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 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.
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
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 limits 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 your wallet and deplete all the crypto 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, and 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.
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 the contact information of the creator in question. Transactions that center around one date could indicate a pump and dump scheme
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 meta mask 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.
Avoiding Scams in the NFT Space
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
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.
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.