Here's How You Can Avoid NFT Scams

by Artyst Space

 

 The year 2021 saw NFTs exploding in popularity, with the market surpassing $40 Billion in value. And the hype stayed strong with endorsements from celebrities like Snoop Dog to renowned people in business like Mark Cuban. However, despite its meteoric rise, there are still lingering doubts and criticisms regarding its legitimacy. It also did not come as a surprise that scammers went on the hunt for a payday. No worries, though! We got you! This article will provide information you can use to understand NFTs better and how you can stay a step ahead of fraudsters. Let's dive in!

 

What are NFTs?

NFT is an abbreviation for Non-Fungible Token. NFT is a digital collectible representing real-world items like artwork and multimedia compositions. By "tokenizing" these real-world tangible goods, you may make purchasing, selling, and trading more efficient while lowering the risk of fraud. A non-fungible asset is one of a kind and has no equivalent. For an in-depth understanding of what NFTs are, click HERE.

 

So How Do NFT scams work?

Most scammers look for ways to get access to your NFT account. They go about this by using a host of phishing cons so you would hand over your wallet key. Once they gain access to your account, they'll drain it as fast as they can before you notice. 

Now, if they can't get a hold of your login information, another avenue they would take is creating bogus or worthless NFT projects relying on people's fear of missing out on the next big thing to entice them to invest. The fraudsters then vanish once the NFTs gain traction and investment pour in, taking the funds with them.

 

How to recognize an NFT scam?

There are a few scams out there. Below are 5 of the most common scams and what you can do to avoid them:

 

Rug Pull or fake NFT projects  

A rug-pull is a scam in which developers hype an NFT but then withdraw after obtaining considerable cash from investors. While waiting for investor cash to flow in, these shady developers frequently use social media to establish trust and hoopla around their NFT. Then, as soon as they have enough money, they shut down the entire project and vanish.

 

What you can do: Buy NFTs only from reputable NFT markets such as Artyst Space, where the artists are vetted.

 

Plagiarized NFTs/Art Theft

NFTs are fundamentally about creating unique digital tokens. Plagiarism is prevalent on many NFT platforms. Back in January of this year, OpenSea stated that over 80% of NFTs coined with its free minting tool were counterfeit. As a result, the likelihood of purchasing a pirated replica of a real-world artist's work is considerable.

Unsurprisingly, the value of your NFT will plummet as soon as it is discovered to be a forgery. That is why you should validate an NFT before making a transaction. Check the seller's history and social media accounts to ensure the work is authentic and theirs.

 

What you can do: Always do your homework before purchasing an NFT. Keep up with the seller on social media. Look for any complaints as well. If the artwork were stolen, you'd be able to track down the original proprietors online. At Artyst Space, we assure you that all the NFTs you buy are authentic. We have partnered with masters in their field to bring you premium, licensed digital artworks.

 

Phishing Scams

Although this is not new, it can be easy to fall victim to phishing scams, especially if you are new to crypto and NFT. Hackers employ phishing to get access to your NFT account information. To do this, they send out fake links, frequently via email or prominent social media platforms and forums such as Twitter and Discord. Often they would ask for your security details or wallet address. Once you click the link and submit your information, hackers employ keylogging or malware to get access to and breach your account.

 

What you can do: Never give out information freely, and store your 12-word seed phrase offline, preferably on a USB drive. To be safe, only exchange your wallet information with sites you trust, and never hand out information if asked. Only provide information when you visit a site without being directed by email or a Twitter post.

 

Pump and Dump Schemes

In a pump-and-dump NFT scam, fraudsters increase the price of an NFT by misrepresenting it and circulating false information. When the price rises, they "dump" the NFT and vanish, leaving investors with worthless assets. This scam is similar to a rug pull, with the only difference being that the fraudsters intentionally raise the price by driving up demand artificially.

 

What you can do: Examine the history and wallet records of any project you're considering. This is where the transparency of blockchain technology comes in useful. Check the number of transactions and buyers for the NFT collection on Rarible or any other NFT marketplace. With EtherScan, you can view all incoming and outgoing Ethereum blockchain transactions.

 

Bidding Scams

This scam often happens in the secondary market, where an NFT holder tries to re-sell their NFT. When you list your NFT for sale, fraudsters will make the highest bid, and you will instinctively want to sell it to them. However, these scammers might switch your preferred currency with a lower-valued cryptocurrency used for bidding without your knowledge, which might result in losses for the vendor.

Here's an example scenario: Let's assume a scammer bids 20 Eth on your NFT. You might anticipate receiving roughly $23,000 in compensation (per the going rate at the time of writing). On the other hand, a cunning fraudster can exchange the cryptocurrency for 50 Dogecoin, which is worth less than $5, leaving the seller with a potentially significant loss. 

What you can do: To avoid such scams, double-check the cryptocurrency you're being paid with and never take less than the agreed-upon bidding offer.

Now that you're aware of the most prevalent NFT scams and what you can do to avoid them, here are some additional practical techniques to help you outwit even the most crafty fraudsters.

  • Avoid clicking on suspicious links. You can end up handing a scammer your account information.
  • Never share your password or seed phrase with anybody.
  • Use strong passwords for your wallets and NFT accounts.
  • Enable two-factor authentication to add an extra degree of security to your account.
  • Before investing in an NFT, do your homework. Before making a purchase, always confirm the identity and history of the NFT developer.
  • Verify the NFT creator's account and social media accounts.
  • Deal with official sites
  • Avoid visiting untrustworthy sites.
  • To store your digital assets offline, use a cold storage wallet

 

Final Thoughts

New scams are always storming the NFT scene, and if you don't keep your eye on the ball, you might lose all of your digital assets. Staying educated is the most excellent way to prevent existing and upcoming NFT scams, and this is where meeting fellow NFT enthusiasts come in handy.

You can trust that Artyst Space strives to give you genuine, premium, licensed digital art and collectibles in the form of NFTs. Your NFT journey may begin with self-education, but if you hit a snag and become overloaded, we'd be more than glad to help you out. Just reach out to us thru our social media channels, or you could catch us on our Discord server. 

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