The idea of NFTs emerged back in 2012 when the concept of the coloured coin was first introduced. Ten years later, these cryptographic assets based on blockchain technology have become the talk of the town, especially in the worlds of arts, music, sports and video games.
With NFTs sales reaching US$40 billion in 2021, more and more people are now making their way to join the hype and take advantage of it. And scammers are no exception.
Last February, hackers launched a phishing attack to steal NFTS from the users of OpenSea, the largest NFT marketplace on the internet. The hackers targeted high-value tokens including NFTs from the Bored Ape Yacht Club collection. The total value of the NFTs that were stolen reached US$1.7 million.
The lack of regulation of the NFT market is one of the many reasons why these schemes are likely to continue. Despite this, there are countless ways you can do to protect yourself and avoid falling victim.
Here’s a list of the most common NFTs scams and what you can do to avoid them.
1. Phishing scams
One of the most common NFT schemes is phishing scams, which involve the use of fake websites that ask for 12-word security seed phrases and private wallet keys. There are also
malicious pop-ups shared on Discord, Telegram, Twitter, forums and via email. In most cases, the resemblance with legitimate websites is almost perfect. Thus, it will take a keen eye to spot even the smallest differences in the URL or the website layout.
To avoid phishing scams, it is best to check the URL first before clicking. Remember not to give your seed phrases and private wallet keys to anyone outside of your NFT wallets.
2. Rug pull scams
Rug pull scams, which got its name from the popular expression “pulling the rug out,” involves fraudulent developers promoting fake NFTs on social media with the goal of convincing more people that the project is real and that they will make more money out of it.
The scammers will hype up a project, making more people invest and then without notice, discontinue the project or “pull the plug.” This occurs once they have fully drained the investors, withdrawing all funds in an NFT wallet. After which, the scammers delete all their profiles on marketplaces and social media platforms.
You can avoid these NFT scams by doing your research. Look for the NFT collection and see if it has legitimate artists and developers behind it. One way to check their legitimacy is by visiting their social media accounts.
Active social engagements and several discussions about their crypto projects are good indications that the project is actually genuine.
3. Pump-and-dump crypto schemes
Compared to rug and pull scams that involve convincing people that they should invest in fake crypto or NFT projects, pump-and-dump scams involve scammers buying a large number of cryptocurrencies or NFTs to create an artificial sense of an asset being in high demand. With people thinking that the project is highly lucrative, they will start placing their money on it as well. Once a price hits a specific level, the scammers will then sell the NFTs or cryptos, leaving the investors with non-valuable assets.
To avoid falling victim to pump-and-dump crypto schemes, make sure to check the number of transactions as well as the buyer of the project you’re interested in. A considerable number of transactions can be an indication of the date when the scammer pumped the crypto or NFT.
4. Bidding scams
Another most popular tactic is called the bidding scam. These involve a scammer changing the cryptocurrency of their offer to a lower value, say ETH to USD. This will cause your earnings to drop to a lower price.
To avoid bidding scams, double-check the currency used. If a potential buyer negotiates for a lower bid, consider that a red flag.
5. Plagiarised NFTs
Scammers may copy or steal artwork and list this plagiarised NFT on legitimate sites such as OpenSea. Since it was copied or stolen, the NFT has no value. Sadly, the victim has already spent a dime to purchase the NFT before even realising it is fake.
Before buying an NFT, look for the blue check ext the artist’s profile on various marketplaces such as OpenSea.
You can also check the authenticity of an NFT by dragging the image of the digital artwork to Google Images. If you find other artists who own the piece, it is more likely that the one you’re about to purchase is fake.
Every asset comes with a risk. To keep yourself away from vulnerabilities such as the types of schemes listed above, understanding the common NFT scams, how they work and how you can avoid them is a must.
Learn more about NFT and how to create, buy and sell them by sending us a message at email@example.com or contacting us at (65) 8687 8143.