8 NFT Scams to Avoid
NFTs are also known as non-fungible coins. (NFTs) are a unique digital asset owned exclusively by the owner and residing on the blockchain, an electronic ledger. It is possible to think of them as exclusive and collectible works of art stored online.
The new cryptocurrency asset attracted the attention of web users worldwide after achieving an estimated market worth of more than 40 billion dollars. But as NFT popularity increased and so did the public’s interest in “NFT scams,” with Google searches reaching an all-time high for the first time during the first week of January 2022.
Like any valuable collectible, you must be aware of methods and techniques used to fool customers. Utilize this comprehensive guide to know everything you need to be mindful of about NFT scams, from the types of NFT scams to how they operate. It is also possible to use the NFT guidelines as your compass for trying to avoid and recognize NFT fraud.
What is an NFT?
A non-fungible token ( NFT) is a distinctive type of digital asset stored on the blockchain. The digital assets aren’t exchangeable, in contrast to other kinds of digital currency, and provide ownership security.
Every blockchain transaction is recorded in a digital ledger to verify ownership. Every NFT has its uniqueness and can’t be duplicated or replaced.
Here are some instances of NFT types:
- virtual real estate
- trading card for trading
The majority of people buy NFTs as unique investments and collectibles. NFTs can fetch thousands of dollars. Digital artist Beeple sold a single piece of NFT artwork for over $69 million.
The other NFT collections, including Bored Ape Yacht Club and CryptoPunks, are sold for hundreds of thousands of dollars per piece.
1. Rug Pull Scams
Rug pulls are a fraud where the product’s promoters make it the focus of social media channels, then quit backing it and begin to take investors’ funds after the price is driven up. In the end, the value of the NFT drastically drops to zero, leading to a loss for the investors who invested in the NFT.
The alternative is that the creators of the NFT eliminate the capacity for selling the currency, and buyers are unable to sell since their developers added code to remove the ability to sell.
What to avoid: The first thing to look into the developers behind the project is to determine whether they are legitimate developers who have received favorable reviews on social media. It could be an indicator if they have many followers but have low engagement.
Utilize burner wallets so that it is possible to limit the number of funds you’d like to invest in a certain purchase. This includes transaction fees and crypto, which reduces your risk.
2. Phishing Scams
Phishing scams are fraudsters who attempt to pretend to be legitimate NFT teams or projects. You’ve likely come upon fake ads through pop-ups or websites asking for your private wallet’s key or the 12-word security seed phrase.
Once the scammers have access to the private keys to your wallet, They will then attack your wallet and decimate your NFT collection and the entire cryptocurrency within it. Locating the best places to buy and trade NFTs should be the first thing you should do whenever you’re interested in NFT investing.
A search on the internet will overwhelm you with results from millions of searches. However, many fake websites for trading are hidden. It is often difficult to distinguish counterfeit sites from legitimate ones.
You must join the crypto wallet before being eligible to purchase an NFT. The users of Metamask, which is among the most well-known digital wallets, have been targeted recently in an online fraud involving phishing.
It is normal to supply your wallet address to complete a transaction. However, scammers could require your wallet’s seed word (the master key for your cryptocurrency wallet) or use it to hack your crypto wallet and take the contents.
Ads displaying malicious pop-ups are prevalent on other public websites such as Discord, Telegram, etc.
3. Bidding Scams
Bidding scams are frequent in the secondary market and happen when investors want to sell their previously purchased NFT. When you put your NFT to sell on the market, a buyer could alter the cryptocurrency you prefer using with crypto with low value without understanding, resulting in a loss.
Marketplaces such as OpenSea allow for offering the possibility of accepting multiple cryptocurrencies in auctioning NFTs. This is a major warning sign since USD 5 ($5) isn’t identical to 5 BTC.
4. Technical Support Scams
Scams involving technical support are an incredibly simple variation of scams involving phishing. This scam consists of a person disguised as a customer service manager for blockchain marketplaces and other NFT projects.
This scam seeks to establish contacts with buyers who are not aware and ask for sensitive personal details. Through official-looking websites and fake hyperlinks, An NFT fraudster uses the trick of solving problems to obtain your details and open your cryptocurrency wallet.
The scam is often seen on forums with many crypto enthusiasts, such as Reddit, Telegram, or Discord.
5. Counterfeit NFT Scam
A fake NFT fraud occurs when a fraudster takes an artist’s work and puts it on an online marketplace where fake NFT artwork is put up for auction. The buyer, unaware of the scam, will buy an NFT that has no value.
NFTs have been the subject of increasing instances of digital theft, as artists have the work of others copied or then sold as fakes to buyers as the original.
6. Pump And Dump Scams
A pump and dump scam is when a small group of buyers intentionally increases the demands of an NFT. Investors who are unaware believe that the NFT is worth something; they then participate in the auction and offer more.
When the scammer is happy with the value of the auction, he will sell the NFT to earn an income, leaving buyers with a useless asset. Wash trades are also a common practice within NFT trading.
Wash trading happens when a single person purchases an asset and then sells it, which drives the price. The NFT attracts naive traders who think they’ve found a great deal or believe it will go up yet.
7. Giveaway Scams and Airdrop Frauds
There will be giveaway scams in any place where there are cryptocurrency exchanges—scammers who offer giveaways target crypto enthusiasts by providing NFTs linked to various NFT marketplaces.
But, as with fake airdrops and scams, swindler appears to be an authentic NFT trading platform through social media to promote giveaway campaigns for NFTs.
The scammer will offer the user a free NFT by registering to their website and sharing their message. The scammer asks you to connect your wallet’s credentials to receive your reward, and during this time, they’ll record all the words you type, get the access you need to open your bank account, and even steal your NFT library.
8. Fake Influencers Scam
NFTs have experienced a rise in popularity. This has resulted in various endorsements by celebrities, which benefit these stars in multiple ways.
However, since the sales of NFTs are conducted online, and all marketing activities are conducted via social media platforms, the information accessible to the public about the project’s marketing is a bit limited.
The most popular NFT communities typically employ celebrities and influencers to promote projects, making it hard to discern the real from fake.
Some scams are based on fake endorsements from celebrities. Many people lose money before realizing that the fake influencer or celebrity isn’t associated with the scheme.
Most NFT scams trick you into believing that you’ve purchased or bought an authentic NFT or even take login credentials for your cryptocurrency bank account. It’s becoming more and more difficult to stay on top of these sophisticated frauds. Also, read about some of the most common scams in the cryptocurrency world and avoid them.
So, it is advised to conduct your research before engaging in these scams. There’s no way to make money easily. Secure your keys and enhance security online by double-checking your information, and dealing only with legitimate websites are just a few methods to ensure you are not a victim of these frauds.