Non-fungible tokens – known as NFTs – are distinctive digital assets representing objects like art, music, videos, and games that belong exclusively to the owner and exist on a blockchain digital ledger. In essence, NFTs allow owners to gain sole possession of a prized item just as a collector would, except the item is a digital file.
The past few years have seen the trading of digital assets as NFTs skyrocket, reaching a value of more than $23 billion last year, according to DappRadar, a site that tracks decentralized applications like NFTs.
The appeal is that artists and content creators can utilize NFTs to monetize their work products. Twitter co-founder Jack Dorsey famously did just that last year, selling his first-ever Tweet as an NFT for $2.9 million. Other celebrities are catching on, with the likes of Snoop Dog and Lindsay Lohan cashing in by selling personal moments as NFTs to interested fans.
But as with any rapidly growing marketplace, loopholes appear before regulations can catch up, leaving room for fraudsters to jump in and take advantage of unwitting buyers. Most NFT scams happen when a bad actor steals a participant’s cryptocurrency wallet login or tricks a buyer into believing they have successfully purchased or sold a legitimate NFT.
Here’s a Rundown of the Most Common NFT Scams and How to Help Avoid Them.
Watch out for Chats on Discord.
Discord, an instant messaging, and digital distribution network is a popular destination for NFT enthusiasts. But the site can attract bad actors looking to prey on those new to the market. According to a recent Rolling Stone article about rampant NFT scams, Discord hacks are one of the most common ways fraudsters con people into buying fake NFTs. If you surf for NFTs on Discord, turn off your direct messaging function, so scammers can’t flood you with messages about special offers that are more than likely fake.
Beware of Fake NFT Stores.
Market participants have flagged scammers who are closely replicating popular NFT stores using domains that copy the real deal. These site names often appear identical to the originals but with tiny, almost imperceivable differences. They can trick even an experienced NFT buyer into purchasing a fake. So always verify the URL of any site before you click, so you can avoid an NFT scam.
Don’t Fall for Fake Online Personas.
Bad actors in the cyberworld can be savvy. Setting up a fake social media presence is one way they trick people into believing they are credible – when in reality, they are selling fake or counterfeit NFTs. Don’t believe anyone’s profile at first glance, but instead do due diligence to ensure the person you are dealing with is legit. Check for a verification tick next to the seller’s profile and surf the web to see what else you can find about this person. If you’re looking to buy work from an artist, check their background and find evidence of other successful sales.
Remember, Nothing Good is Ever Free.
It’s called a giveaway scam, and it’s a classic. In the digital world, it’s known as an airdrop scam. It goes something like this: “You’ve won free tokens! Click here to collect your prize.” But to collect that special prize, you’ve got to enter the credentials of your cryptocurrency wallet. A word of advice: don’t click links or attachments. It likely won’t lead to anything good.
Sometimes Customer Support is Not Very Supportive.
NFT experts warn people to be wary of customer support. Bad actors posing as representatives from popular marketplaces like Open Sea help but need access to your account details to help can be an NFT scam. Avoid falling for this one by only engaging assistance from representatives on the marketplace’s official website and never on an app.
Don’t Let Anyone Pull the Rug Out From Under You.
A new digital asset is set to be released. Once it hits the marketplace, its value will skyrocket, so you better get in now. This is called a rug-pull scam, and it’s basically when a cyber-schemer promotes a new project that is not yet complete and seeks investments from those looking to get in on the action early. But once funds have been sent, the enterprising fraudster disappears and takes your cash with them, never to be seen again. Perhaps the most notorious NFT scam involved a fighting game called “Evolved Apes,” where the anonymous developer disappeared along with $2.7 million in investor cash.
The fact remains that NFTs are the Wild West of the digital world, and many are watching and waiting to see if this market has real-world value. Before participating, do your homework to ensure that you’re educated on how to properly help protect your identity and your finances.