How To Avoid NFT Scams?

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Coinmonks

7 min readJun 15, 2022

NFT, one of the last favourites of the digital world is now a concept that almost everyone knows. As NFTs increase in value in the market and users show great interest in this market, the probability of malicious people scamming people is increasing day by day.

Let’s examine what NFT is and its features.

Key Features of NFTs

Nonfungible tokens are not exclusive to the blockchain gaming industry. These tokens can represent digital and real-world assets such as artwork, real estate, collectibles, and even personal identity. They act as a kind of capital transfer. As a result, NFTs have a wide range of practical applications that address multiple industries and use cases, and their adoption is accelerating. Unlike most other digital tokens, NFTs exhibit three distinct characteristics:

Non-fungibility: Each NFT is a cryptographic token that represents something unique or immutable. In other words, it cannot be replaced by another NFT. The metadata inside each NFT resides on the blockchain as a permanent and unalterable record. Similar to a certificate of authenticity, this record describes what the token represents and describes the token’s ownership history and transaction record. In contrast, many cryptocurrencies are exchangeable, such as bitcoin (BTC), Ether (ETH), and other service tokens. In this context, it can be said that BTC and ETH cannot be used as NFT.

Rarity: The rarity of each NFT is a crucial component of what makes them desirable. For example, in CryptoKitties, users collect and breed digital cats, each shaped by a designated NFT. Some of these CryptoKitties are considered rare collectibles and, as a result, raise their price among collectors who value their demonstrable rarity. For example, in 2018, a CryptoKitty named Dragon was sold for 600 ETH, which was equivalent to $170k at the time.

Indivisibility: Cryptocurrencies such as Bitcoin can be broken down into smaller units given their exchangeability and intended use as a medium of exchange. By contrast, most NFTs must be bought, sold, and stored as a whole and are therefore indivisible — just as you cannot buy 10% of a concert ticket or 60% of a plane ticket.

Common Types of NFT Scams

NFT scams either scam people out of money directly or take credentials to access a person’s digital wallet or cryptocurrency wallet. Unfortunately, it is difficult to recover lost money or stolen digital wallet credentials after a scam.

Here are some of the more common types of NFT scams to watch for.

Rug Pull

Scammers attract buyers by promoting a fake NFT project or collection and promising them to make money. Scammers exaggerate NFTs on social media. All promotions and unfulfilled promises disappear once NFTs are purchased. This causes the value to drop significantly. Scammers also eliminate the possibility of selling this NFT.

Airdrop

Scammers use social media to promote NFT giveaways. Promotions often offer a free NFT to spread the news to friends or sign up for their website. When it’s time to collect the prize, the scammers ask for the cryptocurrency wallet information to send the NFT, but instead gain access to the account and take any money or NFT from the person’s wallet.

Direct Messages on Discord

Discord is quite attractive to cybercriminals and there are various ways to scam users. The platform is divided into communities called servers where people can talk, stream and play games together.

Last December alone, 373 members of a Discord server run by the recently launched gaming NFT marketplace Fractal saw their digital wallet authentication compromised, losing a total of $150,000 worth of Solana.

Other ways to get scammed on Discord are by sending direct messages (DMs) to make users believe they are actually being contacted by a brand, artist, or influencer. Essentially, the larger a Discord network, the higher the chance of receiving scam messages. You should refrain from clicking links sent by strangers or responding to any money requests. Likewise, don’t let yourself get caught up in new NFT opportunities or projects without checking if the offer is legitimate.

Fake Profiles on Social Media

Social media users should be constantly aware of potentially fake profiles, whether on Twitter or any other social media platform. These are usually copies of real profiles, and a little attention to detail can be all it takes to distinguish them — sometimes a single letter is all it takes to report you to a scammer.

At the same time, bots asking users to react to messages or tech support scammers are using social media to interact with users and request information that could give them access to their crypto wallets. While bad actors don’t always succeed, a small percentage of users who get scammed can mean big wins.

In addition, cybercriminals may try to reach users by sending messages pretending to chat or seek advice. Some red flags can help detect a scammer, such as the number of followers, the number of tweets and retweets, or whether the account lacks original content.

Bidding scams

A bid scam happens when someone tries to resell their NFT. After receiving the highest bid, the scammer — the highest bidder — exchanges the cryptocurrency for a lower value. It may seem like the highest amount, but some cryptocurrencies are less valuable than others.

Investor scams

People remain anonymous when selling or buying NFTs, which makes it easy to create investment scams. With an investment scam, threat actors create a seemingly valuable project to invest in. After collecting coins, they disappear without a trace.

A recent investor scam with the Evil Ape developer stole nearly $3 million in investments. Evil Ape originated as part of the legitimate Evolved Apes project but disappeared after raising money.

Pump and dump

A pump and dump scam happens when a group buys a large amount of cryptocurrency or other currency to boost demand. After price increases — or after pumping — the group then sells — or abandons — the asset to cash out the gains — and everyone else loses.

Fake NFTs

Scammers can steal or copy artworks and then list this fake content on legitimate sites like OpenSea. NFT has no value because it is stolen, copied or faked. The person made the purchase before realizing it was fake.

Tips to Avoid Scams

Most NFT scams try to steal cryptocurrency wallet information or trick people into buying a fake NFT. Here are some ways to avoid these scams:

- Keep keys secret. Never share crypto wallet information with anyone. These keys must be private along with recovery codes. No one needs to know these passwords for any reason.

- Research the NFT vendor. Before buying, check the seller’s NFT marketplace account and check the blue tick verification mark. Also, research the seller’s social media accounts, check this seller’s other listings, and search for online reviews.

- Review the transaction history of the NFT. Be wary of NFTs with transactions made in one day.

- Do not click on suspicious attachments or links. Even if the link appears to go to a real site, it can still be fake. It is always best to visit the site directly and not click on any links.

- Cross-check NFT prices. Before buying an NFT, go to trading platforms like Axie Marketplace, Mintable or OpenSea to see if prices are similar. If the price appears to be much lower or higher than the prices on these legit trading sites, it is most likely a scam.

- Watch the bids. Before accepting any offer, be sure to double-check the currency. Do not accept anything less than expected.

- Create strong passwords. Be sure to create strong passwords for NFT accounts and cryptocurrency wallets. Two-factor authentication is another way to keep NFTs secure. Using facial recognition or fingerprinting makes it harder for someone to steal an ID.

- Use reputable NFT currency markets. Don’t believe in offers that sound too good to be true. New marketplaces are popping up everywhere and offer minimal security. Stick to reputable currency markets like OpenSea, Rarible, Mintable, Foundation, MakersPlace and Axie Marketplace.

NFT Security Tips

It is very important to be careful when entering the world of NFT. A little dose of scepticism will save you headaches in the future.

Here are a few quick tips on how to stay safe when using NFTs:

- Never share your seed phrase or password with anyone.

- Always check if the DM you receive is legitimate.

- Never click on a link that promises free or requires a quick response. And if you want to do that, check the source of the link first. This is even more true on Discord.

- Store your tokens in a cold storage hardware wallet, not a software (aka ‘hot’) wallet.

I’m telling you…

The Fitlanders NFT collection offered by the Fitlich app, which I have been following for a long time and writing about, looks like it will make a solid entrance to the world of NFT with the originality of the works and the quality and integrity of the project.

References

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