As the sophistication of crypto-based and NFT scams grows, it becomes simpler to fall for them.
Despite the fact that NFTs have much more widespread applications in areas like the supply chain, drug research, and gated communities, the most well-known use is still the purchase and sale of digital artwork. And there will always be those seeking to cheat others out of their money whenever two parties engage in a monetary transaction.
In February 2022, the market value of these cryptographic assets for exchanging digital art hit $87 billion, attracting the attention of online fans all over the globe. The public’s focus on ‘NFT frauds,’ however, increased in tandem with NFT’s rising profile. The first week of February 2022 saw a dramatic increase in the number of Google searches for the keyword.
Buyers of NFTs, like those of any rare and expensive collectible, should be wary of frauds and fraud schemes. Our team has compiled this NFT scams guide to help consumers learn about the basics, from definitions to operational details.
Scammers prey on individuals of all socioeconomic classes.
Scammers are successful because their methods seem reasonable at first glance. At Supplain, it is our mission to educate the public about blockchain technology, NFTs, and security. To assist you stay safe against fraud, we have compiled the following tips.
What is an NFT?
A nonfungible token (NFT) is a special kind of cryptocurrency stored on a distributed ledger. In contrast to other forms of cryptocurrencies, these digital assets prove ownership and cannot be traded for other items. The blockchain’s digital ledger keeps track of all ownership changes.
Each NFT is one of a kind and cannot be duplicated. Types of NFTs include the following.
- Virtual real estate
- Trading card
NFTs are purchased as rare investments and mementos.
The price of a single NFT may reach the millions. One piece of NFT artwork by digital artist Beeple, for instance, sold for almost $69 million. The Bored Ape Yacht Club and CryptoPunks NFT collections are also fetching six-figure sums at auction.
You may also like reading: Here are the top NFTs with Utility [Updated List]
How do NFT scams work?
When buying or selling digital art, NFT scammers may deceive you into thinking you bought or sold a real NFT, or they can steal the login information for your cryptocurrency wallet.
The high value of digital assets attracts hackers and cybercriminals, who employ techniques like phishing and social engineering to get access to users’ NFTs and cryptocurrency wallets.
Scammers are drawn to NFTs because of the high prices (often six figures) at which they may be purchased. These sums may seem excessive for a JPEG, but the makers of NFTs have this to say in response: utility.
Because NFTs produce a digital record of ownership on the blockchain (known as’minting’), this tokenized digital artwork may also function as a membership ticket to private online communities, games, concerts, Discord servers, and other metaverse activities.
At least, in principle.
In reality, however, NFTs are still unfamiliar to the vast majority of people. NFTs present some profitable chances for fraudsters owing to the sheer amount of money changing hands, which is a bummer for blockchain aficionados who see it as a positive indicator that widespread crypto adoption is on the horizon.
Common types of NFT scams
NFT scams trick its victims into sending them money or granting the scammers access to their digital wallets or cryptocurrency wallets. When your money or digital wallet credentials are stolen, it might be difficult to get them back.
Some frequent examples of NFT fraud are described below.
Scammers lure victims in with the promise of easy money from investing in a bogus NFT enterprise or collection. Scammers promote this item heavily on social media before selling it at a steep markup without intending to follow through on any of the promises made. The result is a precipitous decline in price. The fraudsters also take away the NFT’s resaleability.
Phishing is a classic con, but unfortunately it continues to work. Fake adverts, emails, and pop-ups that direct users to a malicious website are the usual tools of phishing scammers. Users are then asked to provide their private keys to their digital wallets on the bogus website. If fraudsters get access to this information, they may steal the contents of the digital wallet, including any NFT collections or cryptocurrencies.
Scammers often advertise NFT prizes on social media. As an incentive for spreading the word or joining up on their websites, most programs provide participants with a free NFT. Scammers ask for cryptocurrency wallet details when it’s time to claim the reward, ostensibly so they can transfer the NFT, but in reality so they may empty the account of any cash or NFTs that may be there.
Social media impersonation
Criminals in the cyber realm use social media to build trust with their victims before attempting to sell them bogus NFTs. They utilize platforms like Facebook and Twitter to make their bogus sites seem more credible.
Theft or piracy of artwork is a common tactic used by fraudsters, who subsequently post it on reputable marketplaces like OpenSea. The NFT is worthless since it was stolen, cloned, or counterfeited. Once the transaction is done, the buyer discovers the item is fake.
How can you stay safe from NFT scams?
If you want to stay safe from NFT frauds, monitoring the news is a good idea. Optimize your digital security measures, and avoid responding to suspicious contact requests or clicking on odd pop-ups.
Users’ awareness of the need to safeguard their NFTs while trading is growing. It is crucial to know how to prevent an NFT scam if you now own or want to purchase an NFT. As a user, you may put up a number of safeguards to prevent theft of your valuables.
First and foremost, you need to have some idea what you’re doing. Checking the NFT’s trade history might help you avoid being suckered into a “pump and dump.” You should also try to track down the creator’s contact information and read up on them. A red flag should go up if the purchases and sales occurred on the same day.
While we’re on the topic of phishing schemes, it’s important to remember that it’s your data, not someone else’s. Never respond to strange offers or demands for contact, and never give anybody the combination to your wallet. It goes without saying that two-factor authentication (2FA) should be used on all of your accounts at all times.
There are situations in which you simply have no recourse in the case of stolen artwork. You may, of course, check the credentials of the maker, the social media posts, and the group. Research is essential, as it would be in any situation. Some NFT exchanges have created brand new technologies to search public blockchains for fake NFTs. Finally, NFT fraudsters lack the trust indicator next to their user names.
How to secure an NFT
To protect your newly acquired NFT from hackers, it is recommended that you store it in cold storage or on hardware like Trezor or Ledger rather than leaving it on your exchange account. Options for cold storage are more secure since sensitive data is contained inside the device itself, making it more difficult for threat actors to access.
A software wallet, like Coinbase or MetaMask, is another typical place to keep NFTs. These wallets keep their private keys online, making them simpler to locate than those on a cold storage device.
In conclusion, navigating the world of NFTs can be an exciting and potentially lucrative endeavor. However, it is crucial to remain vigilant and informed to avoid falling victim to scams. By following the tips and advice provided in this article, you can significantly reduce the risk of being deceived or losing your hard-earned money.
Remember, always conduct thorough research before engaging with any NFT project or marketplace. Verify the legitimacy of the artists, platforms, and developers involved. Look for red flags such as unrealistic promises, poor communication, and lack of transparency. Stay away from offers that seem too good to be true, as they often are.
Q: How can I verify the authenticity of an NFT?
Verifying the authenticity of an NFT involves conducting thorough research. Check the credibility and reputation of the artist or creator. Look for their presence on reputable platforms, social media accounts, and art communities. Additionally, verify the transaction history on the blockchain to ensure the NFT was minted by the original creator.
Q: Are there any warning signs of an NFT scam?
A: Yes, there are several warning signs of an NFT scam. Be wary of projects that promise unrealistic returns or overnight success. Poor communication, lack of transparency, and absence of a clear roadmap are also red flags. Additionally, be cautious of projects that pressure you into making quick decisions or require excessive personal information.
Q: What can I do if I have been scammed in an NFT transaction?
A: If you believe you have been scammed in an NFT transaction, act promptly. Gather all the relevant information, such as transaction details, communications, and evidence of fraudulent activity. Report the incident to the platform or marketplace where the transaction took place. If necessary, contact law enforcement authorities or seek legal advice to explore your options.
Q: How can I secure my NFT assets?
A: To secure your NFT assets, use reputable wallets and marketplaces that prioritize security. Opt for wallets that offer cold storage and utilize strong encryption. Enable two-factor authentication whenever possible and avoid sharing sensitive information online. Be cautious of phishing attempts and regularly update your software and security protocols.