Non-fungible tokens, or NFTs, have garnered attention over time by providing a unique way to buy, sell, and trade digital art, collectibles, and other virtual items. From Bored Apes to NBA Top Shot, NFTs are not only a prominent use-case for blockchain technology but also represent the awakening of a new era for creators in the digital world, spreading across art, music, and sports.
However, like any rapidly growing market attracting frauds and scams, NFTs have also attracted scammers looking to take advantage of naive individuals. This article will explore some of the common NFT scams and how to protect yourself from this exciting yet risky landscape.
What Are NFTs?
NFTs (Non-fungible tokens) are blockchain-based tokens representing a unique asset such as art, digital content, or media. An NFT can be looked up as an irreplaceable digital certificate of authenticity and ownership for a given digital asset. But with the rise of NFTs and the growth potential of digital collectables comes the risk of fraud, scams, and theft.
What Are NFT Scams?
NFT scams are deceptive activities that exploit the popularity of non-fungible tokens. Bad actors can deceive buyers, sellers, and investors by involving them in the trade of fake or low-value NFTs, basically making them invest in worthless digital assets. Scammers impersonate celebrities or famous artists, exploiting the unregulated aspect of the crypto market. They may also use phishing attacks or hacking to steal money by accessing crypto wallets. To be protected from these attacks, investors should research and verify the authenticity of NFT projects, artists, and platforms before making any purchases or transactions.
Common NFT Scams And How To Be Safe From Them
Now that we have gone through what NFT scams are, let’s take a look at some of the common NFT scams and the mitigation tactics to protect yourself from them.
- Fake Artwork And Counterfeit NFTs: This is one of the most common NFT scams that involves the creation and sale of fake artwork or counterfeit NFTs. Scammers either create entirely new digital art pieces or replicate popular ones, passing them as original and valuable. Inexperienced buyers may end up paying huge amounts of money for worthless or stolen artwork.
To be protected, it’s necessary to verify the authenticity of the artwork and the NFT before you make the purchase. Look for reputable marketplaces or platforms that verify the NFTs they list, research the artist who created the artwork, and check for any previous sales or exhibitions.
- Phishing And Impersonation Scams: Scammers create fake social media accounts and websites that closely resemble legitimate NFT marketplaces or artists’ profiles. They lure unsuspecting investors into providing their personal information or private keys, which leads to the theft of their crypto assets.
To protect yourself, always double-check the website URL and ensure you are visiting a legitimate platform. Be careful of unwanted messages or emails asking for personal information or private keys. Credible NFT marketplaces never ask for your passwords or private keys.
- Rug-Pull Scams: This is a fraudulent scheme where scammers create and promote an NFT project and collect funds, only to suddenly abandon the project and abscond with the funds raised from investors.
To be safe from Rug-pull scams, always do thorough research and check if the team behind the project is credible and publicly known. Verify the project’s smart contract using blockchain explorers like Etherscan or BscScan, depending on where it is deployed, to ensure it’s secure. Try to avoid projects with sudden price surges and over hype. Always trade using trusted marketplaces.
- NFT Airdrop Scams: Scammers distribute free NFT giveaways to users in the name of Airdrop events. Once the users visit the provided link, scammers request them to agree to the specified “terms and conditions.” After agreeing to it, users are prompted to connect their crypto wallet to claim the rewards. Once users enter their wallet details, it is stored in the scammers’ system, giving them unauthorized access to the users’ account, enabling them to drain their assets.
Be careful of clicking on any suspicious Airdrop event links; always cross-check the legitimacy of the token and the event through official sources and try not to share any sensitive data or approve unknown smart contracts.
- Bidding Scams: Bidding scams frequently occur when you try to sell your NFT in the secondary market. Once your NFT is listed, scammers strategically place the highest bid. After you have finalized the deal, the scammers switch cryptocurrency at the last moment (e.g., replacing ETH with a lesser-valued token), leading to lower-than-expected returns.
To safeguard yourself from falling victim to such scams, it is important to consistently verify the cryptocurrency you are being paid with.
- Pump And Dump NFT Schemes: In these schemes, scammers artificially inflate the price of an NFT by creating hype and fake transactions. Once the price is at its peak, scammers sell their holdings, causing the value of the collectible to plummet, leaving buyers with significant losses.
Be aware of sudden spikes in the price of an NFT and do your best research on it before investing. Avoid jumping on the bandwagon without understanding the true value of the asset.
5 Simple Ways To Stay Safe From NFT Scams
To effectively understand and protect yourself from NFT scams, it is important to have a comprehensive knowledge of their nature and tactics. By reading the following information, you will be able to spot and protect yourself from potential activities in the NFT world.
- Research Before You Buy: When you are planning to purchase an NFT, take the time to investigate the project, the creator behind it, and the authenticity of the artwork or collectible.
- Stick To Trusted Marketplaces: To minimize the risk of falling victim to an NFT scam, always use established and reputable NFT marketplaces.
- Verify URLs And Wallet Addresses: Phishing attacks are common in the NFT space. Always verify that the URLs you visit are legitimate. Cross-check the wallet addresses with multiple sources before making any transaction.
- Restrict Sharing Private Keys: No legitimate NFT platform asks you for personal details and Private keys. If asked, never share any sensitive details; instead, report the platform as it is most likely to be a scam.
- Use Security Features To Protect Your Wallet: Utilize security features like two-factor authentication to add an extra layer of security to your crypto wallets. Additionally, consider having a hardware wallet or a secure software wallet to store your NFTs offline and protect them from potential hacks or thefts.
- Stay Informed And Red Flags: Follow reliable sources of information, join NFT communities, and collaborate with experienced artists. By staying informed, you will be able to spot potential red flags, learn about emerging scams, and make more informed decisions.
Conclusion
NFT is an emerging space where creators and artists can shine. Users can buy or sell Artworks, collectibles, and other digital assets on marketplaces. However, like the fraudulent activities in any other rising market, NFTs are also facing scams and thefts. After reading this article, you would have understood the common scams happening in the space and the ways to protect yourself from them. Take all the above-mentioned information into consideration before you decide to invest in a particular NFT.
