If you’re not enthusiastic about NFTs, you may have reservations about investing in them in 2023. And it’s understandable – just take a look at the current state of the NFT market or the crypto market, as the success of the NFT market is closely tied to the crypto market and blockchain technology. These times and this bear market are undeniably challenging.
However, it’s worth considering one thing: the wealthiest individuals in the world always recommend investing during difficult times.
If you want to put the wisdom of these wealthy individuals into practice and truly believe in the power of NFTs, it’s crucial to know how to avoid NFT scams, as there are many bad actors out there who want to take your money.
That’s why this article delves into NFT scams, exploring common scams and the most dangerous ones in 2023, to help you make informed decisions and avoid financial losses.
What is an NFT Scam?
An NFT scam refers to any fraudulent or deceptive activity related to Non-Fungible Tokens (NFTs) that aims to obtain an unfair advantage, often monetary.
This category includes NFTs that don’t represent ownership or proof of authenticity of a unique item or piece of content – the fundamental principles of NFTs.
The market for NFT scams has expanded as NFTs have become increasingly popular and traded. With the rise in popularity of NFTs, more scammers have emerged, employing various methods, some more creative than others, to steal money. In fact, according to a survey conducted by PrivacyHQ, nine out of ten respondents reported experiencing an NFT scam since NFTs gained popularity.
NFT scams can take different forms and typically aim to deceive or defraud individuals in the NFT marketplace.
Common NFT Scams in 2023
1. Rug-Pull Scams
A rug-pull is a well-known scam in the crypto and NFT industry. In this scam, individuals promote an NFT as something exceptional, attracting significant investments, only to disappear later. These scammers often utilize social media to gain people’s trust and generate excitement about the NFT. Once they have collected enough money, they shut down the project and abscond with all the funds.
In a different type of rug-pull, scammers alter the NFT code in a way that prevents owners from selling it. While the creators may profit from the initial sales, the investors end up losing.
For example, Jake Paul recently promoted the “The Animoon” project, which turned out to be a rug-pull scam, resulting in a $6.3 million loss for investors. This project is just one among many NFT scams promoted by Jake Paul.
2. Plagiarized, Counterfeit, or Duplicated NFTs
This type of scam occurs when bad actors steal an artist’s work or create a counterfeit version of it, which they then sell as an NFT on marketplaces like OpenSea. These NFT scams can be highly convincing, leading buyers to believe they are purchasing authentic artwork.
Unfortunately, buyers eventually realize they have been deceived into acquiring worthless art pieces. Once a purchase is made, it cannot be undone.
To illustrate the magnitude of this problem, OpenSea, a popular NFT platform, revealed in June 2022 that over 80% of NFTs created using its tool were fake. This means there is a high chance that if you buy an NFT, it might be a stolen copy of a real-world artist’s work.
Here’s an example involving artist Aja Trier:
3. NFT Giveaways or Airdrop Scams
Before delving into this scam, it’s important to note that not all NFT giveaways or airdrops are scams. There are genuine projects out there. However, if you don’t rely on trusted sources with a good track record, you’re likely to fall victim to a scam.
In this type of NFT scam, scammers masquerade as legitimate NFT trading websites on social media. They use this disguise to promote NFT giveaway campaigns, also known as airdrops.
Here’s how it works: They promise to give you a free NFT if you help spread their message and register on their website. They’ll ask you to connect your wallet to receive your prize. However, during this process, they secretly record the information you enter. Once they have your details, they can access your NFT collection and steal your valuable assets.
Therefore, exercise extreme caution when encountering such offers online, as they could be attempts to steal your valuable NFTs. Only choose reputable websites for research when participating in NFT giveaways or airdrops.
The Most Dangerous NFT Scam in 2023
Phishing scams are widely used in the NFT and cryptocurrency communities and are considered one of the most dangerous NFT scams in 2023. When someone falls for a phishing scam, they can lose everything, not just the money they invested in an NFT. Scammers can obtain personal information such as bank accounts, crypto wallet details, and even gain control of your device.
Phishing scams account for nearly 22% of all data breaches, making them one of the most prevalent cybercrimes, according to the FBI’s 2021 IC3 Report.
But what exactly are NFT phishing scams? These scams involve fake, malicious websites that attempt to steal your crypto assets through two main methods:
1. Displaying a fake pop-up that resembles the login page of a trusted wallet provider. When you enter your login details, the scammers capture them.
2. Deceiving you into approving malicious transactions. Scammers pose as legitimate NFT projects and trick you into signing something that allows them to take your NFTs. They exploit a function called “SetApprovalForAll” in the ERC721 and ERC1155 standards, which grants others permission to manage your assets if you approve it.
To lure people into their scams, bad actors often exploit the fear of missing out (FOMO). This is particularly prevalent in the NFT world, where certain collections can rapidly increase in value. People are eager to seize opportunities quickly, and scammers exploit this urgency to prompt impulsive actions.
Phishing links can be deployed in various ways. As people have become more aware of typical scams, bad actors have developed more creative and deceptive tactics to deceive individuals.
We strongly advise against providing your wallet keys through pop-ups or questionable websites. Always visit trusted websites directly when engaging in cryptocurrency or NFT transactions. Avoid using links, pop-ups, or email prompts to enter your wallet’s key information.
Conclusion
While the NFT scams mentioned above are not the only ones in existence, they are the ones you are most likely to encounter, with phishing being the most prevalent.
If you plan on collecting NFTs in the near future, be vigilant and watch out for these scams to protect yourself from potential fraud. Always conduct thorough research and ensure you have more than just basic information about the assets you intend to invest in.
Tags: Guides, NFTs
