Since the year 2021, the NFT market has grown tremendously. According to the statistics, over 280000 buyers and sellers are attracted by this market. Now the NFT market has grown to $22 billion. However, with this growth, people have become more vulnerable to cybercrimes. As a result, NFT frauds have become a common occurrence. Here is the information to help you avoid such scams.
What is NFT?
NFTs or otherwise known as non-fungible tokens are unique tokens. Non-fungible stands for the uniqueness of that taken, which makes them irreplaceable. Fungible tokens such as Bitcoins are exchangeable as long as they are of the same value. But for NFT, you cannot do the same.
One thing that you must know about NFT is that it can be anything digital. For instance, an NFT can be a photo, video, an audio file, or anything digital. Furthermore, when you purchase an NFT, you are not getting the ownership of the digital asset but the token. Simply put, you cannot use your NFT for any commercial purpose. But you can sell them to somebody else.
How does NFT work?
The working of NFT is also unique, just like its nature. The layering of NFTs is done on top of a blockchain. Blockchain is a system responsible for the transactional records made in any Cryptocurrency. These records are maintained on multiple computers thanks to the network connecting them. Generally, NFTs are found on the Ethereum blockchain. However, this is not the only option since other blockchains support them too.
The digital objects used to create NFTs represent both items, tangible and intangible. For instance, videos, collectibles, music, virtual avatars, art, gifs, memes, and almost anything can be considered NFTs. You can also view them as the digital equivalent of any collector’s item. When it comes to artwork, you are given the art piece for display, and a digital file as an NFT is digital art.
Since you are provided a digital copy, you may think others can have it too, right? However, you will be surprised to see that the ownership of an NFT is exclusive. Thus, only one owner of particular digital art can be made possible thanks to its unique data. Every NFT has unique data which can verify the ownership.
How can you collect NFTs?
If you want to collect NFTS, you must have a digital wallet, and this wallet can store both NFTs and cryptocurrency. To purchase an NFT, you also require cryptocurrency. You can find NFT marketplaces where you can easily browse through all the NFTs. Collecting NFTs is a process that may seem overwhelming at first, but once you understand the ins and outs, it becomes easier.
What are the risks of scams involved in NFT?
1. Rug Pulls
Rug Pull is a common scam that may happen to anyone. The promoters will hype the NFT on social media in this scam, increasing the price. When the investor invests their money into the NFT, then they stop supporting it and disappear with all the money, which may lead to a decrease or crash in the price of the value of assets, and that may lead to losses for investors.
There can be several variations in the theme, and that may leave the NFT’s developers to lose the ability to sell the tokens. In this project, the investors are promised that they will get the benefit, but they are not. It takes place in a short time.
But you can protect yourself from these scams by doing a background check behind the project. You can check their social media channels and look at your activated community. If you think it is suitable and reliable, then only you should invest in it.
There are several third-party marketplaces that you can choose to make the transaction of NFTs, and these platforms offer you the proper security for the NFTs. But criminals have a different point of you, and they imitate those similar URLs that will deceive users.
It will be the same just like other NFT platforms; they will offer you the same feature, but once the investor invests in the company, they can easily copy some plaintext information, which means these websites look just like legitimate marketplaces.
But you can get protected from all these scams only when you do proper research about the marketplace and do not choose any random one.
3. Bidding Scams
Biding scams may happen when an investor wants to resell their NFTs, and it takes place in the secondary market. The scammer may switch the currency you have chosen with the lower value currency, and you will not even have the idea about it because it will happen when you list your NFT sales, which can lead to several potential losses for the sellers.
That is why the person has to double-check the currency before they sell their currency. If they will not, then the investor will have to face a considerable loss.
4. NFT Giveaway or NFT airdrop scams
You may have heard about airdrops where you can get the NFTs for free, but sometimes, these are scams for the users. Not all but some, and that is why the user needs to choose the deal very carefully. You could fall into an airdrop that is not really to claim the airdrop; that is why you need to ensure you make the right choice.
The scammer may even convince you to connect your wallet with the site, which helps them claim the money and currency as they scan your wallet. That is why you should look for the right one. If you do not take care of that, then in your opinion, you may approve the transaction so that you can claim the airdrops, but in reality, you are just giving control to the scammer.
If you do not want to get scammed, then you should not claim airdrops from any mysterious projects. And never connect your wallet to any websites.
Another technique that most scammers use is Phishing. It is a technique that has been around for several years and is quite common. The only motive of this attack is to get the accurate and sensitive details of the person, such as bank account details and passwords. If you use the Metamask, they can even get your private key or the secret recovery phase.
It has happened to many people, and once the scammer gets the information, they may convince the person to send some essential details. Once they get your information, they may get all your money and will disappear. The scammer will try to log in to your account by trying your password reset, which will help you get the impression that something suspicious is happening, and the victim may get aware.
People can protect themselves from these scams; they should be attentive and not give any personal details to anyone. They should never share any code and not click on random links or emails.
6. Customer Support scams
Some hackers or scammers imitate the customer support staff for the users’ blockchain marketplace, like phishing scams. It is a cheap way through which the scammers aim at the investors; as in this, the scammers may contact any social media users, primarily those facing the problems.
Once they contact the user, they pretend to be part of their support staff. They will send you the screenshots of your wallet and the photos and act like they are there to resolve your issue. But the only aim they have is to get the problem fixed. You may have nothing in your hand when they connect that to their wallet. That is why you should communicate with the official person instead of talking to someone on these social media and never send a screenshot of your sensitive information to anyone.
7. Swap Scams
As a trader, you may want to swap your NFT, but there will be a risk that you may fall for the NFT swap scams. Recently a trader got trapped in this scam while swapping their NFTs and lost their bubble gum ape. The website just worked the way a reliable website does and will show you the verified green checkmark and tell you that they have swapped the NFTs, which is original and not any scam.
The scammer adds this green checkmark manually so that the users will not get suspicious about anything. They trick the users into swapping their original NFTs for the fake ones. You can get protection from this scam only if you choose reputable sites; you will not face and manually verify the contact address.
8. Plagiarized Art
You may have got some idea from the name how this work. Plagiarized is when the scammer uses a website similar to the original, making it hard to differentiate. Because of anonymity, thousands of assets are also involved; they can steal your money without letting you know.
The scammer also copies the NFT collection and lists that fake collection on popular markets. You can protect yourself if you do not choose any project you are unsure about. You can even search online on Google for the different projects and then select the right one.
How can you avoid NFT scams?
As an NFT buyer or seller, keeping yourself safe from scams should be your priority. If you are also purchasing or selling other digital assets, the following tips will help you ensure your safety.
1. Set up the wallet for cryptocurrency with a reputable provider
The most common mistake many NFT buyers and sellers commit is not choosing the platform to create a crypto wallet wisely. You must ensure that the platform you use is well-known and is trusted by many.
Another thing that demands your attention is the compatibility of the wallet to the NFT platform. Not every wallet will allow you to make the transaction for purchasing NFT. Thus, you must research on your own and choose the platform that fulfills your requirements.
2. Protect your device with better security software
The importance of having powerful cyber security software cannot be stressed enough. A strong enough software will ensure that any encounter with spyware, malware, or malicious software is handled efficiently. It will also keep your sensitive information safe.
It would be best to consider installing powerful antivirus software to protect the device from malware. You can also use a VPN for the encryption of your data and overall improved online security. Other than this, you can also use a password manager.
3. Never misplace your private keys.
The public key provided to you is essential for receiving and sending crypto, and this key is also visible in blockchain transactions. However, when it comes to the private key, it must not be shared. It is the access to all the digital assets you own and can be used to trade and prove your ownership.
In case you end up misplacing this key, you can use a backup phrase or better known as a seed phrase. This seed phrase is the way to restore the misplaced private key. Though most wallets store the private key within the wallet, the risk of misplacing it still exists.
Nowadays, many traders are using cold storage to store their private keys. In this way, you can keep your private keys without any internet connection on your computer. You can also save it on an external hard drive or choose to write it down. In case you trust your memory, you can also memorize it.
Research properly before making any investment
Not every NFT trader finds the market is genuine. When you are putting your money on the sake, it is recommended that you go through all the information about the NFT collector. It may include the credential and goals. Along with this, also ensure that you are not neglecting the transaction history of the creator.
If you are just beginning, you should buy from well-known NFT creators. Try to restrain yourself from buying from new traders, especially if you cannot find their credentials.
4. Enable the security setting in your crypto wallet
If you have been extra careful with choosing the right platform for your crypto wallet, you will get some extra benefits. All the reputed wallets offer excellent security protocols that are enough to keep your funds safe. But, such security settings are not always enabled by default, and thus, you will have to allow them to yourself.
Some well-known wallets also offer two-factor authentication along with protection against phishing attacks. You can easily find this by familiarizing yourself with the wallet.
5. Secure your wallet with the unique password
After setting up your crypto wallet, a public and private key is assigned to you. But this key alone is not enough. You have to set up a password for your wallet and make sure you use a secure and unique password for every account you have.
There is also the option of choosing two-factor authentication or 2FA. As it is considered a few of the most concrete forms of authentication, you should use it wherever possible. If a person wants to hack into your account, they would need the password you have set and require your device, such as a mobile phone, to log into the wallet.
The Final Words
You must clearly understand the risk you should protect yourself from to become a better NFT trader. Initially, you need to be extremely cautious of your steps and ensure you are not clicking on any suspicious link. By thoroughly researching the platform of the crypto wallet and the NFT collector, you shall be able to protect your digital assets well.