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The massive growth of NFT creation, collection and sales in the past few years has led to a growth in NFT scams seeking to separate investors from their cash or cryptocurrency. In 2021, the NFT market grew by 21,000%, with $17.6 billion in sales, according to Fortune.
NFTs stored in cold wallets — digital wallets that can be disconnected from the cloud for maximum security — are typically safe from theft or hackers. But there are many NFT crypto scams and many ways hackers seek to profit off the NFT trend.
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Understanding and avoiding the most common NFT scams can help you keep your investment safe. Of course, you’ll want to remember that NFTs are still highly speculative investments. You could potentially lose money on your purchase even if you buy a legitimate NFT and keep it safe from cybercriminals.
Here are eight of the most common NFT scams:
NFTs exist in the digital realm, which mean they aren’t “real” items that you can touch or feel. And that makes it even easier for people to create fake NFT projects, selling digital assets that have no value.
In a “rug pull” scam, the cybercriminals promote an NFT project on social media, make false promises about profits and value and then fade into the sunset like a stagecoach bandit in the wild west. The value of the NFT will plummet and the scammers will often make it impossible to sell.
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To avoid a rug pull scam, avoid purchasing NFTs from projects or investment firms you’ve never heard of. Seek out new projects on established, centralized exchanges like Binance, Coinbase, or FTX.
It’s also wise to follow the old adage, “If it sounds too good to be true, it probably is.”
If you’ve ever seen tweets from people claiming to be Elon Musk or another well-known figure and promising free crypto, you’ve seen an “Airdrop” crypto scam in progress. Today, the same scams are taking place with promises of free, high-value NFTs.
The scammer will ask for your digital wallet information to deposit your free NFT, but instead take your information, crack into your wallet and steal any existing cash, crypto or NFTs in your account.
Only buy and sell NFTs or crypto through established exchanges and store your investments in a hosted wallet. Apps like Coinbase take on the burden of keeping your investment safe and are insured against hackers.
However, Coinbase is not responsible for any loss if you’ve given your password to another person. Just as you’d never give your banking password to anyone, keep your crypto wallet password, or your private key, protected. Senders only require the public key to your wallet to make a deposit.
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To further protect any crypto or NFT investments, consider using a hardware wallet that you can take offline when you’re not completing transactions.
An investor or investment scam is similar to a Rug Pull scam, except the people who are supposedly creating an NFT project seem to be legitimate developers with a well-known name behind them.
This happened recently when a band of cybercriminals launched the Evil Apes project as part of the legitimate Evolved Apes community, Vice reported. Evil Apes took off with $2.7 million in investors’ money and then vanished. The Evolved Apes community, however, sought to make the best of the stressful experience, rising to launch a new project called “Fight Back Apes.”
It’s a bit harder to suss out investment scams, since they work under the guise of legitimate developers and investment firms. The best advice in this case, according to an Evolved Apes investor who goes by the name Mike_Cryptobull, is to do your own research.
Don’t ignore red flags. If something seems “off,” it probably is. And, he emphasized in an interview with Vice, “[D]on’t invest anything more than you can afford to lose.”
As with artwork, toys and other collectibles, NFTs are often purchased via bids. In a bidding scam, the scammer is the buyer — someone is attempting to sell an NFT, but the person who ultimately purchases the NFT pays with a cryptocurrency of a lower value than agreed upon.
Keep to the original terms of the deal if you are selling an NFT. And be aware of the market value of cryptocurrencies to avoid getting scammed. Double check the transaction before you accept a payment to be sure it’s what you agreed upon.
This scam originated in the stock community, and it’s made its way to become one of the more common crypto NFT scams. In a pump-and-dump, a single investor or a group of investors will purchase a large amount of crypto or NFTs from a specific game or creator. This drives the value up.
Those who are in on the scam will then sell the NFTs at the same time, leaving anyone not privy to the scheme stuck holding an NFT that has vastly depreciated in value.
Review the transaction history before you purchase NFTs from a specific project or creator.
Some NFTs may rise dramatically in price due to their inherent value. But take time to research the fundamentals of the project to see if there’s a good reason for the price increase. If there is not, steer clear.
Just like fine art, luxury clothing or even fiat currency, NFTs can be counterfeited.
The scary part is that these fake NFTs can be listed on reputable sites. But they have no value.
Before purchasing an NFT, even from a legitimate exchange, verify that there is only one of your NFT for sale. Remember, NFTs are unique, original creations. Just as there is only one Mona Lisa, NFTs are one-of-a-kind.
NFT Culture advises that you should make sure you know the accurate smart contract address of the NFT you’re purchasing. And double check the exchange where you’re buying the NFT to make sure it exists on that exchange.
If you aren’t sure if an NFT is an original, ask an expert you trust.
Hacking comes in many forms and can be used to separate people from their most sensitive passwords, bank account information, personal information — including your Social Security number — and ultimately, your money or good credit score.
A report from Chainalysis found that hackers stole $3.2 billion in cryptocurrency in 2021 — and that’s not including stolen NFTs. Since NFTs and crypto are both stored in similar digital wallets, it could make you concerned about the security of your NFTs, as well.
A hacker can get your digital wallet information in many ways, including hacking into the crypto exchange that hosts your wallet.
To protect yourself, create strong, unique passwords for every account. If a hacker gets into your primary bank account through a data breach, you want to make sure they can’t access other financial accounts, as well.
Unlike the other NFT crypto scams, you may have less control over preventing hacking. Make sure to use a reputable crypto exchange that insures your funds against loss if they experience a data breach that is no fault of yours.
You can also protect your passwords. You can use Google’s Password Checkup tool at passwords.google.com. Change any unsafe passwords promptly.
It’s also a smart idea to use a password manager to keep all your passwords safe.
Far more common than hacking, phishing schemes give cybercriminals access to your account without having to breach the database of a major company. Often, people fall prey to phishing schemes because the emails, ads or text messages hackers use to lure you into giving away sensitive information seem so legitimate.
In a phishing scheme, the victim willingly gives away information, such as the private key to a digital wallet.
Never give anyone the private key to your digital wallet, your crypto exchange password or other information that could be used to access your accounts.
If you receive an email that seems to be from a crypto exchange, NFT developer or creator, or your favorite NFT game, don’t click the link. Instead, visit the company’s page directly by searching on Google or typing the link to their site directly into your browser.
If an offer — such as receiving free NFTs simply by clicking on the email link — seems too good to be true, it probably is.
Phishing scams are some of the most prevalent, but also possible to avoid.
NFT scams are more prevalent than ever. However, they are avoidable. If you take the proper precautions and don’t jump into an opportunity that seems to good to be true, you can keep your NFTs safe.
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