What the rug?! Stopping scams in Solana
For anyone active in Solana NFTs, #SolanaSummer seemed to lead to #SolanaScamFall with rug pulls a frequent occurrence in the ecosystem. The last few months have seen thousands of buyers lose their $SOL to scam projects, with no hope of recouping the money.
Not only does this cause harm to the individuals involved, it tarnishes the reputation of the broader Solana space and puts off newcomers. The economic impact is severe, since rather than $SOL being reinvested back into the community, it disappears - likely immediately withdrawn in fiat.
Our review of rug pulls over the last few months finds two categories:
1. Classic rug pull
A fake NFT project where malicious actors disappear after the mint with the $SOL, deleting all socials.
This may be obvious since a buyer may receive no NFT on minting, or the NFT received may be completely different to what was expected.
In a worst case scenario, individuals who link to a mint such as Solana Cans are drained of all their $SOL in that wallet.
Iconics buyers knew immediately they had been conned when they received just a list of emojis instead of the promised 3D busts.
SolTimber minted identical tree seed NFTs for each buyer instead of different tree artwork.
In other cases, buyers may actually receive a very low quality NFT somewhat similar to what they were promised. The Solana Towers community was very confused after minting NFTs with floating doors and furniture and unsure what was going on. It then became very clear it was a rug pull when all social accounts were shut down after the mint.
2. Project Abandonment
There are many projects that have effectively been abandoned by their teams for various reasons. Crypto Greeks were abandoned by their developers shortly after mint with the community now trying to take over the project themselves. Kangaroo Gang was shut down after the team disappeared halfway through an unsuccessful launch - leaving after 1300 mints. Soltopian Bears and Cats owners are in a confusing situation with some trying to resurrect their failed project under The Solana Sanctuary although there is ongoing debate about whether members of the original team are still involved or not.
Since most teams in the crypto space are anonymous, it is very easy for scammers to get away with stealing people’s money, with some teams carrying out multiple rug pulls. The perpetrators of the Slothanas rug pull were so confident in being untouchable that they boasted of rugging while their mint was still ongoing! There are very high sums of money involved - stolen funds from Zombie SolToads and SolToads were traced to a binance wallet holding 190 million SOL and 120 million USDC. This mix of anonymity and lucrative gains means that classic rug pulls will continue to be a risk unless there is some form of accountability system in place.
Project abandonment is also facilitated by anonymity, with communities left trying to contact developers and project teams through their project discord or Twitter after they have left (if not deleted) and no other means of communication. The Crypto Greeks still have no access to the community treasury, social media accounts or website.
Further, it is not just buyers who are affected, rug pulls reflects badly on influencers who promote the projects despite calling on their followers to "Do Your Own Research". Marketplaces also list the rug pulls calling into question their approval processes. Magic Eden had pre-approved SolTimber and pulled the listing after the rug. SolToadz was also quietly removed from marketplaces after their rug a week and a half after mint.
At Proof of Pizza we are working on a verification process that will contribute to system-wide efforts in reducing rug pulls. We understand there are important reasons that teams may wish to stay publicly anonymous and so we provide a way for them to be privately doxxed to the Proof of Pizza team. Once verified, this shows a level of accountability to their community.
Proof of Pizza deteras would-be malicious actors who are unable or unwilling to go through private social media doxxing, a face-to-face interview with our team and third-party ID verification process.
Buyers, influencers and marketplaces can feel confident in the projects that are verified and ask difficult questions to those who are not.
We believe Proof of Pizza will reduce the number of abandoned projects, since the teams who go through verification are likely to be highly committed. We do not aim to police bad projects, but to uplift projects that are transparent, accountable and motivated by good intentions. Where a project has red flags (e.g. Solana Cans appeared only 4 days before mint) potential buyers could ask the team to undergo Proof of Pizza verification and if they refuse without good reason, the community knows to stay away.
Towards a scam-free Solana
Widespread adoption and usage of Proof of Pizza, resulting in a culture of transparency will ultimately benefit all projects in the Solana ecosystem. We are piloting the protocol and are looking for projects who would like to participate. We are also looking for developers and designers who will help us build the website of verified projects, showing whether the authenticated project wallet is holding the Proof of Pizza NFT. If you are interested, please get in touch with us.
For those who have been affected by rugs, The Solana Sanctuary is working to help these abandoned communities by offering support in helping them form DAOs, find a home and explore options such as reminting to solve issues around collecting royalties.