The world of non-fungible tokens is both frightening and thrilling. This is due to the fact that the virtual world currently has no rules, laws, or restrictions. Despite the fact that everything on blockchains is largely open to the public, you might still fall prey to NFT scams!
To avoid it, you must keep your eyes peeled for indications of potential scamming. In this article, we will give you a detailed explanation of NFT scams and the top 10 types of NFT scams, and how to avoid them.
Now, let’s get started!
What are NFT scams?
NFT scams, also known as NFT rug pulls, occur when a team of an NFT project begins promoting and selling their work. Then they vanish from the face of the Earth, taking all the money with them. Of course, the money of those who contributed to the initiative, aka your money.
But, technically, are NFT frauds illegal? Actually, not much. As a result, if you are the victim of a rug pull, there is little you can do. So, here’s how to avoid that entirely!
10 Most Common NFT Scams and How to avoid them?
Duplicated or Plagiarized NFTs
What is Duplicated or Plagiarized NFTs?
A common form of NFT fraud is the duplication of original NFTs. Here, scammers steal an artist’s original work before turning it into NFTs.
The marketplace accounts of con artists have listings for additional auctions of these plagiarised or stolen NFTs. These NFT scams are so expertly planned that a consumer can mistake them for genuine artwork and purchase one right away.
Owners eventually realize they were tricked into purchasing worthless art works. Owners who purchase such reproductions ultimately wind up with worthless works of art. There is, regrettably, no turning back at this point.
The second instance of duplication involves making NFTs that resemble a well-known NFT collection. Investors are perplexed by this copy, and the majority mistakenly think it to be a brand-new collection developed by the original premium collection team. The biggest losers in this con are the purchasers of such stolen NFTs.
How to avoid Duplicated or Plagiarized NFTs?
Investors must exercise caution in order to avoid NFT frauds 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 vendor. Cross-referencing the seller’s account information with their social media profiles is also necessary.
Platforms such as OpenSea display a ‘blue tick’ next to the vendor to indicate their validity. To facilitate your NFT trades, you should always strive to buy NFTs from a reputable seller or use a reliable product like NFT Profit.
What is Phishing Scams?
Another sort of NFT scam is phishing, which involves adverts on local websites and phone calls asking customers for their private wallet keys or 12-word security codes.
Before acquiring NFTs, most purchasers are asked to sign up for a wallet. MetaMask is a popular Ethereum wallet that people choose for collecting their NFTs.
Last year, Metamask clients were warned of a phishing scam that requested their 12-word security code. Metamask afterwards stated that it is a massive hoax.
The Phishing fraud has not only affected MetaMask. In May, 29 Moonbirds NFTs worth about 750 ETH ($1.5M) were lost in a phishing scam.
How to avoid Phishing Scams?
Before opening, double-check the domain URL. Users should avoid verifying or performing any wallet-related action via external links.
Whenever an activity requests sensitive data or security, it must be confirmed with the customer support staff or community.
In the case of MetaMask wallets, complete verifications and other wallet-related operations via the official domain ‘MetaMask.io URL’ rather than clicking on sponsored adverts or other illegitimate connections.
Rug Pull scams
What are Rug Pull scams?
Promoters attempt to create a pre-hype around the NFT collection using social media channels in a typical rug pull scam. After enough money has been invested, developers suddenly disappear with it. The underlying anonymity of the decentralized space facilitates such NFT Scams.
Rug-pulls occur as a result of ‘hyping and promotion,’ which raises both the price and the recognition of the tokens. And once enough NFTs have been sold, the advocates unexpectedly withdraw their support for the NFT. As a result, the market price of NFT progressively lowers until it reaches zero.
Another variation of the rug pull involves the developer changing the underlying programming to bar holders from selling the NFT. The inventors may make enough money from the early sales in this case, but the investor loses money.
How to avoid Rug Pull scams?
So how can you define if the NFTs are “rug-pulled”? Notably, due to how deftly it is executed, this is one risky category of NFT scams that is 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 its performance thus far.
Users must also be on the lookout for warning signs like contradicting data and a team that is unresponsive. Check out the official website in full as well. An added benefit is the website’s crystal-clear map.
Bidding Scams in NFT Collection
What are Bidding Scams in NFT Collection?
Common NFT frauds include bid-rigging, which is done mostly on the secondary market to drive up prices. Bidders switch their preferred currency to a low-value currency when NFTs are listed for selling.
The altering of the coin turns out to be the NFT collection’s biggest grievance because a change in the worth of the currency could result in losses for investors.
How to avoid Bidding Scams in NFT Collection?
Without a doubt, bid frauds are simple to avoid as well as to recognise. For that, you must constantly check the mentioned currency and avoid accepting bids that are below your limits.
Pump and Dumps in NFT Projects
What are Pump and Dumps in NFT Projects?
Pump and dump scams are widespread in all trading markets, including the NFT space. Fraud refers to inflating the demand for NFTs fraudulently. Once the pump raises the price of the NFTs, con artists sell off all of their assets at a healthy profit.
This typically occurs when an individual or group purchases a large number of NFTs from the same collections. They sell off at a price increase and bid for a price increase. Other investors who purchased NFTs in light of the increased demand are now in the negative due to the deception!
This fraud includes a practice known as “Wash Trading Technique.” When the same person purchases an asset and then sells it, the price of the asset increases even more.
How to avoid Pump and Dumps in NFT Projects?
When you come across such unexpected NFT pricing increases, look into the collection’s price history. Not only that, but one must be conscious of the wallet records. Fortunately, NFT marketplaces such as OpenSea include this feature for checking wallet information.
Take note of the total number of deals during the hype stage, as well as the transaction history. If there are fewer people active in the purchasing and selling of NFTs, this is a clear ‘Red Flag.’
Meanwhile, examine discord, Twitter, and community debates to learn what others think. Examining the price-hike environment can assist you in determining the cause of the price increase. Again, if you notice a rapid surge in popularity, avoid a low-valued project!
NFT Airdrop or Giveaway Scams
What are NFT Airdrop or Giveaway Scams?
Airdrop scams occur when scammers offer free NFT giveaways on social media. Scammers invite users to agree to “terms and conditions” when they click on the link. They also invite users to share the message or tweet with others.
When a user clicks on such a link, they are prompted to connect their MetaMask wallet credentials in order to receive the prize. Your credentials will be saved on their system. Spammers will have easy access to your MetaMask library and will be able to steal your assets.
How to avoid NFT Airdrop or Giveaway Scams?
It is simple to avoid NFT airdrop or giveaway scams.
If you are unsure about the legitimacy of the website, DO NOT CLICK. To clear up any confusion, go to the websites or social media accounts connected with the concealed links.
Technical or Customer Support NFT scams
What are Technical or Customer Support NFT scams?
Technical or customer service fraud is a common occurrence in every business. To carry out this type of NFT scam, fraudsters obtain contact information from NFT holders using Discord, Telegram, or Reddit.
They will contact users who have created false identities on legitimate-looking websites. Scammers impersonating marketplace technical professionals attempt to persuade users with schemes. These fraudsters may also pose as problem solvers and request sensitive information from consumers
If you are convinced, the charlatans will want your digital collectible’s credentials and confidential data. Once you provide the information, the assets of the NFT owners will be stolen.
How to avoid Technical or Customer Support NFT scams?
Please take note that the official team may not contact members of the community 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. Or an NFT scam could be waiting for you.
What are website scams?
For this kind of NFT scam, highly adept con artists manufacture 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 to avoid website scams?
Before engaging in any website activity, it is important to conduct adequate investigation into the reliability of the website’s official URL. Examine the domain. Never enter the website using links, pop-up windows, or email messages.
What are fake influencers?
Influencers and celebrities can significantly affect how well-liked an NFT project is. So to market their projects, NFT developers approach influencers. Before the audience even recognizes the bogus endorsements, they may fall for such NFT schemes.
Scammers may attempt to make false promises in the name of charity. A Brazilian adolescent was conned out of 0.14 ETH in June by a bogus NFT influencer dubbed Mineeervas.
For 0.14 ETH, Mineeervas is believed to have sold the victim an alpha pass for a project that is purportedly run by Murat Pak and promoted by Punkie. The buyer eventually recognized the pass was for a fictitious project and that it was a scam.
How to avoid fake influencers?
Make thorough investigation into the project. Make sure the influencer is connected to the project by checking their social media profiles. If there is an affiliation, influencers will publicly promote it.
Stealth Drop NFT Scams
What are Stealth Drop NFT Scams?
Social media, particularly Twitter, has become an excellent platform for carrying out this NFT scam. And, of course, algorithms have a role in this. As you become more involved in NFT conversations, Twitter begins to recommend more of that content to you.
As a result, scammers build a ‘Stealth Drop’ NFT that finally appeals to naive customers who consider it a ‘good offer.’ As the approach goes, the NFT is portrayed with promises of “instant riches,” but in reality becomes the bait for luring innocent individuals into an NFT scam.
How to avoid Stealth Drop NFT Scams?
One technique to identify a Stealth Drop project is to see if their Discord channel is closed and only accessible via invitation. Typically, scammers would invite select prospects who are easy prey for NFT scams.
The NFT market has flourished and expanded significantly. The beginning of this year presented enormous security challenges for NFT exchanges.
Aside from the numerous profit prospects, NFTs are also fraught with danger! Scams and frauds are unavoidable in the world of opportunities, so scammers will continue to play tricks in NFT marketplaces.
As a result, one must devote time to research projects. Two-factor authentication and strong passwords are recommended. Be cautious of any activity taken on official websites. Before taking any action, double-check every fact.
Regardless, no one wants to lose out on profitable chances, even if it means being duped. As an investor, one must avoid greed and encourage caution. By paying attentive attention, people can avoid falling prey to fraud to a large extent.