Thinking about buying an NFT well I have news for you. For every moon shot, there are hundreds of scams, so you're more likely to get wrecked than to get a bag. That is, unless you know how to spot dodgy NFT's or NFT Scams(To read in depth about what NFT is please click on me) . In this blog post, I'm going to give you the top ten red flags to lookout for in order to avoid falling for one of these. This one guys you definitely cannot afford to miss. Before we continue with our mission to spot those scams , I need to let you in on a little something. I need to give you a disclaimer before I talk about this bill. I am not a financial advisor , I'm just an educator and this blog post is written with the sole purpose of providing you factual information. Please contact a financial advisor if your portfolio has been killed. If you're new here, you might be feeling a little bit lost right ? My name is "MrCrypt "and I am your crypto geek here at the cryptolibrarynow . I pass on the knowledge of cryptocurrencies, exchanges, DeFi, protocols, NFT's and market analysis are just a few of the topics I tackle on the daily basis. Now enough with the intro. Let's get it on , Let's unpack these NFT scams and see what's in it.
Phising Scams -:
First up, beware of phishing scams and suspicious pop up's . Now, phishing scams have been around for as long as crypto wallets have been us ed. However, given the recent boom in NFT drops and the minting that they entail, new users are often asked to sign transactions which they can't fully verify, for example. About a month ago, Opensea was going through a planned smart contract upgrade. This required users to approve the smart contract upgrade in their wallets. However, unbeknownst to many of these users a phishing e-mail purporting to be from Opensea was making the rounds. This directed users to a phishing site that asked them to approve a malicious smart contract. The scammer did this with numerous people and collected as many approvals as they could then when the time was right the scammer transferred all the NFT's and crypto of those who had approved transactions. Almost $2 million in NFT's were stolen and Opensea did eventually come out and reimburse the users. They were lucky, as the same phishing attack could have happened on a platform that was not as well backed. For example. There are also fake malicious popups operating via Discord, Telegram and other public forums that link to normal and rather innocent looking login pages such as Meta Mask, Phantom and numerous others. If a bad actor gets hold of your private keys via a phishing attempt, they can very easily drain your wallet of all its available fans. So pro tip , if any site ever asks you to insert your seed words, navigate away immediately. That's a scam. Now, as a general rule of thumb, you will only ever need to use your private seed phrase when creating a hardware backup of your crypto wallet or if you need to recover your wallet. In addition, always navigate directly to the verified website to execute any crypto related transactions, never using links, popups, or an e-mail address to enter information. So please folks, make sure you write down your seed phrase on a sheet of paper and lock it away somewhere safe you will only ever need that in the rarest of circumstances. OK, that's phishing scams.
Fake Discord Groups(Impersonation Scam) -:
Next up we have fake personas, impersonators, and artificial social media accounts . Now, discord has historically been one of the most popular tools to build communities in the NFT space, but not everyone is perfectly familiar with it, as it has primarily been used for the development of gaming communities, guilds and teams. Furthermore, as it's still a relatively new platform, not everyone is familiar with it and this makes it the perfect environment for scammers. Now, when you start joining discord servers for several NFT projects, it's very likely that you will begin receiving countless dodgy looking dm's. Now the golden rule for protecting the nft's in your wallet is to never click on any promotional links received through direct message. This is primarily because in most cases it is indeed very unlikely that any legitimate NFT project will actually attempt to reach out to you directly. All the projects announcements generally tend to happen in one of its official channels, so it's imperative that you don't interact with any direct messages, even if they seem like they're from an official member of the NFT project you invested in. Oh, and just a quick tip on that note, you might want to consider changing your server privacy settings . In order to avoid being added to unwanted groups and communities.
Social Media Impersonators(Impersonation Scam) -:
The next major red flag to keep an eye out for is social media impersonation. Scammers/social media impersonators often copy original or verified accounts of genuine nft projects by creating unofficial pages that closely resemble the original ones. Through these fake accounts, scammers can convince users of their legitimacy and therefore induce them to buy fake NFT artworks. This constitutes yet another way for malicious actors to pass off illegitimate and unofficial non fungible tokens for profit. Moreover, these fake social media accounts can also host fake giveaways, which can pose a major risk to all unknowing users. Thus, in order to avoid engaging with these illegitimate accounts, it is of ultimate importance to check for a verification mark next to the accounts name. That being said, a variety of legitimate nft projects and their social media accounts are still unverified, which means that not every giveaway or free mint will result in a dead end. But just to be safe, I would urge you to navigate to the official website of the project in question and follow the official links that they have on their site. There is much less chance of confusion. If you use this method project accounts aside, social media platforms such as Telegram, Instagram, Discord and Twitter are absolutely rife with fake NFT artist accounts. In fact, it's not uncommon for scammers to impersonate established NFT artists and to sell false versions of well known NFT assets to users at considerably subsidised prices. Ultimately, folks, if the price seems too good to be true, then it probably is.
Wash Trading -:
The next red flag you absolutely need to pay attention to is the extensive amount of wash trading and artificial price inflation occurring within the NFT ecosystem. While this doesn't necessarily pose a risk to a user's NFT's, what it does do is create a fabricated and sometimes hyperinflated market structure for a specific NFT collection. Now if that term wash trading is new to you, here's what you need to know. Basically, wash trading is a form of market manipulation. Where one investor simultaneously sells and buys the same asset to create false and misleading activity in a marketplace in the traditional crypto markets, it's mostly done to make it look like a particular exchange or coin as trading activity and interest, when in reality it has very little of either. The same can be said in the NFT market, except given the illiquid and unique nature of NFT assets, the individual sells it to themselves at a higher price. This makes it look like the NFT is appreciating in value, when in fact it's all manipulation. In a recent report, the blockchain analysis firm Chainalysis tracked wash trading by analyzing sales of NFT's to addresses that were reportedly self financed. In other words, sales that were funded either by the selling address or the address that initially funded the selling address. Now this method yielded results that revealed hundreds of wash trades with one user, perhaps the most prolific wash trader of all identified by Chainalysis as having been found to have made over 830 sales to the addresses they self financed. This type of illicit activity can indeed pose major issues to nft traders and investors alike. This is especially due to the fact that wash trading usually entails large trading volumes and relatively high-priced sales, which might trick investors into thinking that the NFT they're purchasing has been growing consistently in value. Thus, in order to avoid such situations, I'd suggest you always double check the trading activity tab on your preferred NFT marketplace and make sure that wallets doing most of the trading and contributing to the growing trading volume , are separate and individual wallets because ultimately I'd hate for you to get caught up in buying an artificially inflated NFT collection.
Bidding Scams -:
Next up, perhaps the most insidious scam of all , bidding scams . Now bidding scams historically occur mostly in the secondary market after a user has purchased a valuable NFT and wishes to resell it to the highest bidder. It's natural economics, right? But it hasn't always been smooth sailing. In fact, once a board ape or crypto punk NFT, for instance, has been listed for sale on the marketplace, dodgy bidders might switch up the cryptocurrency used without notifying the seller and as opposed to receiving your well deserved 80 ETH for your board ape NFT, you end up receiving a mere $80 for it. Now scammers have figured out that they can make offers for listed NFTS on opensea in usdc, which as we all know, is much less valuable than ETH. This bidding scam isn't actually that intricate. It relies on the bad actor placing a bid on one valuable NFT in usdc value, as opposed to bidding in the asking cryptocurrency. The seller receives a bidding notification on their opensea account, and they decide to sell, thinking that the bidder has met their selling price. Only to then break into tears after they realize they've just sold their favorite ape or punk for a ridiculously cheap amount. What's particularly frustrating about this scam mechanism is that technically, the malicious bidders aren't really breaking any laws. They simply placed a bid for an NFT. The seller willingly accepted it, and the bidder is now the rightful owner of that NFT. So in order to avoid this ever happening, please make sure to double check the actual cryptocurrency that you'll receive when you sell your NFT folks. While technically not illegal, this bidding scam does ethically equate to theft, and I would hate to see you being left holding the bag, so do watch out for it.
Plagiarism and Counterfeit NFT's -:
The next potential red flag to pay close attention to is counterfeit or plagiarized NFT's. Now, it's worth remembering that minting a piece of artwork as an NFT is not technically the same as having intellectual property or IP ownership of it. This has led to the rise of a serious and potentially dangerous activity in the NFT ecosystem one revolving around plagiarized fake NFT assets, but thanks to opensea's beginner friendly minting station, pretty much anyone can turn any photo file or image into a non fungible token, whether or not they actually own the rights to the IP. As mentioned already, this has opened up a fertile environment for scammers and bad actors who regularly plagiarized the underlying artworks associated with an NFT contract mint, a new token represented by the same image and open a fake collection on Opensea plagiarists, will usually then list their counterfeit NFT's for sale, and once sold, there is no way for the buyer to claim their funds back. Thus, to avoid this happening, it's always worth buying an NFT from a verified wallet or account marked by the blue check mark. If the collection is brand new and hasn't been verified yet, it's constructive to navigate to the collections official website or social media accounts where more often than not, links to the authentic NFT collection on opensea can be found.
Untrustworthy Storage Site -:
Next up on our list untrustworthy storage sites. This is another ethical Gray area, not so much a scam. Now at times NFT's can go missing once they've been purchased. That's because the contract that lives on the blockchain, i.e ,the NFT, is different from the actual network. For instance, say you were to upload an MP3 file of original music to a platform like opensea. When the collector is ready to buy it, they place a bid and pay the seller in ETH for instance, which will then create a record of ownership known as a smart contract. Technically, the smart contract is actually what gets minted on the blockchain with the content and metadata being separate. Now, I know this might sound a bit abstract. However, it's worth noting that non fungible tokens are all about the ownership of the underlying asset, but the asset itself could be absolutely. Anything. Therefore, when the tokenized digital content or artwork wrapped within the smart contract is stored on a centralized platform, one should make sure that it is indeed trustworthy. Also, it's advisable not to buy an NFT that merely links to a URL with an image. This is because whatever page image or file is stored within that URL can be altered at anytime without the NFT holders permission, leaving them holding a token that essentially points to nothing concrete. So when buying an NFT, it is important to take possession of the tangible or digital asset, be it in the form of a JPEG, M3 or PDF file outright.
Suspicious Promotions of NFT's -:
Next, paid ads and suspicious promotions. The popularity of NFT's has led to numerous celebrity endorsements and paid ads in recent times, which enables them to profit in a variety of ways and not always ethically. In fact, because NFT trading occurs online, there is a finite amount of information that the public can gain access to regarding the marketing process for an NFT project. And certain scams involve intricate forms of fake endorsement as well as suspicious paid promotions and before the public realizes that the supposed celebrity brand ambassador is not actually involved, many investors will have most likely lost their money already. Scenarios such as these have happened time and time again and tend to take place when the NFT market is particularly hot. This is due to the fact that NFTS are primarily still a retail driven market and the general lack of major institutional capital within the NFT space makes it exponentially more manipulable, both in terms of social and asset value. Thus, to avoid falling victim to a fake NFT celebrity endorsement first and foremost. Make sure you thoroughly research the project and understand its ultimate goals. This will most likely shed light on the role that a particular celebrity might have in furthering the project's development, and will also highlight their position when it comes to helping the project achieve its objectives.
Unrealistic Roadmaps -:
Which leads me on to my next scam. Unrealistic road maps now just like with the rest of the cryptoverse, I would argue that an NFT projects road map is absolutely instrumental to its overall success. A logical and sophisticated road map can also help investors differentiate between a fundamentally solid NFT Project and, well, a completely worthless one. But unfortunately the NFT space is currently not only saturated with worthless individual pieces and collections, but it's also spiced with a toxic mixture of high expectations and unrealistic objectives. Furthermore, it's not been uncommon for investors to fall victim to an NFT project boasting a technically unfeasible or overly promising road map and short term goals. Usually these NFT projects lead to an overly hyped minting procedure, which generally sells out within a few minutes, only to then collapse soon after. Due to either a rug pull or a general lack of demand for that particular collection.
DYOR -:
And finally, the most effective way to avoid falling victim to NFT scams is Do your own research(DYOR) now, I simply cannot stress this point enough folks. I would argue that NFT's are currently in their initial coin offering or ICO stage, and because of how primordial and perhaps underdeveloped their ecosystem still is doing your own research could potentially save you from falling victim to malicious activity carrying out proper due diligence will inevitably raise your antenna and make you increasingly more aware of potential scams. For instance, after having spent a sufficient amount of time browsing through several NFT projects, they're founding teams, road maps, and the assets themselves, you'll become accustomed. The spotting any potential irregularities and discrepancies with a particular NFT project and while NFT scams or rug pulls can happen at any moment, doing your own research will make it easier for you to spot phishing attacks. A fake discord Group A bidding scam, a counterfeit NFT, or a fake endorsement. It'll also allow you to become infinitely more sophisticated, and more importantly, careful when it comes to your NFT investing.
How to protect yourself from such NFT scams ?
Now that's it for today guys new and intricate scams are always storming the NFT verse, with bad actors finding clever and alternative ways to scam even the most experienced NFT investors out of their private keys and valuable jpeg's. Now the best way I've found to avoid existing and new NFT scams is to remain involved in the space and to stay as informed as possible, and that's where finding fellow NFT enthusiasts becomes imperative. But having said that, I would argue that one's NFT journey should start first and foremost with a strong dose of self education. This will enable the budding NFT enthusiast to gain an initial understanding of how the NFT economy works, what its fundamental principles are, as well as the dynamic set of social elements driving its market. In my eyes, NFT's are structuring an exciting new economic framework based on an entirely alternate set of financial and more importantly, social principles and because of how immature the NFT market is exercising the right amount of caution has never caused any harm. So enjoy the development of this exciting new space. But remember to always be careful.
Ok, that's the blog post done for today guys, but I'm sure you'll have tons of questions, so please don't hesitate to let me know in the comment section down below. What do you think about NFT's? Have you ever fallen victim to any NFT scam? What would you look out for in order to avoid a rug pull for instance, I'm keen to hear your views, folks. So please don't leave me hanging. Remember to share this article to as many people as possible it motivates me to make more such interesting content on crypto.
To read more such interesting articles please pay a visit to cryptolibrarynow by clicking on me.
I have also written an insightful article on Top 5 Crypto Scams|That will become commonplace in 2022 .
To read my article on 7 Legitimate Ways to Earn Free Crypto Online click on me .
My last blog post was on Metaverse will Snatch the Touch Away ? Metaverse Explained 2022 .
Thank You , Keep learning keep growing .
Comments
Post a Comment
If you have any doubts, please let me know.