The crypto world has been surprising us with so many things, and each of them comes with significant benefits and reveals new technologies that can contribute to improving the way we perceive and use assets. Among them, NFTs (Non-Fungible Tokens) may be the most intriguing digital assets.
Who would have thought that we would own digital artwork built and stored on a blockchain that can be transferred through fast and secure transactions in just a few seconds?
Well, it is possible, and NFTs have become so popular that almost 2 million crypto enthusiasts hold or held at least one digital collectible. Furthermore, 9% of the current NFT holders are so passionate about digital artwork that they are responsible for 80% of the total market value.
While some are tirelessly following the NFT space to find new NFTs to buy, others are carefully creating NFT scams to increase their earnings without actually selling genuine NFTs. But how can you stay away from such NFT scams?
About NFTs
NFTs (Non-Fungible Tokens) are unique digital assets developed on a blockchain. Each NFT has an identification code that makes it possible to distinguish them from other types of tokens.
Just like regular cryptocurrencies, non-fungible tokens can be traded on specialized platforms called NFT marketplaces. You can trade an NFT for fiat or crypto, depending on your requirements and the assets supported by the buyer.
An NFT marketplace can also allow you to create unique digital collectibles and sell them to other NFT accounts. NFTs can take many shapes and have various features.
For instance, while specific digital artwork is bought and stored as it is, some NFTs can represent tickets to concerts or special events. Furthermore, there are NFTs related to real-life assets. Just imagine holding an NFT linked to Starry Night. Intriguing, right?
The main purpose of NFTs is to prove ownership of a unique digital asset. This is why NFTs are not interchangeable, which makes them non-fungible. Thus, once you own an NFT, you also are the owner of the piece of art it represents on the blockchain.
Where Can You Find NFTs?
NFTs can be purchased from many platforms, but some NFT marketplaces are the most legitimate NFT sellers and are widely used all over the world.
Two of the most trustworthy NFT marketplaces are OpenSea and Rarible. If you want to avoid NFT scams, choosing the right platform where to look for digital collectibles is the first step you should complete.
OpenSea
Launched in December 2017, OpenSea is the largest NFT marketplace. The platform provides hundreds of NFT collections and offers extensive details depending on the information it receives.
OpenSea is well known for its pretty low fees, charging 2.5% for each transaction. Furthermore, many users choose OpenSea thanks to its user-friendly platform and wide range of NFT projects available. The platform offers NFTs from many categories, including art, music, trading cards, photography, collectibles, sports, virtual worlds, and utility.
OpenSea is a pretty accessible NFT marketplace, working hard to maintain its position in the NFT space and increase its $20 billion in NFT sales. The NFT marketplace supports numerous wallets, including Coinbase, Trust Wallet, and MetaMask.
OpenSea also developed OpenSea Pro, a platform similar to the main one but allowing users to perform more advanced NFT-related actions. Besides, OpenSea only charges 0.5% for each platform transaction, which might be a significant advantage, especially when trading more expensive digital collectibles.
Rarible
Rarible is an NFT marketplace founded in 2020. Currently, Rarible is one of the most trusted platforms for minting and purchasing non-fungible tokens, with over 1 million registered users.
Just like OpenSea, Rarible provides numerous NFT collections from various artists, each one of them being carefully checked before being posted. However, as double-checking is never wrong, we strongly advise you to perform your research before purchasing NFTs, no matter the platform you choose.
In terms of fees, Rarible charges 1% for each transaction for both buyers and sellers, which is a little lower when compared to OpenSea. The platform lists NFTs from various categories, including art, photography, music, games, and many more.
Top 5 Types of NFT Scams
NFT scams happen pretty often in the crypto industry, and if you are an NFT holder, it is critical to know how to protect yourself from bad actors. While there are plenty of ways to conduct an NFT scam, some of them occur more often than others.
1. Rug Pull Scams
You probably have heard of rug pull scams, as they can also be conducted to steal regular cryptocurrencies. Basically, a rug pull scam implies a company building an NFT project and promoting it just like any other genuine collection to encourage users to purchase its NFTs, only to pull out after receiving a significant amount of funds.
The scary thing is that NFT rug pull scam websites look just like any others, making it pretty hard to notice whether the NFT collection is trustworthy or not. Such fake NFT projects also promote themselves on social media accounts, thus aiming to increase trust for their collections and make as many users as possible buy their artwork.
At the moment, there are 2 main types of rug pulls: hard and soft. Hard rug pulls imply that the developers do not have any intention to complete the project’s roadmap, so they leave a little “way out” in the project’s code. This way, the process becomes pretty simple, and developers can easily run with the funds.
On the other hand, soft rug pulls are a little trickier as developers focus on marketing to increase the project’s value. After users are intrigued enough to purchase the NFTs available (or at least most of them), the project founders shut everything down (website, social media accounts), but not before taking all the funds with them.
What’s even scarier is that rug pulls are not considered to be a crime, at least not for now. The US SEC (Securities and Exchange Commission) is still a little vague regarding where the line is drawn with crypto, and no such scams have been scrutinized by the agency yet. However, considering the ongoing crypto crackdown, the SEC might also look into some NFT or crypto scams. Until then, all we can do is thoroughly research the projects before investing our funds to purchase one of their NFTs.
2. Phishing Scams
Just like with regular cryptocurrencies, before completing an NFT purchase, you must set up a crypto wallet to have a safe place to hold your digital collectible. Unfortunately, bad actors thought of a way to steal funds through cryptocurrency wallets, too.
And this is how a phishing scam works. Their main goal is to access wallet information and then steal part of your digital assets. For instance, some hackers might develop a platform extremely similar to a crypto wallet, like MetaMask, and ask you to verify your account.
This is why you should always check the email addresses when you receive emails related to your crypto assets and not only. Furthermore, check the URLs before entering sensitive data, as phishing scams might also be able to steal it through websites.
3. Pump-and-Dump Schemes
Pump-and-Dump schemes occur pretty often in the crypto space and, unfortunately, in the NFT world. They imply a project inflating the price of an NFT collection through various efforts, including through social media accounts. Once the tokens reach a certain price due to high demand, the team behind the scam sells the assets they hold, thus causing the price to fall.
Such NFT scams work pretty well when the developers behind them focus on making the project seem trustworthy enough. Thus, when looking for an NFT collection to invest in, don’t choose one based only on how trustworthy the creators look. Instead, extend your research to other details that can tell you how safe the project is.
4. Plagiarized NFTs
Once you purchase an NFT, you must keep it as safe as possible. NFTs can easily be plagiarized, and you can either be the one whose artwork was plagiarized or the one buying a counterfeit NFT. Either way, your NFT will be affected.
Plagiarized NFTs result from minting a piece of art that already exists. Usually, fraudsters would choose artwork they like and mint it as NFTs to earn funds without working to create digital art. Some bad actors might even try to create fake profiles to increase trust even more, aiming to acquire users who are not aware there already is an NFT that looks the same.
When you purchase a non-fungible token, you should ensure there is no other digital asset that looks the same. Once you get a plagiarized NFT, there might not be too much you can do. Furthermore, if you’re an artist, keep your art safe and ensure that no fraudster can steal or copy it.
5. Airdrop and Giveaway Scams
If you have been around for the littlest of time, you probably have heard of NFT airdrops and giveaways. Basically, NFT giveaways are special events where users can win a free NFT. However, when participating in such events, it is critical to avoid NFT giveaway scams, among the most common NFT scams.
In NFT giveaway campaigns, users are usually required to complete various tasks and even provide personal information to register on various platforms. Thus, NFT scammers have many ways of getting to you with an NFT airdrop scam. After you decide to participate in an NFT airdrop or giveaway, scammers will ask you to access a link where you can get your free assets, and that is when your account funds might be compromised.
How to Avoid NFT Scams
Check the Whitepaper
A project’s whitepaper can tell so much about how it works, if it is trustworthy, why it was developed, and more. Just like regular cryptocurrencies, NFTs should also provide extensive information about how the digital assets are built, the story behind the concept, how it will progress in time, and even who its creators are.
Thus, carefully researching an NFT project’s whitepaper can help you understand if it really is worth it to invest some of your funds in one or more digital collectibles from that collection. Most importantly, it can show you if the project is genuine and whether the creators are bad actors trying to steal funds and data.
Look into the NFT’s History
Let’s say you find a stunning coat, and it looks like it has been worn before. Wouldn’t you want to find out who wore it in order to ensure that it is safe for you to wear it, too?
It’s the same with NFTs. You might want to know who owned it before because this can tell you how successful the digital collectible was, whether it came a long way in what concerns its owners, and even if it has had comparable prices on various marketplaces.
Carefully Choose NFT Airdrops and Giveaways
If you want to get some NFTs through airdrops and giveaways, ensure that you only choose legitimate NFT projects that turn out to be safe and not aiming to steal your funds and personal information.
To do this, you can check a project’s official website and social media accounts and even look for more information on NFT marketplaces and other related platforms.
You should not register for a giveaway before ensuring that all you will end up with is an NFT and not fewer funds. Although some NFTs look intriguing and safe, it is highly possible that they were just built to look this way. When researching NFTs, you should be a little of a “doubting Thomas” and not let engaging art get in front of other essential details about a collection or special event.
Use Popular and Trustworthy Marketplaces
Just like with any other type of crypto platform, the most popular options have become popular thanks to their features and the high levels of security they provide. It’s the same with non-fungible token marketplaces.
Usually, widely used marketplaces have a dedicated team working on checking whether the NFT collections registering on the platform are trustworthy and will not affect the marketplace’s user base. For instance, OpenSea or Rarible have a lower chance of listing fake NFT collections, as they reached a point where such a thing would affect them and make their users look for safer options.
FAQ
Is the NFT market legit?
The NFT market is an intriguing place where you can find profitable digital collectibles if you know how to choose them and plan your investments. While there are some bad actors building NFT collections to get users’ funds, other creators just want to offer their art to NFT enthusiasts from all over the world.
How trustworthy is an NFT?
An NFT can be extremely trustworthy. For example, digital collectibles from Bored Ape Yacht Club are among the most trusted NFTs. However, you should always remember that there also are fake NFTs, and your primary goal should be managing to tell what’s what.
How do NFT scams work?
NFT scams can take many forms. For instance, some may imply a platform similar to a wallet or NFT marketplace, which requires users to provide their personal information to verify their accounts. You can also get scammed by participating in NFT airdrop scams or investing in an NFT collection that performs a pump-and-dump scheme.
Can an NFT lose value?
Yes, an NFT can lose value just like cryptocurrencies do. The mechanisms behind such digital assets are pretty similar, meaning that where there is high demand, there will also be a higher price, and the other way around.
What is the most expensive NFT ever sold?
The most expensive NFT ever sold was “The Merge,” a digital collectible developed by Pak. “The Merge” sold for $91.8 million in December 2021.
In Conclusion
NFTs are so intriguing, offering crypto enthusiasts many opportunities to invest, discover the crypto world, and be proud owners of stunning digital art. However, some developers do not aim to provide unique digital art but steal users’ funds.
Some of the most popular NFT scams include rug pulls, pump-and-dump schemes, NFT airdrop scams, and phishing scams. Each one is pretty dangerous, and it is critical to avoid them as well as possible.
To avoid NFT scams, ensure you use trustworthy NFT marketplaces, carefully research the projects’ whitepapers, and only participate in legitimate NFT giveaways.
