Products such as non-fungible tokens and cryptocurrencies are already changing the world. There is now a shift that blockchain believers predict will revolutionize how we bank and transfer money, how people pay for commodities, and even how we socialize in the emerging metaverse.
It is necessary to recognize that NFTs are a new technology that requires refinement, as well as to recognize that NFT frauds and crypto scammers are a fact of the current state of the game.
In the cryptographic world, non-fungible tokens (NFTs) are a method of registering digital files like art, film, and game assets on a blockchain. By doing this, it creates a scarcity and increases the value of said products.
This means that digital artists will have a new cash source as well as the assurance that their work will be protected by intellectual property laws.
In the world of non-traditional financial services, frauds are commonplace. As more artists and designers adopt NFTs and become acquainted with this new technology and revenue streams, the likelihood of NFT scams are increasing.
Understanding how to prevent NFT scams can be as simple as knowing what to look out for, and in many cases, a little extra caution can be beneficial. When purchasing an NFT, there is typically a sense of uncertainty, as well as the possibility of panic-selling and buyer’s regret.
The good news is that there are ways to stay safe online while creating and purchasing NFTs without falling victim to NFT scams.
In this article, we will be discussing how NFT artists make money, how scams occur in the space, and how you can save yourself from them.
What are NFTs?
An NFT is an abbreviation for a non-fungible token. This means that concealed within those quirky artworks is a single unit of data that cannot be exchanged and is recorded on a digital ledger utilizing blockchain technology to prove ownership.
Essentially, the same or similar technology that is used to guarantee the uniqueness of each NFT and to verify who owns it is also used to guarantee the uniqueness of each NFT.
Because each NFT is completely distinct from others, it cannot be exchanged for another NFT in the same way that crypto can. Consequently, NFTs have evolved into collectible digital assets with monetary value, similar to how physical art is valuable.
It is possible to keep an NFT for any type of digital file that is easily duplicated in order to distinguish it from the original copy. This means that it is possible to create NFTs from any type of photography, art, music, or video file.
How Do NFTs Work?
The blockchain ledger can be used to verify the unique identification and ownership of an NFT. They were initially introduced on the Ethereum blockchain, but they are now also supported by other blockchains, including FLOW and Bitcoin Cash.
Regardless of the source file, the NFT that indicates its ownership can be purchased and sold just like any other piece of art – and, like with physical art, the price is primarily determined by market demand.
Similarly to how you would discover replicas of great works in a gift shop of an art gallery, there are some NFTs that behave in the same way.
There are bits of the blockchain that are completely valid, but they do not have the same value as the original.
NFTs will almost always come with a license to the digital asset that they refer to, but this does not inevitably imply ownership of the underlying copyright. The copyright owner has the right to reproduce the work, and the NFT owner receives no income from it.
When you fall victim to an NFT scam, the perpetrators either steal your cryptocurrency wallet login credentials or deceive you into believing you have purchased or sold a valid NFT.
Cybercriminals are drawn to the monetary value associated with these digital assets. This is why they modify their traditional hacking methods to get into cryptocurrency user accounts and steal NFTs.
Some Common NFT Scams
Art Theft
As is always the case when purchasing an NFT, do your homework. OpenSea displays a blue tick next to the seller’s account to indicate that the seller is a legitimate creator.
Follow the seller on social media and look into their previous transactions on NFT marketplaces to find out more about them.
If the artwork has been taken, look for complaints against the perpetrators. You can also look for the rightful owner of the art being sold through a quick Google search.
A significant challenge for non-profit organizations is the theft and plagiarization of artwork. This is why a lot of artists refuse to work with NFTs.
We can all contribute by raising our voices when we witness stolen art being sold on NFT platforms. NFT marketplaces aren’t really doing nearly enough to tackle the problem.
Rug Pulls
This occurs when a new NFT project obtains a large sum of money in a short period of time by hype and bluster, frequently by connecting itself with a currently successful NFT.
Those that invest in the NFT project might be disappointed when the developer ‘pulls the rug out from under them,’ leaving them with a collection of useless NFTs.
When you perform some basic investigation, such as verifying the creator’s social media profiles, looking at their history on NFT markets, and following connections to the project’s website, you can potentially avoid being a victim of a rug pull.
Long before any NFT is issued or any money is exchanged, a strong social media community will be established for a legitimate NFT project.
Make sure to look at engagement rather than followers. This is because fraudsters will frequently pay for followers, but fake interest, so make sure to look for any discrepancies between the two.
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Pump and dump
Pump and dumps are common wherever there is a lot of excitement and money involved. A pump and dump is when a group buys up NFTs in order to artificially inflate demand.
What they do is that theywill purchase their own non-financial assets (NFTs) using bogus names and accounts. These suddenly highly valuable NFTs will be sold, and the creators will be forced to exit the market as a result.
Check the history of the wallets in order to avoid a pump and dump situation. All sales and transactions will be recorded on the blockchain and everyone will be able to access them.
Another smart idea is to check out a project’s community support to see how engaged the community is with it.
Untrustworthy sites
The fact that the NFT smart contract, which is stored on the blockchain, and the real artwork are two distinct entities is one of the reasons why some people are opposed to NFTs.
An NFT is a proof of ownership of data, a link, and in a way, the artwork is something to hang the NFT from. This means you are merely buying the receipt, not the artwork itself.
You should preserve the asset or digital file that represented the NFT somewhere secure if you decide to purchase one. Do not merely accept a URL to connect through to the digital file if you decide to purchase an NFT.
Make sure you have it, and ideally save it offline on a USB drive. Don’t save your related NFT file on a cloud storage service.
Understanding how to back up your NFT is an excellent method to protect yourself against scammers.
Phishing
Fraudulent e-mails are nothing new, but in the new and sophisticated world of non-fiat currencies and cryptocurrencies, it is easy to be duped if you are unfamiliar with the technology.
If you’re not careful, it’s easy to get caught up in the hoopla around fresh NFT releases.
Fraudsters will frequently ask you for your security data or the location of your digital wallet. Do not hand your personal information voluntarily, and do not reveal your 12-word security phrase. This should be kept offline, preferably on a USB stick.
Keep your information safe by sharing it with only trusted websites and never providing personal information when prompted by suspicious links.
Offer specifics only if you’ve visited the website address directly, rather than through an email linking to the site address.
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Fake giveaways
“Scammers frequently use social media to promote NFT giveaway programs, commonly known as airdrop scams, by impersonating real NFT trading platforms.
In most cases, the fraudsters would guarantee a free NFT in exchange for spreading their message and registering on their website.
Once they have your cryptocurrency wallet credentials linked in order to get your reward, they will record every keystroke you make and have access to your library of NFTs once they acquire access to your account.
Investor scam
Investor frauds are widespread due to the ability of persons to remain anonymous while dealing with cryptocurrencies.
Scammers sometimes take advantage of this by creating initiatives that look to be worthwhile investments, then disappearing with the money they acquired from those who were interested in investing in them without a trace.
Why are NFTs Frowned Upon?
A large number of non-fungible tokens have been sold by artists, causing a commotion in the art world and opening doors for aspiring artists and content providers. Non-fungible assets are now being looked into by a wider audience as a result of this campaign.
By emitting carbon dioxide, NFTs have a negative impact on the environment that affects the entire planet. This is because in order to create digital artworks, a large amount of computer power is required, which results in increased greenhouse gas emissions.
By uploading their work and pressing the “mint” button, an artist initiates a mining process. In order to do this, a lot of processing power and a lot of energy must be used in tandem.
The production of a typical NFT results in a significant environmental effect of more than 200kg of global warming carbon being released, according to independent research.
Take note that an automobile powered by gasoline with a range of around 500 kilometers emits the same amount of power used in the minting process.
How Do You Protect Yourself from NFT Scams?
Always use caution when clicking on links or attachments that come from unknown sources. Additionally, when it comes to requesting assistance with concerns on an NFT platform.
In the event that you want assistance, always contact the legitimate customer care on the official NFT trading website.
Do your own research.
Before investing in NFTs, carefully review the project’s website, roadmap, social media channels, and founders’ biographies to determine the long-term worth of your investment and if it is a good investment in the first place.
Verify the contact information.
The location where the NFT was coined should be included in the address. Whenever in doubt, visit the creator’s website to ensure that the information is accurate.
Keep your wallet credentials safe.
Remember to keep your credentials in a secure spot and not to share it with anybody, or to take a photo of it and save it on your phone. To further increase the security of your accounts, use strong passwords and use two-factor authentication (2FA) whenever possible.
Make use of reputable wallet applications and browser extensions.
There are a large number of fraudulent apps that masquerade as legal ones. If you want to prevent being phished, make sure you download your wallet software or browser extension from the authentic, official website.
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