Jimmy McNelis, the founder of Web3 technology company nameless, says too many NFT projects are coming to market without proper smart contract testing, which could lead to multimillion-dollar losses.
Speaking to ETN, McNelis suggested that many NFT projects often come to market without fully simulating how the smart contracts will work, even skipping extensive audits in some cases.
McNelis said an example of this was observed during the sale of the Akutars NFT Collection in February 2021 – with 15,000 tokens listed for sale on the NFT marketplace Nifty Gateway, owned by Winklevoss.
McNelis said that while the NFT drop sold out, a major bug caused $33 million of Ether (ETH) generated from the sale to be locked into a smart contract that the developers can’t access, explaining:
“That was the kind of thing that they could have tested more fully in a private test environment and run the tests against those sales and edge cases that they may or may not have taken the time to do or thought they would do on a public test net.”
McNelis stressed the importance of getting the testing phase right, as bugs in smart contracts cannot be patched after launch:
“The test phase of a project is extremely critical as it is really going to determine the success of your drop or launch as far as the technical and market solutions go.”
McNelis explained that while projects can use public testnets to run trials for networks like Ethereum, many don’t, as it could open the door for copycat scam projects. He also says some don’t want to test for lack of confidentiality in public environments.
“The other thing is, there are a lot of brands that may want to explore the Web3 space but aren’t ready to publicly announce that they are doing so.”
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Nameless was founded by McNelis in mid-2021, and the project has so far gained the support of popular entrepreneur and NFT advocate Gary Vaynerchuck, among others.
It is gearing up for a new product launch later this month with an NFT software called StealthTest, which will provide private testnets for developers to try out smart contracts for Ethereum, IPFS, and Arweave.
Commenting on the NFT market, McNelis expects big-name companies to continue to enter the market with their own tokenized products, and interest from organic retailers will continue to grow.
However, he noted that in terms of investments, it is still too early for the large financial companies to want to speculate on NFT themselves.
“I think institutions will still be primarily focused on producing things like that. But some of the braver companies may be speculating on some NFTs, but I don’t think NFTs are mature enough and the markets are not mature enough yet to make safe long-term investments,” he said.