Since the emergence of non-fungible tokens (NFTs), NFT scams are becoming more common as the popularity of NFTs grows. Many fraudsters have taken advantage of investors by creating fake NFT projects or schemes.
People have started using it, but they haven’t understood the technology behind it and they are trading it and collecting it. . Therefore they are becoming the victims of such scams.
Unfortunately, many investors are not aware of the risks associated with investing in NFTs, and they can be easy prey for scammers. In this blog post, we’ll discuss some of the most common NFT scams, and we’ll give you some tips on how to avoid NFT scams. So if you might want to invest in NFTs, make sure to read this post first!
What are NFT scams and how do they work?
NFT scams come in many different forms, but they all have one thing in common: the fraudsters behind them try to take advantage of investors by promising them returns that are too good to be true. For example, a scammer might create a fake NFT project and promise investors that they will make a lot of money if they invest in it. Or, a scammer might create a fake NFT scheme and try to get people to buy into it.
Related: What Is NFT Whitelist and How To Get One? Full Guide
What are some of the most common NFT scams?
There are many different ways that NFT scams can work, but they all have one goal: to steal money from investors.
Here are some of the most common NFT scams:
On the internet, there are many such YouTube channels or blogs. Which you will come across that are truly running on paid partnerships for NFT projects. This means they are being paid directly to promote such NFT projects. Some people can purchase those NFTs and in the end, it becomes a possibility of a scam. It can also happen that you might know the influencer or it might be a fake identity with lots of followers. You could see the engagement in the account, but there might be a possibility that it can be fake. So it’s better to cross verify.
Now, what are gray sites called? Let us first understand how digital rights work. So basically, what happens in the world of NFT is that the asset remains the same and the owner gets changed. We are not actually trading the asset, so what happens is that We might get cheated. Assume that there is a link that is converted into an NFT and we have purchased that link.
So we have earned the ownership of that link, but we don’t know where will it redirect us. If during the selling of the link, you are being told that you will get something. So you might get something at that time but afterward, the creator can change that thing.
So eventually, the creator is not cheating you. As per the contracts, you are about to get the ownership of the link and you are getting it. But inside the link, whatever might be the data it can change at any time. Also, there might be a possibility that it won’t contain information worth your money.
Basically in Blockchain, a smart contract address gets saved, Which tells the information about the asset’s ownership. Now what things are getting changed in that asset or what changes are occurring via it? That doesn’t have any authority. Actually, what happens is that NFTs don’t get saved on the blockchain.
Because the process of getting saved on the blockchain is very expensive. According to the report of 2021, if we see the calculation then only 500KB of data, if want to save on the Ethereum blockchain, then it Would cost around $20,000.
This is the reason why many NFTs are converted into different links and if the link gets damaged, then you might incur losses.
There are many sites where people bid their NFTs. Suppose you made an NFT, then you can bid on such websites where auctions take place.
There are some platforms that allow bidders to switch the currencies which creates a loophole. Suppose you have listed an NFT of 0.5 ETH, but the bidders have changed the currencies to dollars. So there becomes a possibility that your NFT might get sold for 0.5 dollars instead of 0.5 ETH. And you can’t do anything about it. Because the contact address will get updated on the blockchain, and you will get 0.5 dollars and whatever commission is left will be cut off.
So it is better to cross verify the currencies whenever you are listing on any of the websites. To get rid of this bidding problem.
OpenSea has introduced USDC, which is a stable coin of $1. Earlier OpenSea was mostly used to work on Ethereum. Because most of the audience of NFT already have ETH and listing would only require some gas fees.
Now USDC is introduced on OpenSea. That will reduce the gas fees and it will become easy for the users. So this I felt good that big companies are taking some steps, reduce the expenses of the people and finding an effective way.
Basically, phishing is the process of making a clone of a process or a product. Making an exact clone that is fake, and it is promoted, where people end up giving their personal information. So in this way, phishing is causing losses to people.
Phishing is being used very extensively to empty the wallets of people. I’ll tell you how. You might be aware that in web3, the wallet recovery phrase is very important. You need to note it down somewhere. If someone recognizes your recovery phrase, then he/she might empty your wallet as he gets access to all your funds.
So basically, what happened here is that phishing attackers made pop-ups like meta mask, in which they added a box of the recovery phrase and asked users to add the recovery phrase so that it gets unlocked. As result, many people ended up entering the recovery phrase. Scammers got all the information and accounts got emptied.
Let me give you an example. Recently, OpenSea issued a notice from 16th Feb to 25th Feb that they are upgrading their networks. Due to that all the Ethereum NFTs will be transferred and relisted again.
And in this case, a scammer got an opportunity. He made a replica of the OpenSea page and started sending emails to many people that it is an official letter from OpenSea. The scammer asked them to click the link in-order to redirect or relist the NFTs. On clicking that link 32 people got scammed. Due to this, all the NFTs went to the scammer and they incurred huge losses.
Again as I said, NFTs are something that exists completely in a digital form. Let us say that you are a collector, so you might want to buy NFT and what you are seeing to buy might turn out to be a copied NFT.
Basically, I can take a screenshot of your NFT that does not belong to me. I can again go to Opensea and list it at the price half lesser or 1/10th of your price. So if there is any value in your NFT so my copied/screenshotted NFT might be sold out First.
A person tweets that he purchased an NFT and realized after a few months. The NFT that he has purchased is not original. So he made a tweet to aware other people. People have dived into the sea of NFT, but making money out of it is not simple as it seems.
NFT investment scams:
Investment scams are another type of NFT scam that promises investors high returns in exchange for their investment. However, the fraudster behind the scam will often use the money to simply line their own pockets instead of investing it.
NFT giveaway scams:
Giveaway scams are another type of NFT scam that tries to take advantage of investors. In this type of scam, the fraudster will promise to give away free NFTs in exchange for people sending them money or cryptocurrency. However, once the money or cryptocurrency is sent, the fraudster will simply keep it and never send the promised NFTs.
How can you avoid NFT scams?
Here are some tips that can help you avoid NFT scams:
Use Cold Storage:
If you are going to buy or invest in NFTs, it is important that you use cold storage. Cold storage is a type of offline stores that can help protect your digital assets from hackers.
Do your research:
Do to forget to do your research before investing in any NFT project or scheme. It is important to deep dive into what you are investing in.
Invest what can you afford to lose:
NFTs are a risky investment, So Invest what can you afford to lose.
Be careful of promises of high returns:
If someone is promising you high returns in exchange for your investment, be cautious.
Don’t send money or cryptocurrency to someone in exchange for free NFTs:
If someone is promising to give you free NFTs in exchange for your money or cryptocurrency, don’t do it! This is most likely a scam.
What to do if you’ve been scammed?
If you think you’ve been the victim of an NFT scam, there are a few things you can do:
Report the scam to the appropriate authorities:
If you’ve been scammed, make sure to report it to the appropriate authorities. This can help them investigate the scam and catch the people behind it.
Report the scam to the platform:
If you’ve been scammed by hacking, phishing, or grey sites, make sure to report it to them. By doing so, you can help them improve their security and protect other investors from being scammed.
Get in touch with a lawyer:
If you’ve been scammed, you may want to get in touch with a lawyer. They can help you understand your legal options and protect your rights.
NFT scams are becoming more and more common, so it’s important to be aware of the risks associated with investing in NFTs. If you’re thinking about investing in NFTs, make sure to do your research and be cautious of any promises of high returns. And if you think you’ve been a victim of an NFT scam, make sure to report it.