Here’s How to Avoid NFT Scams
NFTs have taken the world by storm. Individuals, businesses and governments across the world are trying to understand NFTs. The underlying technology of blockchain makes digital assets and goods scarce and valuable. This is a sunrise sector of the industry. NFTs will grow in leaps and bounds over this decade. So capitalize on your interest in NFTs and become a part of a booming market! But, beware of NFT scams too. We explain why.
Hence, with so much going on in the NFT space, it is easy to forget that buying and selling NFTs is an unregulated market. As a result, this has its own set of pros and cons. Pro because individuals can innovate without interference. But, a con is that this leaves ground fertile for NFT scam artists, theft and misinformation to spread. This makes people wary of arriving in the NFT space, and many often turn away because of risk.
So, how can we prevent NFT scams? Today, we will tell you about 5 common NFT scams and how to avoid them.
NFT Scam 1: Phishing
What is phishing? Scammers and hackers to trick you into clicking a genuine-looking link. As a result, you reveal your personal details like cryptocurrency wallet address. Phishing has been happening since the dawn of the commercial internet. As new users are unfamiliar with the medium and keen to experiment with things, they often fall prey.
In case of NFT scams, always beware ad banners on different websites which contain links. They can sound something like “free NFT giveaway, drop your wallet address”. First, original NFT projects will ask your wallet address from their own channels, and never from a random website. Second, if you’re asked for your 12 word seed phrase, it’s a huge red flag. Avoid them at all costs. No one will ever ask you for your cryptocurrency wallet’s seed phrase.
Remember, phishing scams have caused people to lose all their NFTs and cryptocurrencies.
NFT Scam 2: Pump and Dump
A classic NFT pump and dump scheme works something like this. A new NFT project gets launched and you would feel wonderful for having found it early. You overlook the project’s white paper, while the project’s team on Discord or Telegram are hyping up the project. Statements like “creating a revolution” or “a new revolutionary NFT art project with a social cause” are common.
Once the NFTs mint, you buy into the hype believing that the project is on its way to mainstream success. The moment prices reach a certain level, the NFT project team packs its bags. They sell all their works, delete their social handles and disappear with your money. The NFT scam here is the fact that you’re left holding worthless NFTs with no value.
Always do your own research and stick to the basics. Check the credentials of the founding team. Are they anonymous (red flag) or do they have a previous record? How does the community behave on social media? Are they talking about the utility of the NFT or about the future trading price? (a red flag). It’s surprising how you can tell NFT scams from the originals with some basic steps of research. This will take a few minutes of your time. Also, chat with community members of the project on social media and gauge their feelings.
NFT Scam 3: Catfishing
It is about impersonating someone to trick you into revealing your personal details. Like your NFT wallet address. It is easy for NFT projects to start online, hire influencers, and start marketing. Scammers and hackers pose as someone as someone from the founding team or community member.
It is common knowledge that a founding team member will not begin a direct conversation. Unless they engage with you first on a public forum while discussing relevant topics. So if you receive a message in your inbox from someone claiming to be from the founding team, don’t respond.
NFT Scam 4: Counterfeiting and Plagiarism
It is easy for anyone to use software available from NFT marketplaces to mint any picture or creative media into an NFT. Counterfeiters and plagiarists have sprung up overnight to make a dent in the NFT market. Like how difficult it is to tell counterfeit physical products from originals, imagine how easy it can be for NFTs. All NFT scammers need to do is steal any image they like and mint it into an NFT. With the right amount of marketing, the original artists won’t even know about it.
How to avoid this? Make sure the account that is selling you the NFT is from a verified profile. Or better, message the artist directly on Discord (most artists are available on Discord) and ask him or her whether this artwork was made by her into an NFT. This simple act will save you a lot of money and energy.
NFT Scam 5: Bidding
While not so prevalent, it is easy to fall prey to bidding NFT scams, especially in the secondary NFT market. It is a modus operandi used, when instead of the bid you want to receive, bidders change the underlying cryptocurrency used and manipulate you into accepting a lower bid than what you expect to receive. For example, instead of receiving 5 ETH you may end up receiving 5 ATOM or 5 dollars.
It’s easy to avoid these scams. One, make sure you never accept anything less than your bid amount. And two, even if you do accept a lower bid, double-check the currency being used to place the bid, and triple check when it’s time to process the transaction as success. Once you make the sale, you will never receive your funds back.
NFT Scams are sort of inevitable
Every new technology often goes through a ‘validation period’ where developers and founders try to understand what is working and what not. NFT scammers, while malicious in their nature, will help us understand the vulnerabilities in the current NFT market and fix them. Individuals and communities who have fallen prey to NFT scams, often tend to double down in their belief in NFTs by ensuring that others do not go through what they did. There are several educational initiatives being spearheaded in this regard.
