NFT Scams: Staying Safe in the World of Crypto ArtMay 18, 2023
If you're familiar with the DeFi world of course you've heard about NFTs. These are non-fungible tokens that have emerged recently and quickly became popular due to their unique nature. NFT allows you to own some pieces of digital art, music, and other creative works. However, with the increasing popularity of NFTs, there has also been an increase in NFT scams. There are different types of NFT scams and it is important to know how to avoid them.
This article is an explosion for the most common NFT scams and steps to take to stay safe while investing in NFTs.
1. Phishing Scams
Phishing scams involve scammers tricking investors into providing their private wallet keys, login credentials, or financial information by impersonating real accounts, exchanges, or NFT platforms. Common tactics of phishing scammers include sending fake emails with links to fake websites, producing fake NFT listings or giveaways, and using fake social media accounts to ask for private information.
To avoid phishing scams, investors should be cautious when clicking on links, checking the URL of the website, never sharing their private information or seed phrases with third-party websites, and enable two-factor authentication for their accounts. Real-life examples of phishing scams include the "Binance NFT Airdrop" scam, where scammers stole $2.3 million worth of cryptocurrency from investors.
2. Rug-Pull Scams
A rug-pull scam is a type of fraud when a group of developers creates a cryptocurrency or NFT, convinces investors to buy it by promoting it with false information and hype, and then suddenly disappears with the invested funds. Common tactics of rug-pull scammers include promising unrealistically high rewards, creating fake communities and social media pages, and manipulating token prices.
To avoid rug-pull scams, investors should carefully research the project's team, social media presence, and reputation before investing. Real-life examples of rug-pull scams include the recent case of the "COVID Alien" NFT from popular project Rarible, which was created by anonymous scammers and stolen the original artwork.
3. Plagiarized NFTs
Plagiarized NFTs refer to creating and selling counterfeit or unauthorized copies of existing artwork without the original artist's permission. Common tactics of NFT plagiarizers include copying the artwork and re-publishing it with minor changes, using fake attribution, and manipulating metadata to deceive buyers.
To avoid plagiarized NFTs, investors should research the authenticity of the artwork, look for signs of copying or attribution fraud, and verify the ownership rights of the artist. Real-life examples of plagiarized NFTs include the "CryptoPunk" case, where scammers created fake copies of the popular NFT artwork and sold them to unsuspecting investors.
4. Bidding Scams
Bidding scams involve creating fake or manipulated NFT auctions, where the scammer is both the seller and the buyer. Common tactics of bidding scammers include artificially inflating prices with fake bids, using bots to automate bidding, and canceling the auction after receiving payments.
To avoid bidding scams, investors should research the seller, the authenticity of the artwork, and look for signs of manipulated bidding. Real-life examples of bidding scams include the infamous case of "Forever Rose," a $1 million NFT that turned out to be a fake artwork.
5. Airdrop Scams
Airdrop scams refer to offering free NFTs or cryptocurrencies to investors for participating in social media campaigns or other promotional events. Common tactics of airdrop scammers include asking for private information or seed phrases, offering unrealistically high rewards, and creating fake NFT listings or giveaways.
To avoid airdrop scams, investors should verify the legitimacy of the airdrop campaign with the official NFT platform or project, never share private information or seed phrases, and be aware of the risks of participating in airdrops. Real-life examples of airdrop scams include the "OpenSea Airdrop" case, where scammers created fake social media accounts and stole investors' personal information.
6. Pump-and-Dump Scams
Pump-and-dump scams refer to manipulating the value of an NFT by artificially inflating its price and then suddenly selling it off at a profit, leaving other investors with a worthless asset. Common tactics of pump-and-dump scammers include using social media influencers to promote the artwork, creating fake buy orders, and spreading false rumors about the value of the NFT.
To avoid pump-and-dump scams, investors should check the authenticity of the artwork, look at the trading patterns of the NFT, and be wary of sudden spikes in value. Real-life examples of pump-and-dump scams include the "War NFT" case, where the artwork's value skyrocketed after false rumors about its ownership being linked to a popular cryptocurrency exchange.
7. Investor Scams
Investor scams refer to using false promises and fraudulent tactics to defraud investors and steal their funds. Common tactics of investor scammers include offering high returns with low risks, using fake testimonials and endorsements, and manipulating token prices.
To avoid investor scams, investors should research the credibility and reputation of the project and team, read the whitepaper, and be wary of unrealistic returns. Real-life examples of investor scams include the "SushiSwap" case, where scammers created a fake NFT project and stole investors' funds.
How to avoid NFT scams
Now you know how NFT scams work and it's essential to stay vigilant and take precautions to protect your digital assets.
- One of the most crucial tips is to avoid clicking on any suspicious links that could compromise your private information;
- It's also crucial to never share your password or seed phrase and enable two-factor authentication for added security;
- Before investing in an NFT, always research the seller's identity and history to ensure legitimacy;
- Moreover, consider using a non-custodial wallet to keep your digital assets safe.
Look at Arctic Wallet as an example. It is a multi-chain non-custodial crypto wallet that doesn't store your personal data. Here you can buy, sell and exchange crypto.
|Source: Arctic Wallet Website
With these practical tips, you can outsmart even the most cunning fraudsters and enjoy the benefits of NFTs without fear.
As NFTs continue to grow in popularity as a form of digital ownership, it's crucial to be aware of the different types of NFT scams. These scams can be financially devastating, but fortunately, there are steps investors can take to protect themselves. By staying vigilant and researching the legitimacy of NFT projects and sellers, investors can minimize their risks and keep their investments safe. Remember, if something seems too good to be true, it probably is. Stay safe, and happy NFT investing!