NFT SCAMS AND HOW TO AVOID THEM

by Rohan

NFT or Non fungible token is a type of digital asset that exists only on a blockchain. Each NFT is one-of-a-kind and cannot be duplicated or replaced. NFTs are sold for quite a large amount of money. Maybe it’s not surprising that fraudsters are creating NFT scams given that the market had trade volume that exceeded $40 billion in 2021.

Some examples of NFTs are as follows :

  • Image 
  • Cartoon 
  • Video 
  • File

Would you like to know about different types of NFT scams and how to avoid them? Then keep reading! 

1. Rug Pull

A rug pull scam occurs when a dishonest team develops a brand-new NFT artwork and advertises it on social media to unwary investors before unexpectedly fleeing with the money after a sufficient amount of people have invested in it.

How to prevent:

  • Think about making investments in reputable projects using well-known coins.
  • If you possess the necessary abilities, you might be able to spot harmful code or code that prevents an investor from selling.
  • Read the terms and conditions before deciding whether to add your tokens to a liquidity pool. The developers could sell all of the tokens at any time, therefore stay away from liquidity pools where the tokens aren’t locked. When locked in liquidity pools, tokens are more secure.
  • Projects that suddenly materialize should be avoided. Genuine developers take their time when making new tokens, and many aim to generate excitement by making announcements, running social media promotions, and perhaps even doing airdrops over the course of months or even years.

2. Bidding scams 

In the secondary market, bid frauds frequently take place when investors are attempting to resell NFT that they have already purchased.

Once you put your NFT up for sale, a bidder could replace your chosen cryptocurrency—which has a higher value—without your knowledge, thus causing losses. Multiple cryptocurrencies can be offered and accepted when bidding on NFTs on marketplaces like OpenSea. 

3. Phishing Scams

Phishing attacks are performed by con artists pretending to be part of reputable NFT teams or projects.

How to prevent:

  • Never reveal the passphrase or private key to your wallet.
  • Be cautious and sure it’s a reliable source if you’re requested to verify your PII.
  • In emails coming from unknown addresses, stay away from unusual links.

4. Airdrops

A corporation or developer will “airdrop” free cryptocurrencies or NFTs to consumers as a marketing ploy, usually to spread word of a new good or service. Participants in airdrops do receive free NFTs or coins, but it’s important to keep in mind that they are always gratuitous.

Ways to prevent:

  • Airdrops that urge you to deposit cryptocurrency to “secure” your participation are probably scams, so ignore them.
  • Avoid receiving airdrops that require you to enter your wallet’s passphrase or private key in order to accept them. Never divulge such knowledge. You should never share your private key. Your public key serves as the address for your wallet and functions much like an account number.
  • Emails announcing an airdrop that contain spelling or grammar errors should be avoided.
  • You should exercise caution if you receive a contact regarding an airdrop that offers a significant amount of free cryptocurrency. Usually, extremely little amounts of coins are distributed during airdrops.

5. Technical Support Scams 

Can I report NFT scams? Yes you can. Contact customer service right away and let them know if you spot a scam on an NFT trading platform. Use those channels if they are available because certain marketplaces offer reporting mechanisms that are geared toward reporting scams. You might not always get the chance to report a NFT Scams. Some scammers would impersonate NFT customer support representatives in order to obtain private information from NFT owners. This kind of fraud is typical on Discord. Scammers will solicit information from you in order to resolve your issue if you connect with a false customer service server rather than the legitimate server. This operates similarly to utility or bank account scam calls. 

6. Influencer Scam

It might be challenging to distinguish between actual and phoney influencers who are hired by well-known NFT communities to promote a project. Fake endorsements from celebrities are used in other schemes. Before many consumers realize that the alleged influencer or celebrity isn’t connected to the project, they have probably already lost their money. 

7. Fake Marketplace Or Store Scams 

Using a marketplace like OpenSea is recommended if you want to buy or sell an NFT. With this configuration, you can keep the sale confidential and restrict purchases to a single address. This keeps you secure by placing the market in the role of your trust and maintaining the transparency of the transaction, pricing, and fees. Replicating an NFT marketplace, such as OpenSea, and setting up NFT storefronts is a sophisticated but typical scam. Even the most seasoned NFT customers can be duped by these websites since they appear official and are frequently identical to the actual counterparts.

8. Pump and Dump Scams 

When a group buys a significant amount of cryptocurrencies or another type of currency to boost demand and raise the price, it is known as a pump-and-dump fraud. Everyone else loses when the group sells the item after the asset’s price has increased or been pumped up in order to profit from the profits.In NFT trading, wash trading is however typical. When one person buys and sells an asset, driving up the price, this is called wash trading. The NFT attracts inexperienced traders who believe they have just found a fantastic deal or that the price will continue to rise.

Conclusion

It is becoming more and more difficult to stay on top of these complex scams. As a result, it is recommended that you always do your homework before engaging with any of these projects. Money that is simple to make does not exist. You can prevent falling for these frauds by keeping your private keys private, enhancing internet security, double-checking, and only transacting with official websites.

Let us see what are the Pro Tips we learned on avoiding NFT Scams :

  • Always Investigate about the NFT seller beforehand. 
  • Never click on any links or attachments that seem suspicious.
  • Always create and use strong passwords 
  • Use trustworthy NFT exchange markets.

ALSO READ :- 8 BEST SOFTWARE TO CREATE NFT ART IN 2022

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