NFT Scams are on the Rise. Here’s How to Avoid Becoming a Victim of NFT Scams.
by Kaitlyn Ranze and Kenneth Medford III
The NFT art market and crypto has a problem: popularity.
No longer flying under the radar and under-valued, the explosion of opportunities to buy NFTs has created ample opportunities to grow and generate wealth. It’s also created ample opportunity to get scammed.
Take for instance the story of the Evolved Apes. The anonymous developer of the project stole $2.7 million, or 798 ether, after investors poured copious amounts of money into the project.
Why is there a theft and fraud problem in NFTs and crypto spaces?
Ostensibly one of the most secure technologies, why are blockchain-based technologies resulting in major losses for people? First, let’s take a look at what they are.
NFTs are non-fungible tokens.
They’re digital items like images or video, usually bought with crypto, where the transactions are recorded in blockchain.
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
This is the foundation of all cryptocurrency. Long story less long, the coding of your crypto of choice logs every transaction that takes place within its network. After a certain number of transactions are logged, that ‘block’ is essentially locked. They’re then given an unbreakable code, and a new block is started.
It is these chains that also act as the security of crypto. Each block has its own code which links to the next block creating the chain.
Adjusting any of the transactions changes the code that the system has already acknowledged and accepted, a system made up of the collective computing power of everyone within the network. Essentially, you would have to fool the individually logged blocks of, at this point, millions of people around the world. Spoiler alert, it’s not happening.
So, why is fraud and theft happening then?
Well, for starters, fraud is pretty easy. Anyone can take someone else’s image, upload it as an NFT, and sell it. Fraud makes your NFT valueless with little way to get your money back.. Original artists and their families can request the artwork be removed, especially if it’s copyrighted, through a bureaucratic process: filling out a Digital Millennium Copyright request and waiting. The real problem?
Crypto wallets tend to be anonymous.
This makes dealing with the fraud on NFT marketplaces more difficult even though the sellers’ accounts can easily be scanned and inspected due to blockchain.
How big is the NFT problem, really?
Platforms like OpenSea and DeviantArt are now scanning for NFT infringements. Since September, DeviantArt has reported 90,000 cases and as of January 20th, 2022 we haven’t found a public report from the largest NFT host, Open Sea.
As technology grows more profound, the scams become increasingly sophisticated. Start by taking this amazing Scam Test from Curious Addys’ Trading Club. Then familiarize yourself with some of the more popular 💩💩💩 plaguing NFTs.
Be aware of phishing
Bots across a number of platforms including Discord are asking users to verify their account information. If they get access to your wallet keys, they can drain all of the crypto in your digital wallet. Instead, always go directly to the verified websites for any crypto or NFT transactions, avoiding links, pop-ups, or emails to enter your information.
Be aware of catfishing
Remember when your parents told you not to talk to strangers? This includes celebrities endorsing an NFT. Ok, it’s not really that simple. But catfishing in NFts means that fake profiles are created for ulterior motives.
How can you spot a catfisher?
Start by checking out their profile. They won’t provide a link to their NFT collection/portfolio, and/or it won’t be stored on a recognized platform. The profile will also be too good to be true with bougie profile pictures with lambos and dope suits.
If you’re an artist, you may get approached by the “I want to be your first buyer.” They also might follow you… and a million other friends of yours with no one returning the follow. Alternatively, they may try to lure you with the amount of crypto they have to spend. They’ll also post as many good reviews as possible on an NFT.
Pump and dump
Finfluencers can get swept into the same scams we are. One example is “pump and dump.” This is where the price of an NFT or cryptocurrency is artificially inflated so that there’s an increase in trading. Once the price rises (pumped), scammers sell the shares at the inflated price (dumped). Look at Dogecoin. To avoid this, look at the history of the project that you’re interested in buying into.
Crypto Swaps at Auction
This happens most often when you put your crypto on auction. When you resell your NFT, a bidder will switch the cryptocurrency used for payment. If you accept the offer without verifying the type of payment you could receive Briancoin (a completely worthless crypto our developer created) instead of one Bitcoin.
Counterfeit or plagiarized NFTs
Make sure you’re buying from verified accounts. Those blue check marks next to the artist’s profile are worth their weight – so is a little bit of digital stalking and due diligence by finding the artist on Twitter, other social media channels, and through their websites. Verify that the artist matches the user profile you are buying from. Are there any other accounts with a similar name with considerably more followers? If so, the bigger number is probably the legitimate page. Also, lean into your community on Discord.
Though this article is chockful of warnings, being part of the digital revolution is an incredible opportunity to access and generate wealth. With People like Matthew Gould, Founder and CEO of Unstoppable Domains, predicting “300-500 percent year-over-year growth“, NFTs aren’t going anywhere. It’s also easier than ever for you to purchase an NFT now that Mastercard has teamed up with Coinbase so you can skip the wallet and purchase straight from a card.
And Congress is finally catching up on increased regulation to mitigate scams and other negative aspects. (I mean NFTs have been around since at least 2014. It was about time.)
Just like we have faith that you can navigate your finances, we know that you can navigate NFTs. Start with a few tips.