CryptoMines Is a Cautionary Tale of a New Problem: Rug Slips

There is a growing pile of bones; projects abandoned, roadmaps opaque with dust and regret. This ought to bring about a different brand of due diligence in all investors of projects going forward.

The term “rug pull” is a common feature of the crypto lexicon and has affected people investing in projects and tokens of all descriptions. Whatever the underlining product is, a rug pull is simply when the creators are scammers intending to reach a point in development where they can take as much of the money as possible and vanish. Many rug pull scams are made with the express intention of executing an exit strategy as soon as their greedy little hands are holding enough.

These elaborate scams can come in varying complexities. Some are simply NFT collections with hype and no substance, and some are entire crypto platforms. For example, arguably the most famous rug pull of the year is Thodex, a decentralized exchange in Turkey. After building an impressive number of active users — just shy of 400,000 — the founder, Faruk Fatih Özer, took around $2 billion of investors’ money on an excursion to Albania where he promptly vanished.

The difficulty with such a wide array of rug pulls is that, naturally, the term gets applied incorrectly. That is, a rug pull is malicious; an intentional act. Whereas, particularly in the blockchain gaming sector, it is applied to something related, but distinct. I have not seen a term for what is happening in these cases and so I’m coining one: “rug slips”.

Rug Slips: The Accidental Rug Pull by Incompetance

What is a rug slip? A rug slip is when the creators of a project cannot achieve what they have promised, and flee. It is different from a rug pull because the project was not made with malicious intent, but upon realizing they cannot achieve what they have set out to, the creators cut and run.

This has become remarkably common in the crypto space for a few reasons. The primary cause of this effect is the blend of how easy it is to create a roadmap for an idea with how unprecedentedly easy it is to get funding for said idea. That is, FOMO has people crowdfunding anything and everything, including projects founded by people with nowhere near the required experience. The WAX Lyrical podcast episode on scams discusses this in a bit more depth.

The chief enemy of start-ups is typically capital, and in crypto — blockchain gaming in particular — this issue has been all but entirely resolved. The problem is, the weight that people put in money is off-kilter; you can’t necessarily achieve outlandish goals simply because you have funding. We have seen this repeatedly with Kickstarter games over the years. Some MMO by an indie studio goes viral and achieves all of its stretch goals that would be borderline insurmountable for the most established of studios. Need I name names?

So, what does CryptoMines have to do with this?

The Rise and Fall of CryptoMines

You know there’s a story when the price chart looks like the euthanasia roller coaster prototype.

CryptoMines was a Play to Earn (P2E) project on the Binance Smart Chain utilizing NFTs and its own token, $ETERNAL. The sci-fi-inspired game revolved around mining planets in the familiar strategic mechanics of current P2E titles. The $ETERNAL token went live around the 13th September 2021 and steadily rose every day until mid-November when it went parabolic.

The price reached a dizzying all-time high of nearly $800 before doubts began circulating in the community. The most pernicious of concerns was that the biggest holders of $ETERNAL were the game’s developers, which comes with a lot of potential issues. Then, even quicker than the game had rocketed to prominence, it crashed, losing over 99% of its value almost overnight.

The developers attempted to stem the bleeding, but the gushing sea of red was beyond a few comforting Tweets and in-game incentives. So, CryptoMines made the decision to shut down the project and start a new game, titled CryptoMines Reborn in which “legacy” players and $ETERNAL token holders will receive some benefits.

“What happened to CyptoMines?” is not a question you want to see written on the official blog of CryptoMines.

A lot of players lost a lot of money, which is made all the more painful when it likely came off the back of unparalleled gains. As a result, social media is alight with pitchforks and calls of “rug pull” and “Ponzi scheme”, as well as outrage that the developers have closed the failed project and started again.

Perhaps I will be proven incorrect in this case, but I believe CryptoMines is the prime example of a rug slip. I can find no evidence that the game’s developers had set out to make a scam project and rug pull when it reached success. Equally, the crash in price did not come from whale sell-offs as far as I can tell. It seems that it was more the consequence of missteps from indie developers.

These sort of “innocuous” mistakes might hamstring a game’s success ordinarily, but in the wild world of crypto, they involve inordinate quantities of money. As a result, the players didn’t just become disenchanted with the game or its direction, but financially impacted. To what degree the players felt the financial hit is tragically correlated with how much they believed in the project. That is, those who invested heavily in CryptoMines because they thought the game was going to be a success, were the people who suffered the largest losses.

Closing Thoughts

The blockchain gaming industry is singular and novel. Ideas have seldom been so valuable and investments so abundant. This has created a perfect storm in which projects that fail to attain their goals, through ineptitude or intent, take a lot of crisp, hard-earned Benjamins down with them. To make matters worse, with crypto in its early stages, there are few recourses to recover the money.

While the outcome of rug pulls and rug slips — devastated project backers left out of pocket — is the same, a distinction between the two must be drawn. I have a level of sympathy for projects like CryptoMines — not a lot, mind — because, like many rug slips, their intentions were mostly good. These indie project creators just overestimate what is possible with investment and missteps becoming mini-financial crises.

There is a growing pile of bones; projects abandoned, roadmaps opaque with dust and regret. This ought to bring about a different brand of due diligence in all investors of projects going forward. You must not only look for red flags of scams and rug pulls, but if the team behind a project has the ability and experience to bring the idea to fruition. The malevolent man in the shadows waiting to pull the rug is not the only risk to your investment. In 2022, it wouldn’t be surprising if the number of rug slips far exceed that of rug pulls; ensure the ground you are standing on has no fingers gripping the edges, but also that it is steady enough to build upon.

Lead image by Stormseeker via Unsplash
Robert Baggs
Robert Baggs
Full-time professional crypto writer and Editor of Token Gamer. Co-host of the Mint One Podcast. Obsessed with MMOs. London based. Primary holdings: WAXP, ENJ, & BTC. Secondary holdings: ETH, GALA, & MATIC

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