Do not fall for these 8 NFT scams
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The massive growth of NFT creation, fundraising and sales in recent years has led to a growth in NFT fraud seeking to separate investors from cash or cryptocurrency. In 2021, the NFT market grew by 21,000%, with $ 17.6 billion in sales, according to Fortune.
NFTs stored in cold wallets – digital wallets that can be disconnected from the cloud for maximum security – are usually secured against theft or hackers. But there are many NFT crypto scams and many ways hackers seek to profit from the NFT trend.
Understanding and avoiding the most common NFT scams can help you keep your investment safe. Of course, you will remember that NFTs are still very speculative investments. You can potentially lose money on your purchase even if you buy a legitimate NFT and keep it safe from cybercriminals.
8 Common NFT Scams
Here are eight of the most common NFT scams:
- Carpet cover
- Airdrop
- Investment
- Bait-and-Switch
- Pump-and-dump
- Counterfeits
- Hacking
- Phishing
Rye Pull: Sale of fake NFTs
NFTs exist in the digital realm, which means they are not “real” objects you can touch or feel. And it makes it even easier for people to create fake NFT projects, and sell digital assets that have no value.
In a “rug pull” scam, cybercriminals promote an NFT project on social media, make false promises of profit and values, and then disappear into the sunset like a stagecoach in the Wild West. The value of NFT will plummet and fraudsters will often make it impossible to sell.
How to avoid this scam
To avoid a rye pull scam, avoid buying NFTs from projects or investment companies you have never heard of. Seek out new projects on established, centralized exchanges such as Binance, Coinbase or FTX.
It is also wise to follow the old saying, “If it sounds too good to be true, it probably is.”
Airdrop: Promises of Free NFTs
If you’ve ever seen tweets from people claiming to be Elon Musk or another famous figure promising free crypto, you’ve seen an “Airdrop” crypto scam going on. Today, the same scams take place with promises of high-value free NFTs.
The scammer will ask for your digital wallet information to deposit free NFT, but instead take your information, hack into your wallet and steal existing cash, crypto or NFT in your account.
How to avoid this scam
Buy and sell only NFTs or cryptocurrencies through established exchanges and store your investments in a hosted wallet. Apps like Coinbase take on the burden of keeping your investment safe and insured against hackers.
However, Coinbase is not responsible for losses if you have given your password to another person. Just like you would never give your bank password to anyone, keep your crypto wallet password or your private key protected. Senders only require the public key to your wallet to make a deposit.
To further protect any crypto or NFT investment, consider using a hardware wallet that you can take offline when you are not completing transactions.
Investment fraud
An investor or investment scam is similar to a Rug Pull scam, except that people who allegedly create an NFT project appear to be legitimate developers with a well-known name behind them.
This happened recently when a group of cybercriminals launched the Evil Apes project as part of the legitimate Evolved Apes community, Vice reported. Evil Apes took away $ 2.7 million in investor money and then disappeared. However, the Evolved Apes community tried to make the most of the stressful experience, and got up to launch a new project called “Fight Back Apes”.
How to avoid this scam
It is a little harder to detect investment fraud, since they work under the guise of legitimate developers and investment companies. The best advice in this case, according to an Evolved Apes investor who goes by the name Mike_Cryptobull, is to do your own research.
Do not ignore red flags. If something seems “off”, it probably is. And, he stressed in an interview with Vice, “[D]do not invest more than you can afford to lose. “
Bait-and-switch bidding
As with works of art, toys and other collectibles, NFTs are often purchased via courier. In a bidding scam, the scammer is the buyer – some try to sell an NFT, but the person who eventually buys the NFT pays with a cryptocurrency of lower value than agreed.
How to avoid this scam
Adhere to the original terms of the agreement if you sell an NFT. And pay attention to the market value of cryptocurrencies to avoid being scammed. Double check the transaction before accepting a payment to make sure that is what you agreed on.
Pump-and-dump
This scam has its origins in the stock market, and it has become one of the more common crypto-NFT scams. In a pump-and-dump, a single investor or a group of investors will buy a large amount of crypto or NFTs from a particular game or creator. This increases the value.
Those who are involved in the fraud will then sell the NFTs at the same time, so that everyone who is not familiar with the scheme is stuck with an NFT that has weakened significantly in value.
How to avoid this scam
Review the transaction history before purchasing NFTs from a specific project or creator.
Some NFTs can rise dramatically in price due to their inherent value. But take the time to research the basics of the project to see if there is a good reason for the price increase. If not, steer clear.
Counterfeit NFT scam
Just like art, luxury clothing or even fiat currency, NFTs can be counterfeit.
The scary part is that these fake NFTs can be listed on reputable websites. But they have no value.
How to avoid this scam
Before buying an NFT, even from a legitimate exchange, make sure that only one of your NFTs is for sale. Remember that NFTs are unique, original creations. Just as there is only one Mona Lisa, NFTs are unique.
NFT Culture recommends that you make sure you know the exact smart contract address of the NFT you are purchasing. And double check the exchange where you buy the NFT to ensure that it is on that exchange.
If you are not sure if an NFT is an original, ask an expert you trust.
Hacking
Hacking comes in many forms and can be used to separate people from their most sensitive passwords, bank account information, personal information – including your social security number – and finally your money or good credit scores.
A report by Chainalysis found that hackers stole $ 3.2 billion in cryptocurrency in 2021 – and that does not include stolen NFTs. Since NFTs and cryptocurrencies are both stored in similar digital wallets, it can also make you worried about the security of your NFTs.
A hacker can obtain information about your digital wallet in many ways, including hacking into the crypto exchange that hosts your wallet.
How to avoid this scam
To protect yourself, create strong, unique passwords for each account. If a hacker enters your primary bank account through a data breach, you want to make sure that they do not gain access to other financial accounts as well.
Unlike the other NFT encryption scams, you can have less control over preventing hacking. Be sure to use a reputable crypto exchange that secures your funds against loss if they experience a data breach that is not your fault.
You can also protect your passwords. You can use Google’s password checking tool at passwords.google.com. Change insecure passwords immediately.
It is also a smart idea to use a password manager to keep all your passwords safe.
Phishing
Far more common than hacking, phishing schemes give cybercriminals access to your account without having to break the database of a major company. Often people fall victim to phishing schemes because the emails, ads or text messages hackers use to entice you to give away sensitive information seem so legitimate.
In a phishing scheme, the victim willingly gives away information, such as the private key to a digital wallet.
How to avoid this scam
Never give anyone the private key to your digital wallet, your crypto exchange password or any other information that could be used to access your accounts.
If you receive an email that appears to be from a cryptocurrency exchange, NFT developer or creator, or your favorite NFT game, do not click on the link. Instead, visit the company’s page directly by searching on Google or typing the link to their site directly into your browser.
If an offer – such as receiving free NFTs just by clicking on the email link – seems too good to be true, it probably is.
Phishing scams are some of the most common, but also possible to avoid.
Remove
NFT fraud is more prevalent than ever. However, they can be avoided. If you take the right precautions and do not jump into an opportunity that seems too good to be true, you can keep your NFTs safe.
FAQ
Here are the answers to some common questions about NFTs.
- Is nfts a scam?
- NFTs are not scams. NFTs are original, unique forms of digital currency that have a real money price based on market value.
- But investors need to be aware of counterfeit NFTs, which are scams.
- Is a nft real money?
- An NFT is not money. NFT stands for “non-fungible token.” In the financial world, “fungible” means that it is exchangeable for the corresponding currency. For example, if two people were to trade dollar bills, each person would still have a single US dollar. In the same way, one bitcoin corresponds to one bitcoin.
- However, because non-fungible tokens are all unique, you cannot exchange one NFT for another and walk away with the same value. NFTs have the value the buyer is willing to pay.
- How do I know if my NFT is legitimate?
- If you are considering buying an NFT, you should examine the contract on an NFT exchange. If you find two NFTs that are exactly alike, one is not real.
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