In today’s digital economy, Non-Fungible Tokens (NFT) are all a craze where people are able to make money by trading NFTs. They are digital assets that come in all shapes and sizes, including art, image, GIFs, music, video game items, collectibles, memes, virtual fashion, and more. NFTs help creators to include a string of code into their works so that they can share them without fear of piracy and also guarantee that they will be paid directly by their supporters and fans through royalties and sales.
Small businesses are also looking toward NFT projects for their marketing campaign: promotional tools and customer loyalty programs. There is money to be made from NFTs in fact, the global NFT marketplace is expected to reach some $80 billion by 2025 promoting people to create an NFT. With so much money on the line, NFT scams are now everywhere. Here are some of the NFT scams to avoid before you start buying these tokens.
What is an NFT Scam?
Like any investment, online investing scams do occur and cost victims lots of money. For example, some NFT marketplaces are phishing sites where scammers create what look like authentic websites to dupe visitors into sharing confidential details like their crypto wallet private key. This is further compounded as there’s no real way that they can get them back their money.
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Common NFT Scams to Watch Out for
The popularity of digital assets trading as NFTs has grown exponentially over the past few years, with NFTs now going for millions of dollars. But as any marketplace grows, it’s only natural for scammers to use the NFT marketplace to try to take advantage of unknowing buyers, here are some common NFT scams.
1. Rug Pull Scams
A rug pull is a scam in which promoters of a project hype it up through social media channels, suddenly stop backing it and take their investors’ money after the price has been driven up. As a result, the price of the NFT dramatically falls to zero, which leads to losses for investors in the NFT. A variant includes where developers of an NFT remove the ability to sell the token where purchasers will be unable to sell as the developers have added code removing this ability
Small Business Deals
How to Avoid: The first thing to check is the developers behind the project to see if they are bona fide developers that have received good reviews over social media. If they have large followers but low engagement it could be a tell-tale sign. Use burner wallets where you can limit the number of funds you want to commit to a particular purchase-including crypto for transaction fees this limiting your risk.
2. Phishing Scams
NFT phishing scam involves phony advertisements through fake websites and pop-ups that ask for users’ private wallet keys or 12-word security seed phrases. Once in possession of your wallet’s keys, scammers will hack into it and deplete all the cryptocurrency and NFT collection stored in it.
How to Avoid: Never give your wallet’s keys on pop-ups or suspicious websites. Always go directly to verified websites for crypto transactions, never use links, pop-ups, or your email to enter your wallet’s key information.
3. Bidding scams
Bidding scams happen when investors want to resell their purchased NFTs in a secondary market. Once they list their NFT for sale in an NFT market, bidders might switch your preferred currency with low-valued cryptocurrencies without telling you, leading to potential losses for you.
How to Avoid: Double-check the currency used before selling. For additional insights please read our previous article on how to sell an NFT.
4. Counterfeit NFTs
This happens when scammers steal an artist’s work and open a fake on an NFT marketplace where they list counterfeit artwork for auction. Unsuspecting buyers will then make purchases on an NFT that has no value.
How to Avoid: Before investing in an NFT from any marketplace, do your own research to make sure the NFT you are buying is from a verified account and is the real artist in question. Most legitimate NFT sellers will have a blue checkmark beside their usernames.
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Pump-and-dump schemes refer to when a group buys up NFTs thus artificially driving demand up. Unsuspecting investors believing that the NFTs have some value will join the auction and start bidding more. Once the bids go up, the scammers will sell off the NFTs for a profit leaving buyers with useless assets.
How to Avoid: Review the transaction history of the NFT and contact information of the creator in question. Transactions that center around one date could indicate a pump and dump scheme
Less Common NFT Scams
Some less common NFT scams include:
6. NFT giveaways or airdrop scams
Here scammers pose as legitimate NFT trading platforms on social media to promote NFT giveaway campaigns also known as airdrop scams. The scammers will offer you a free NFT if you spread their message and sign up on their website. They then prompt you to link your metamask wallet credentials to receive your prize during this they record what you type and start to steal your library of NFTs after gaining access to your account.
How to Avoid: Double-check the account’s social media page for verification and/or ensure the link sent to you matches the NFT company’s URL.
7. Investor scams
Because of the relative anonymity accorded to NFT over the internet, trading scammers would often use this to create projects that seem to be viable investments to only disappear with the funds they collected from interested people.
How to Avoid: Make sure that you can verify the creator behind the project and have contacts information for them. Do some sleuthing and see if there have been any prior complaints in regards to dealings with others.
8. Customer support impersonation
A variation of the phishing scam where hackers will pose as customer support staff for blockchain marketplaces and reach out to unsuspecting buyers through Discord or Telegram. NFT scammers through the use of a fake link and official-looking websites will under the ruse of resolving issues get personal information and access to cryptocurrency wallets.
How to Avoid: Communicate only with the designated creator’s official webpage or official social media platforms of the NFT marketplaces.
- Read More: How to Buy an NFT
Avoiding Scams in the NFT Space
|Tips to Avoid NFT Scams||Description|
|Keep your private keys private||Ensure you never share your private key with anyone.|
|Boost your online security||Create strong passwords and enable two-factor authentication for enhanced protection.|
|Deal with official sites||Avoid dubious platforms; stick to established blockchain networks and official websites.|
|Do enough research before investing||Prioritize research, read reviews, assess creator engagement, and ensure legitimacy before making a purchase.|
|Always double-check the NFT project price||Verify NFT prices on reputable trading platforms; suspiciously low prices often indicate a scam.|
Essentially most common NFT scams work by either stealing your cryptocurrency wallet login credentials or tricking you into believing you successfully purchased or sold a legitimate NFT. To avoid getting duped by such scams follow the following rules:
Keep your private keys private: Make sure you do not share your private key with anyone.
Boost your online security: Don’t forget to create strong passwords for your cryptocurrency wallet and other NFT accounts. For added security, you might want to opt for two-factor authentication for all your NFT accounts.
Deal with official sites: resist the lure of bargains and questionable blockchain networks. If it is too good to be true, it probably is.
Do enough research before investing: look at reviews, the level of engagement that creators have, and see if there are any previous complaints in regards to their transactions. Always be cautious and make purchases only when you are certain of the information.
Always double-check the NFT project price: Always before making any NFT purchase, cross-check the price on an official trading platform like OpenSea, Axie Marketplace, OpenSea, Raible, or Mintable. If the price appears presented is lower than what’s listed on the legitimate trading site, it most probably is a scam.
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What is an NFT?
An NFT is a unique digital asset representing ownership or proof of authenticity of a specific item using blockchain technology. Unlike cryptocurrencies like Bitcoin, NFTs are non-fungible, meaning each one is unique and not interchangeable with other tokens on a one-to-one basis.
Key Characteristics of NFTs
Each NFT is distinct and represents a specific item or piece of content. This uniqueness is maintained through metadata and cryptographic hashes.
NFTs are indivisible, meaning you cannot split them into smaller units like you can with cryptocurrencies.
Some NFTs can be used across different applications or platforms. For example, a virtual costume bought as an NFT in one game might be used in another game.
4. Ownership Control
Owning an NFT means you have ownership of the unique item it represents, though this may not include intellectual property rights to the item itself.
NFTs contain detailed information about the ownership history, providing a clear and immutable record of who has owned the item.
Applications of NFTs
NFTs are not limited to digital art and can be applied to various domains:
- Digital Art: Artists can tokenize their work, enabling proof of authenticity and ownership.
- Collectibles: From trading cards to virtual pets, NFTs allow for unique and collectible items to be bought and sold.
- Real Estate: Virtual real estate can be bought and sold as NFTs in virtual worlds.
- Music and Media: Musicians and creators can tokenize their content, providing new ways to sell and distribute their work.
- Physical Assets: NFTs can also represent ownership of physical objects, linking the digital token with a real-world item.
Pros and Cons of NFTs
- Ownership and Control: NFTs provide a new way to own and control digital assets.
- Creativity and Innovation: They open up creative opportunities for artists and developers.
- Transparency: Blockchain technology ensures transparent and immutable ownership records.
- Environmental Concerns: Some NFT platforms consume significant energy, leading to environmental concerns.
- Legal and Ethical Issues: The rapid growth of NFTs has led to questions about intellectual property rights, plagiarism, and more.
- Market Volatility: The NFT market can be highly volatile, with prices fluctuating dramatically.
Is NFT legitimate?
NFTs are the latest phenomenon in the digital economy. They offer seamless digital asset transactions between creators and fans thus cutting out the middle man. For savvy, NFT investors trading in NFTs can be potentially rewarding. For additional insights please read our article on how to make money with NFT.
Is NFT a pyramid scheme?
No NFTs are not a pyramid scheme they are a medium through which people trade digital assets through the use of cryptocurrency. NFTs are decentralized, limited in number, and have smart contracts. If you own NFTs, the value of NFTs comes from their scarcity just like real-life fine art and also have the potential to appreciate over time. NFTs can also be programmed by their owners to help generate royalties for them as well.
What are NFT scams?
NFT scams refer to deceitful practices involving non-fungible tokens, where scammers sell fake or counterfeit digital assets.
How can I recognize an NFT scam?
Recognizing NFT scams requires careful investigation, including researching the platform and seller, verifying the token’s authenticity, and checking for known red flags.
What precautions can I take against NFT scams?
To avoid NFT scams, always verify the creator, use secure and recognized platforms and wallets, follow established community guidelines, and avoid deals that seem too good to be true.
Can I recover lost funds from an NFT scam?
Recovering funds lost to an NFT scam can be challenging, and often impossible. Immediate reporting to law enforcement and the involved platform may increase chances.
Where can I buy NFTs safely?
Purchase NFTs from well-known, reputable platforms, and always verify the authenticity of the token and the credibility of the seller.
How do scammers execute NFT scams?
Scammers may use fake platforms, impersonate real artists, sell plagiarized or non-existent tokens, or manipulate transaction details to execute NFT scams.
Are all NFT platforms risky?
No, many legitimate NFT platforms follow security protocols and provide safe transactions. Researching platforms and following community guidelines can mitigate risks.
Image: Depositphotos, Envato Elements
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