A new token standard called ERC721R has recently been introduced to make a more stable NFT space. It is developed from ERC721 after adding an attractive refund option.
A refund incentive can be good for building trust in an NFT project to some extent as it reduces the chances of rug pulling, yet it should not be mistaken as a quality project. Moreover, a refund feature cannot certify that the respective NFT project is not a rug pull as the refund offer is time-bound. The refund option doesn’t speak for the quality, which matters the most in every NFT project.
Nonetheless, the refund twist can be appealing to many minters, and they will be tempted to buy more tokens due to the refund option than they would have purchased with a ERC721 standard – that doesn’t have any refund policy. They can use the refund policy to maximize their profit and minimize the risk of loss as the refund feature enables them to simply sell off the rarest NFTs and claim the refund for others. Here’s another essential point to note the refund option can affect the overall general price of NFTs because the increased use of the refund policy may result in an increased cost of the NFTs to cover the potential refunds.
Blake Wilkinson, CEO & Founder of bQuantum doesn’t believe it will work in practice. “With the NFT currently seen as an investment opportunity playing field, ERC 721R sounds amazing but does not align with a real-world scenario. In the public market setting, You can’t buy a stock and, in 30 days, get your money back. You invested, and it’s a choice you have to live with”. However, when it comes to the future of NFT representation, ERC721r has great use for real-world physical assets. Think about buying some clothing where the company officers a return policy. This return policy is honored on that good for a 30-day period which helps give the satisfaction of returning the good.
We cannot just rely on the refund policy to save us from potential loss. The best way to reduce your risk of loss and enhance your confidence in an NFT project is to do your research thoroughly. For that, you must master the art of conducting proper research.
Furthermore, those seeking a way to distinguish good projects from rug pulls should note that there is no better way than doing extensive and proper research to identify which project sells tokens only to disappear later and which will stick around for all the years to come.
ORIGINALLY PUBLISHED BY: Elizaveta Palaznik
Co-founder & COO of bQuantum