NFT stands for “nonfungible token” and is a type of digital asset built on the blockchain. NFTs are unique and can represent ownership of the physical or digital item they represent. Today we dive in to the topic of what is NFT scam.
NFTs differ from traditional cryptocurrencies such as Bitcoin or Ethereum because their value relies upon the characteristics that make them one-of-a-kind, rather than just their exchange rate against traditional currencies. NFTs do not lose value when traded, meaning that owners retain all rights to NFTs even after they are sold on the market.
NFTs are used in a variety of ways, ranging from collecting NFT art to buying real estate and more. NFT creators and businesses can quickly monetize artworks and other assets without relying on a third party broker – making it easier for independent creators to sell their work online without any fees or commissions.
NFT space opens up an entirely new way for people to generate income through art and other means, creating a whole new avenue for innovation in the digital economy. NFT technology has been steadily growing in popularity over recent years, with more industries recognizing its potential in creating secure transactions online that remain unique and difficult to counterfeit.
What is a NFT scam?
A Non-Fungible Token (NFT) scam is a type of fraud in which investors are enticed to invest in what appears to be a legitimate investment opportunity involving digital assets such as art, music and videos.
NFT scam always ends up with investors losing their money and/or being stuck with a worthless assets (NFTs) that they will most likely never be able to sell for the price that they had paid.
NFT markets represent an innovative way to build value into digital assets. Described as a form of blockchain-based asset trading, NFT marketplaces are marketplaces that enable the buying and selling of non-fungible tokens (NFTs). At the heart of these markets lies the concept of “monetizing” digital assets through tokenization.
Taking this further, some NFT marketplaces also offer limited editions and special offers for those who are looking for something extra. As such, these NFT marketplaces open up an array of possibilities when it comes to creating, trading and profiting from virtual assets in one convenient space.
There are various types of NFT scams, most of them occur on NFT marketplace. First and the most important scam prevention step is to not buy any goods from unknown NFT marketplace.
Types of NFT Scams
Non-Fungible Tokens (NFTs) have risen in popularity in recent years. They provide a secure and immutable way for users to store and trade digital assets of rare or unique items, such as artwork, sports cards, collectibles, and more.
However, as with any type of asset, there are risks associated with trading NFTs. Fraudsters have taken advantage of this emerging technology. They create various types of NFT scams that are specifically designed to target unsuspecting buyers.
There are a lot of common NFT scams that you might have heard of, but as the market and ecosystem is evolving NFT scammers are evolving too and coming up with new NFT scams.
Types of NFT scams include:
Scammers lure buyers by promoting fake NFT items or collectibles and promising them that they will make money. The scammers hyped the asset on social media, but after the purchase all promotions and all unfulfilled promises disappeared. As a result, the value dropped dramatically. Scammers also removed the ability to sell these NFTs.
Lana Rhoades NFT fraud is a great example of rug pull. A porn star launched what appeared to be a legitimate NFT project and ran away with 1.5 million dollars.
Rug pull scam is one of more common NFT scams.
NFT Phishing scams
Phishing scam may be an old scam, but it’s still popular. Typically, phishing scams involve fake ads, emails, and pop-ups that redirect people to bogus websites.
In some cases phishing scam sites use tools such as promoting fake NFT giveaways to get their victims hooked.
The fake website then requests the user’s private wallet key to access their digital wallet. Once scammers have access to this private information, they can use up any NFT collectibles or cryptocurrencies in the digital wallet.
Bidding fraud occurs when someone tries to resell their NFT. After getting the highest bid, the scammer (the winning bidder) exchanges the cryptocurrency for a less valuable one. This may seem like the maximum amount, but some cryptocurrencies are worth less than others.
Social Media Impersonation
Cybercriminals create online social media profiles to convince people to buy fake NFTs. They use social media to make their fake websites look legitimate.
Scammers use social media to promote NFT giveaways. The promotions usually offer a free NFT for spreading the word to friends or signing up on their websites. When it is time to collect the prize, the scammers ask for cryptocurrency wallet information to send the NFT, but instead, they gain access to the account and take any funds or NFTs in the person’s wallet.
When selling or buying NFTs, people remain anonymous, which makes it easier to create investment scams. With an investment scam, scammers create a seemingly potential project to invest in. After collecting the funds, they disappear without a trace.
NFT scams like this are usually easiest to avoid.
Pump and dump scams
A pump and dump scam occurs when a group buys large amounts of cryptocurrency or in this case NFT from same collection in order to inflate the price of demand.
When prices rise – or skyrocket – the group sells – or dumps – assets to capitalize on the gains, and everyone else suffers losses.
Pump and dump is one of the more common NFT scams
Counterfeit NFT scam
Scammers copy artwork and then list this counterfeit content on legitimate sites, such as OpenSea NFT market. Because it was copied or fake, the NFT has zero value. The person has already made the purchase before realizing it is a fake and is now stuck with worthless NFT.
Unfortunately, it can be difficult to spot these scams due to their deceptive nature. Therefore, exercising caution is key when transacting with anyone when purchasing an NFT.
Taking the time to research vendors thoroughly before making an investment decision can help protect against NFT scams from potential fraudsters who might try to take advantage of vulnerable buyers. By adopting safe practices in the buying and selling process, users can minimize the risks associated with participating in the NFT market.
What To Do If You Get Your NFT Scammed?
While Non-Fungible Token (NFT) trading can be a great way to make money, it also carries risks. There have been numerous cases of NFTs being scammed out of the rightful owners in recent months. If you find yourself in this unfortunate situation, here are some steps you can take to protect yourself financially.
First, check your blockchain details and ensure that the token has not been transferred away from your wallet address. If it has, immediately contact the NFT platform you used and ask for assistance in recovering it. They may be able to assist by freezing or reverse transaction processing or even contacting the buyer if possible.
Additionally, report the case to any relevant law enforcement agency as soon as possible. So that they can investigate and possibly try to recover any stolen funds or tokens. You should also consider filing a chargeback with your credit card company if you made a payment through one while purchasing the NFT to try and recoup some of the losses.
Finally, always double check who you are transacting with when buying or selling an NFT and never give out personal information or financial details at any time; this is especially true for anonymous buyers/sellers on decentralized marketplaces like OpenSea.
Taking these precautions when trading digital assets can help protect you from becoming a victim of an NFT scam.
In pump and dump scams cases best solution is to sell the NFT as soon as possible and this way minimize the loss.
How to avoid NFT scams?
Securing an NFT is an important part of the process for digital asset collectors. Fortunately, there are several ways to secure your digital property.
One method is through cold storage, which is the practice of storing a copy of your data on a secure device that isn’t connected to the internet or any other type of network. Cold storage options can include USB drives, paper wallets, secure hardware wallets such as Trezor wallet , and even physical crypto collectibles. This method is the safest and will help you avoid NFT scams.
The second technique is through using a secure software wallet such as MetaMask or Trust Wallet. These types of wallets use strong encryption technology to protect your NFTs and other cryptocurrency assets.
Finally, you can also secure your NFTs by adding them to an auction platform like OpenSea or Rarible. This platform allows you to store and track your NFTs in one dedicated marketplace that is secure from malicious users and hackers.
We recommend you to check our full guide on how to avoid NFT scams.