Utility: A project with utility and a clear use case is more likely to be successful.
  • Daily Trades: More daily trades indicate higher liquidity and demand, boosting project success and desirability.

Understanding token distribution models is crucial. Investors should familiarize themselves with common models such as public sales, airdrops, and governance onboarding to assess the fairness and sustainability of a project.

Actionable Advice for NFT Investors

Investing in NFTs requires careful due diligence. Here’s a step-by-step guide to help you make informed decisions:

  1. Research the Team: Investigate the team behind the project. Are they experienced and reputable? Do they have a track record of success?
  2. Analyze the Tokenomics: Understand the token distribution, vesting schedules, and utility of the token. Is the tokenomics model sustainable and fair?
  3. Check the Code: Look for evidence of security audits and carefully review the project's code. Are there any red flags or potential vulnerabilities?
  4. Assess the Community: Evaluate the size and engagement of the community. Is the community active and supportive? Are there any signs of manipulation or fake accounts?
  5. Use Bubblemaps: Use Bubblemaps to visualize the relationships between wallets and identify potential red flags.
  6. Stay Informed: Keep up-to-date with the latest news and developments in the NFT space. Be aware of emerging scam tactics and red flags.

Here’s how to protect your investments from NFT rug pulls. By leveraging tools such as CoinGecko’s Bubblemaps, you can position yourself accordingly and mitigate your exposure.