Top 6 common NFT scams and ways you can avoid them

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Having looked at 2012, colorful coins were the first indication of what we now refer to as non-fungible tokens (NFTs) or nifties for some. Ten years later, everyone is talking about these blockchain-based assets that can represent just about anything, notably in the entertainment, sports, and video game industries.

In just the past year, the market for non-fungible tokens (NFTs) has grown dramatically to become a multibillion-dollar sector of the cryptocurrency market. Top collector’s pieces can sell for $30,000 or more, including rare items from the Cool Cats and Bored Ape Yacht Club collections.

The market is still driving cryptocurrencies worth thousands to millions of dollars, providing lots of opportunities for scammers and raising many questions about the security of this commodity. A digital wallet may be hacked using malware or social engineering strategies. Because the NFT industry is unregulated, it provides a breeding ground for all types of scams. A number of businesses, including Adobe, are working to develop authentication marks that will make it simpler to confirm a token’s integrity. This is a fast-paced environment that depends significantly on user activity despite some anti-fraud obstacles.

Here are some typical NFT scams you should be aware of and some tips on how to avoid being a victim:

1. Phishing scams and suspicious pop-ups

You must create an Ethereum blockchain wallet in order to purchase your first NFT. For those who collect NFTs, MetaMask may be the most well-liked Ethereum wallet. However, a recent phishing scheme that used fake adverts to solicit users’ private wallet keys or 12-word security seed phrases targeted MetaMask users (a big red flag). Additionally, there are phony harmful pop-ups that operate through Discord, Telegram, and other open forums and link to login pages for well-known websites like MetaMask.

A bad actor can steal all of the cryptocurrency in your digital wallet if they manage to obtain your private information through a phishing effort.

A bad actor can steal all of the cryptocurrency in your digital wallet if they manage to obtain your private information through a phishing effort.

How to prevent these scams

Typically, you will just need your seed phrase to create a physical backup of your crypto wallet or to restore it. The MetaMask pop-up and all other pop-ups should never be used to enter information. Never use links, pop-ups, or your email to enter your information while transacting with cryptos; always go directly to the verified website. Write down your seed phrase on paper, but never disclose it to anyone or even save a picture of it on your phone.

2. False identities and catfishing

It’s simple to fall victim to catfishing because NFT sales are conducted digitally and all marketing is done via social media. It can be challenging to determine which popular NFT groups are genuine or not because influencers and celebrities frequently work with them to promote them.

Also Read:  What Happened after Hackers stole $1.7 million in NFT from OpenSea

How to prevent these scams

Never reply to a direct message from someone who identifies themselves as a founder, celebrity, or influencer. C-level staff will never DM you unless you first send them a message or you reach an actual agreement in a public Twitter thread or Discord channel, according to NFT protocol that is widely accepted. In the NFT universe, don’t open links or share any secrets if someone DMs you first.

3. Pump-and-dump

In the crypto and NFT realms, pump-and-dump scams are unfortunately becoming more predictable. The term describes the process by which a group of people buys a lot of NFTs or money and artificially raises demand. Once they are successful, the scammer payout at high prices, leaving others who did not join with worthless assets.

Similarly, you may have heard the term “paper money” to describe NFT initiatives that aren’t technically frauds but have limited liquidity as a result of a small number of pushy buyers.

How to prevent these scams

Whatever project you are interested in, look into its history and wallet records. The transparency of blockchain technology is really helpful in this situation. View the number of transactions and purchasers for the NFT collection on OpenSea or any other NFT marketplace. You can view each incoming and departing Ethereum blockchain transaction with EtherScan.

Join the project’s Discord server and follow it on Twitter as well. A project needs a good number of interested investors and collectors as well as an active community where people interact, engage, and share information in order to have excellent liquidity and/or lasting artistic or communal value.

You can view each incoming and departing Ethereum blockchain transaction with EtherScan.

4. Bidding scheme

The secondary market is where most bid-rigging scams take place after you’ve bought your NFT and are looking to sell it to the highest bidder. The cryptocurrency utilized by bidders may change after you offer your NFT for sale and without informing you. For your preferred NFT, you may obtain $5 rather than 5 ETH (approximately $15,000–$20,000).

How to prevent these scams

Verify the currency used twice, and never accept a bid that is less than what you desire.

5. NFTs that are fake or plagiarised

It’s important to realize that minting a piece of artwork as an NFT does not guarantee intellectual property (IP) ownership. Whether or not they possess the IP rights to the image, anyone can convert any snapshot or image into an NFT thanks to OpenSea’s user-friendly software. Scammers and other undesirables might easily steal an artist’s creation and create a phony OpenSea account to post and auction off bogus artwork. Once the community learns about the scammer’s activities, this would effectively render your NFT worthless, and there would be no way to get your money back.

Also Read:  Wondering what are Non-Fungible Tokens or NFTs? Here's everything you need to know

How to prevent these scams

Make sure the artwork you are purchasing is from a verified account before purchasing an NFT from any marketplace. On OpenSea or other NFT markets, look for the blue check mark next to the artist’s profile photo. If there isn’t, you can find the artist online via their website, Twitter account, or other social media platforms. Ask them personally if the piece of art you want to purchase is theirs and if your user profile is appropriate. Inquire with other members of the community and check to see whether the artist or NFT project has a Discord channel.

Keep an eye out for fake blue checks. A blue checkmark on the outside of the profile image, not inside, indicates a genuine verified account.

6. Unreliable storage sites

This is an example of an ethical grey area, rather than a scam. NFTs can disappear after being purchased. This is so because the NFT, the contract that resides on the blockchain, is distinct from the original piece of art. Consider the scenario where you publish an original music MP3 to a website like OpenSea. When a buyer is prepared to purchase it, they submit a bid and pay you in ether, which will result in the creation of a smart contract, a digital record of ownership.

The blockchain is where the smart contract is actually created. However, the file you supplied is distinct. Although it may sound abstract, keep in mind that NFTs are only about asset ownership—the asset itself might be anything.

Decide on a reliable central platform if you plan to store the artwork, house deed, or other digital content that was included with the smart contract there. And avoid purchasing an NFT that simply contains an image link to a URL.

Decide on a reliable central platform if you plan to store the artwork, house deed, or other digital content that was included with the smart contract there. And avoid purchasing an NFT that simply contains an image link to a URL. Any page or piece of artwork that is kept at that URL is subject to change at any time without your consent, leaving you with a token that essentially points nowhere.

How to prevent these scams

If you purchase an NFT, be careful to also acquire full ownership of the tangible or digital asset (in the form of a JPEG, mp3, or PDF file).

The number and variety of modern scams that you can fall for are a little frightening. Every other week, cybercriminals develop new tricks to deceive people as they get more creative and clever. However, you’ll undoubtedly keep yourself safe when exploring the fascinating world of NFTs if you remain cautious and knowledgeable about the various frauds that exist and how to spot them.


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