9 NFT Scams and  Effective Tips to Avoid Them

11/20/2022

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Cryptocurrencies and blockchain technology are becoming increasingly popular, and with that growth comes an increased risk of fraud and scams. This article will discuss typical safety risks when using or investing in non-fungible tokens (NFTs).

What is an NFT?

A non-fungible token is referred to as NFT. Fungible, which means interchangeable, refers to things like bitcoins since you can swap one for another and still have the same amount of money. Due to its uniqueness and inability to be directly substituted by another NFT, an NFT is non-fungible. Anything digital, including images, videos, audio data, and more, can be an NFT.

Their ability to use technology to sell and collect digital art has caused a lot of excitement. Since NFTs are essentially digital assets, the ‘token’ in non-fungible tokens refers to these assets. You do not acquire ownership of a digital asset when you purchase an NFT associated with it. It is not permissible to copy it or use it for profit. Instead, you’re acquiring ownership of a blockchain-based record of your purchase, which you can keep or transfer to another person.

How do NFTs function?

NFTs point to a web link, such as an image file, and are layered on top of a blockchain, a ledger of transactions saved across numerous computer systems. NFTs are often stored on the Ethereum blockchain, though they can also be found on other blockchains. Digital artifacts representing tangible and intangible objects are used to build NFTs. These consist of the following:

  • Art
  • Memes and gifs
  • Videos
  • Collectibles
  • Online avatars
  • Music

This list is not all-inclusive. NFTs can be nearly anything; for example, Twitter founder Jack Dorsey is renowned for selling his first Tweet as an NFT for more than $2.9 million.

NFTs are the equivalent of collectibles in the digital world. Instead of receiving physical artwork, the buyer receives a digital copy. The fact that NFTs can only have one owner at a time grants them exclusive ownership rights. Ownership may be confirmed thanks to each NFT’s unique data. Additionally, owners or producers can store particular information within them; for instance, articles may have their signature within the metadata of an NFT.

You require a digital wallet that can hold cryptocurrencies and NFTs to collect NFTs. For your NFT purchases, cryptocurrency is also required. You can browse NFTs on NFT marketplaces; among of the most well-known ones are OpenSea, Rarible, and Foundation. While some contend that any blockchain transaction involves a resource cost, others assert that NFTs are a tool to support digital artists. Knowing the dangers of NFTs, such as fraud and scams, is crucial if you are interested in them.

Common NFT Scams

Rug Pull

Scammers attract customers by advertising a fake NFT project or collection and assuring them of financial gain. On social media, scammers promote this asset, but once it is purchased, all of the promotion and any unfulfilled promises disappear. This results in a sharp decline in value. The fraudsters additionally make it impossible to sell this NFT.

How do I spot a rug pull fraud?

So how can someone tell if they’ve been “rug-pulled”? Notably, due to how expertly it is executed, this is one risky category of NFT scams that are challenging to spot!

Investors must look at the social media accounts of developers before taking any NFT investing risks. They should also consider the preference for engagement over following (as high engagement and followers are good signs).

The next stage is to determine the project team’s historical collections and their performance thus far.

Additionally, users must be alert for warning signs like contradictory data and an unresponsive team. You should also carefully review the official webpage. An added benefit is the website’s crystal-clear map.

Phishing

Despite being an old trick, phishing is still widely used. Phishing scams sometimes feature false emails, pop-up windows, and adverts that direct consumers to a fraudulent website. After that, the fraudulent website asks for their private wallet keys to access customers’ digital wallets. Scammers can empty the digital wallet of any NFT collection or bitcoin once they have access to this secret information.

How can I avoid phishing scams?

Before opening, one must check the domain URL. Users must avoid using external links to authenticate their identity or carry out other wallet-related actions.

One should always double-check with the customer support staff or community whenever an activity requests any of your critical data or security. 

When using a MetaMask wallet, only use the official domain “MetaMask.io URL” to complete wallet verifications and other tasks; avoid clicking on paid advertisements or other illegitimate sites.

Airdrop

Scammers advertise NFT giveaways on social media. In exchange for telling your friends about the promotions or signing up on their websites, you will often receive a free NFT. When it comes time to claim the reward, the con artists ask for the recipient’s cryptocurrency wallet address so they may deliver the NFT, but they get access to the account and take any money or NFTs present.

How can I avoid giveaways and airdrop scams?

Scams using NFT giveaways or airdrops are simple to avoid. How ??

If you have any concerns about the website’s credibility, visit the websites or social media pages linked to the hidden links.

Social Media Impersonation

To persuade individuals to purchase fraudulent NFTs, cybercriminals build social media personas on the internet. They make their bogus websites appear authentic by using social media.

How to spot impersonators?

Make a thorough investigation into the project. Ensure the influencer is connected to the project by checking their social media profiles. If there is an affiliation, influencers will publicly promote it.

Bidding Scams

When someone tries to resell their NFT, bidding fraud occurs. The scammer, who placed the highest bid, then exchanges the cryptocurrency for one with a lower value after winning the highest bid. Although it could seem like the most money, some cryptocurrencies are worth less than others.

How Can You Avoid Bidding Scams?

Without a doubt, bid frauds are simple to avoid and recognize. For that, you must constantly check the mentioned currency and avoid accepting bids below your limits.

Pump and Dump 

When a group buys a significant amount of cryptocurrencies or another currency to boost demand and raise the price, it is known as a pump-and-dump fraud. Everyone else loses when the group sells the item after the asset’s price has increased or been pumped up to profit from the profits.

How can the Pump and Dump Scam be avoided?

Check out the collection’s price history when encountering abrupt NFT price increases. Not only this, but one must also be conscious of the same’s wallet records. Fortunately, this feature for reviewing wallet records is available on NFT marketplaces like OpenSea.

Take note of transaction history and the overall number of trades during the hype stage. A “Red Flag” is raised if fewer persons purchase and sell NFTs. 

Analyze the discord, Twitter, and local discussions to learn what other people think. You can determine the cause of the price pump by examining the environment of the price increase. Again, if you notice a project with a low value, avoid it.

Duplicated or Plagiarized NFTs

Scammers may steal or copy works of art and then post this fake content on reputable websites like OpenSea. The NFT is worthless since it was taken, copied, or faked. Before understanding it is a fake, the person has already paid for it. 

How can you prevent NFT scams that use counterfeit artwork?

Investors must exercise caution to avoid NFT fraud involving counterfeit artwork. Before acquiring an NFT from a certain collection, one might think about doing more than two platforms’ worth of research on the seller. Cross-referencing the seller’s account information with their social media profiles is also necessary.

A “blue tick” next to the seller on websites like OpenSea denotes the merchant’s validity. To facilitate your NFT trades, you should always strive to purchase NFTs from a reputable source or use a reliable program like NFT Profit.

Technical or Customer Service Phishing Attacks

In any industry, technical or customer support fraud is a common occurrence. For this type of NFT scam, fraudsters use Reddit, Discord, or telegram to find the contact information of NFT holders.

They will contact users using fictitious identities made on sites with a professional appearance. Scammers that act as marketplace technical support workers attempt to convince users through deceptive tactics. These con artists will occasionally pose as problem solvers while requesting private information.

If you are persuaded, the con artists will ask for your digital collectible’s credentials and private information. Once you give the information, the NFT owners’ assets will be taken.

How can technical support scams be avoided?

Please note that the official team may not contact community members on social media. Therefore, avoid sharing any critical information on social media. Before replying to messages that request private customer information, get in touch with the official team first—an NFT scam could be waiting for you!

Website Fraud

For this kind of NFT scam, highly skilled con artists create copies of authentic markets. The designs will resemble the websites’ original layouts. The similarity is intended to mislead page owners about the genuine page.

Social engineering schemes are the name for this type of NFT fraud. Owners who purchase NFTs from such shady websites lose their money if they are not carefully examined.

How Can I Spot an NFT Scam Website?

Before engaging in any website activity, it is important to investigate the reliability of the website’s official URL. Examine the domain. Never enter the website using links, pop-up windows, or email messages.

Tips to Avoid NFT Scams

  • Secure your keys. Never reveal a person’s cryptocurrency wallet details. Both these keys and any recovery codes must be kept in confidence.
  • These passcodes are completely unnecessary for anyone to know.
  • Look into the NFT seller. Look for the blue check verification symbol on the seller’s NFT marketplace account before making a purchase. Additionally, look into the seller’s social media profiles, previous listings, and online reviews.
  • Analyze the NFT transaction history. NFTs with transactions all in one day should be avoided.
  • Avoid clicking on links or attachments that seem shady. The link could still be false even if it appears to lead to a legitimate website. It’s advisable to never click on any links and to always go directly to the website.
  • Verify NFT price ranges. Visit trade platforms like Axie Marketplace, Mintable, or OpenSea to compare prices before purchasing an NFT. It’s most likely a fraud if the price appears significantly higher or lower than those on these trustworthy trading websites.
  • Observe the bids. Verify the currency once more before accepting any bid. Never settle for less than you expect.
  • Make secure passwords. Create secure passwords for your bitcoin wallets and NFT accounts. Another method of protecting NFTs is through two-factor authentication. When fingerprints or facial recognition are used, it is more challenging for someone to steal an identity.
  • Utilize trustworthy NFT exchange markets. Never believe offers that seem too good to be true. Numerous emerging markets provide bare-bones security. Avoid rogue exchange marketplaces and stick to trustworthy ones like OpenSea, Rarible, Mintable, Foundation, MakersPlace, and Axie Marketplace.

Evil Twin Attack: A Detailed Guide

It is crucial to understand what an Evil Twin attack is and how to defend yourself from it. You will learn in this article how to defend against evil twin attacks.

Conclusion

NFT scams will likely continue to be a concern. You can take a lot of measures to safeguard yourself, though. Before making any decisions, you must be aware of the many frauds and educate yourself on the marketplace.

Numerous businesses are also creating new and creative strategies to thwart scammers. This is a crucial area that will only become more crucial. Therefore, be sure to keep an eye out for emerging new options.

Don’t waste time if you become a scam victim; let others know by reporting it. Always inform the appropriate authorities so that they can take appropriate action.