Defined as interconnected virtual worlds, the metaverse concept is taking the cryptocurrency world by storm. And Shiba Inu (SHIB 1.78%) is jumping into the fray with a metaverse project of its own. But despite the hype, this project could leave investors badly burned because of some questionable development decisions. Let's dig deeper.
1. Shiberse doesn't seem to use SHIB token
Analysts at Bloomberg intelligence expect the metaverse market to be worth $800 billion by 2024. And blockchain technology is well suited to benefit from this trend. Regular tokens double as in-game currencies, while non-fungible tokens (NFTs) (which are unique tokens stored on the blockchain) serve as digital proofs of ownership. Together these technologies lay the foundation for a virtual economy.
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In January, Shiba Inu's developers announced plans to tap into this opportunity through a platform called "Shiberse," billed as an "immersive experience" for the metaverse space. And in February, they announced Shiba Lands, which will be virtual real estate inside this ecosystem. The anonymous developers (known only by pseudonyms like Ryoshi and Shytoshi) plan to start auctioning off "Lands" "really soon." But there are some red flags Shiba Inu investors should consider.
According to the announcement, "Lands" will not be purchasable with SHIB tokens, so the auctions probably won't have any fundamental impact on SHIB's price. Instead, they will require a lesser-known coin called Doge Killer (LEASH), which has market cap of just $122 million. Further, the developers claim to be working on an anti-dump system to stop investors from selling their LEASH, which could enable fraud.
2. Shiberse has some common characteristics with scams
Anti-dumping systems restrict investors from selling a cryptocurrency after purchasing it, leading to explosive growth by eliminating selling pressure. Unfortunately, this technique can be used in "rug pull" scams where large token holders (usually its developers) drive up the price of a thinly traded cryptocurrency only to sell it at the top, leaving everyone else holding the bag. There is a big recent example of this happening.
In November, the developers of the Squid Game Token used an anti-dumping mechanism to help them steal $3.4 million worth of funds from investors. LEASH's programming could enable similar behavior.
LEASH ownership is also alarmingly centralized, with 10 wallets holding around 56% of the roughly 108,000 coins in circulation, according to data from coinmarketcap.com. LEASH is unusually vulnerable to price manipulation and rug pull scams. And it is unclear why Shiba Inu's developers have chosen to conduct virtual "Lands" sales with such a risky asset instead of its more liquid and mature counterpart, SHIB.
Shiberse looks like bad news for SHIB holders
The Shiba Inu metaverse project, Shiberse, has some red flags for investors. Virtual real estate will be sold for LEASH, not SHIB tokens, which means the project may have limited fundamental benefits for SHIB holders. And the developers plan to implement an anti-dumping system that could prevent users from selling their LEASH when they want to.
While there is no evidence that Shiba Inu's team is planning a "rug pull" scam, all the ingredients for one are there. And investors should avoid both SHIB and LEASH until more information becomes available about the developers' long-term strategy.
