There is no denying that NFT scams are rampant in the space. From phishing to rug pulls, scammers steal millions of dollars per year.
That is why in this article I will be covering 6 of the most common NFT scams and how to avoid them. So without further ado, let’s jump right in.
1. Phishing Scams
This scam is as old as the internet itself. Essentially, hackers create fake websites, applications, and promotions that impersonate legitimate ones.
Often times they send out various emails and links to entice unsuspected customers. Then when users connect their NFT wallet and authorize a transaction their funds are compromised.
Additionally, they can ask users for private keys which grant full control over their NFT collections. Therefore, this is why it is important to never give out your private key and to verify all applications.
Moreover, if you are interacting with any NFT applications it is vital to use a hardware wallet. The one that I recommend is the Ledger Nano X. Click here to check out my review.
2. Pump and dumps
Pump and dump schemes are one of the most popular tricks in the NFT book. They involve scammers artificially driving the price up which in turn creates hype and attention.
Once the price reaches a certain threshold they quickly sell leaving retail investors with worthless tokens. This can simply be avoided by finding reputable projects.
Moreover, they mainly happen around the launch date therefore if you wait to buy, it can provide more clarification.
3. Fake NFTs
Like other forms of art, NFTs also have large amounts of counterfeits. It takes as little as a few minutes to mint an NFT which has led to a rise in fakes.
That being said, this is easily preventable as all the information is verifiable on the blockchain. You can check the corresponding metadata which contains the token ID as well as the ID of the NFT collection.
Furthermore, marketplaces often use verification badges to ensure authenticity.
4. Rug pulls
This is another common scam in the NFT space. In essence, this scam has two types. The first is a soft rug, this is when developers cease support for the project while taking money from investors.
The second type is the hard rug. This scam is illegal as the code is altered to facilitate nefarious activity. For instance, developers can prevent investors from selling tokens by changing the code at the smart contract level.
Rug pulls can be avoided by finding reputable projects. You should avoid anonymous teams at all costs. In most instances, they are rarely held accountable if something goes wrong.
Furthermore, if developer funding is distributed over a long period then it incentives them to continue building.
To learn more about NFT rug pulls. Click here to read my previous article.
5. Impersonation scams
This scam involves the impersonation of legitimate influencers as well as technical support. Regarding technical support scams, malicious actors pose as support teams for marketplaces and projects.
In the supporting consultation, they ask for sensitive information under the guise of helping you. They then leverage this information to gain access to your accounts and funds.
Similarly, scammers can also pose as popular influences. This usually involves social media accounts such as Twitter and Discord and use the same method. Additionally, projects often fake celebrity endorsements to bring attention and generate hype.
To prevent these scams it is important to encrypt personal information and never give out your private key. Moreover, VPNs and virus protection can also help. Not to mention, only communicate through official channels and research.
6. Bidding scam
Bidding scams are extremely common on NFT marketplaces. Essentially, buyers switch cryptocurrency during the bidding process to a lower-value asset. For instance, it may originally be listed for 5 Ethereum but then they switch over to $5 worth of DAI.
This leaves sellers with a price significantly lower than expected. However, this can be avoided by double-checking the purchase price and only accepting certain cryptocurrencies.
If you want to check out this article in video format then click my video below:
As you can see, there are several NFT scams that are worth paying attention to. In most cases, the end goal of these scams is to get access to sensitive information.
Therefore, it is important to follow some of the tips in this article and as always do your own research. I hope you found this article useful and thanks for reading it.
Want to learn about 7 great NFT business ideas? Click here to read my previous article.