The NFT space has grown exponentially both in terms of popularity and market. Between the Q4 of 2021 to the Q1 of 2022, the total amount of NFTs traded increased by 13.25% as the total amount of NFTs traded increased from $14.531.875.047 to $16,456,945,150. The growth of the market has also increased the risks of cybercrimes in the space. There are different forms and shapes on which these scams are perpetrated. These scams are more sophisticated and organized and it is easy to fall prey to these scams. This article seeks to examine 6 of these scams and how they can be avoided.
Duplicated or Plagiarized NFTs
This is the duplication of already existing NFTs. Scammers duplicate the originally created NFT into another NFT. Once this is done, the forged NFT is then listed for sale to deceive buyers into buying fake NFTs with the hope that they are purchasing the original art. At the end of the transaction, the buyer then realizes that they have been duped and deceived to buy a worthless NFT since they are fake.
Another form of duplication is the creation of NFTs similar to popular NFT collections. Buyers buy these NFTs thinking it was created by the original collection team. Through this, an investor purchases fake NFT and loses their capital.
How to Prevent this scam
NFT duplication and plagiarism scams can be avoided by researching the seller on other marketplaces to confirm their legitimacy before purchasing. It is also important to cross-check and verify the details of the seller-provided on the marketplace with their social media profiles. Sellers who pass this check are less likely to scam.
Some platforms such as OpenSea verify the legitimacy of sellers by adding a blue tick to their name, these verified sellers should be patronized to avoid the likelihood of this scam.
Phishing Scams
Phishing scam involves advertisement on local websites, social media and phone calls that requests the private wallet keys of users or their word security keyphrases. All these are to gain access to the funds in the wallet. These adverts often come from handles posing as corporate entities and they often send links to click on.
How to prevent this scam
Before clicking any link, it is important to check the domain URL. Users should not verify or perform any activity associated with their wallets through external links.
In addition to this, when a user’s sensitive data or security is being requested, confirmation must be sought from the customer support team to confirm the authenticity of the activity.
Rug pull scams
In rug pull scams, promoters of an NFT create hype around it (SHILL) through social media channels. Once they have convinced people to invest heavily in the project, they abscond with all the investments. The main reason for the hype is to draw more people to the project so they can get enough funds to abscond with. Another form of rug pull is the altercation of the existing underlying code which will prevent holders from selling the NFTs.
How to prevent this
Before investing in an NFT project, it Is important to do a background check on the developers and check their track record. This will determine the credibility of the project. Teams that are unresponsive or give contradictory information are suspicious and necessary precautions should be taken. While scrutinizing a project, the roadmap should be examined. This can also be used to determine the credibility of a project.
Pump and Dump
This is a very common scam in the NFT space. This is when the demand for a particular NFT is artificially increased. This is to make the value increase. Once the value increases, the tricksters that created the artificial demand sell their position at a good profit. This usually happens when a group buys a lot of NFTs in a collection. They then create the demand for this NFT to make the NFTs in the collection increase. This fraud only profits the tricksters as investors who buy the NFT with a hope of an increase in price run at a loss.
How to prevent this scam
Before aping into an NFT, check the price history and look out for price surges. The transaction records have to be examined. The number of wallets transacting the NFTs, the records of those wallets. This gives the insight to know if the hype and demand are natural. Discord, Twitter, and other social media channels should also be scrutinized. The discussions and opinions of others are key. Check for wash trading.
Website scams
This is mostly perpetrated by highly killed NFT swindlers who create a replica of original marketplaces and lure unsuspecting investors to the site. The interface looks exactly like the original website. This makes it difficult to detect.
How to avoid this scam.
Make adequate research about the legitimacy of the official URL of the website before trading or connecting your wallets. Check the domain. In addition to this, abstain from using links, pop-up messages, or email letters to enter the website.
NFT airdrop or giveaway scams
Airdrop scams are situations where scammers offer free NFTs to users. To qualify for this giveaway, “terms and conditions” issued by the scammers must be adhered to. These T&C are made to make the fake airdrop seem legit, and ignore any seeming red flags. Once this is done, the investors will have to connect their wallet credentials to claim the free NFT. These credentials will be stored in their database and the wallet’s asset can be accessed.
How to prevent this
To confirm the legitimacy of NFT giveaways, check the website and social media handles associated with the project to confirm if it is truly issued by the project. If they are not convincing, it is better not to click on the link. Run a Google and twitter search about the airdrop. Someone may have spotted something off about it, and tweeted.
Closing thoughts
NFT scams are becoming rampant and it is important to tread the space with caution. The above listed are common scams and how they can be avoided. If these are followed, the exposure to scams is mitigated. But it should be noted, these are just some of the scams. Bad actors are getting smarter by the day, so you need to always be on the lookout. Be mindful of suspicious DMs, emails and offers that seem too good to be true.
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