By Saravanan Jaichandaran
The NFT market is gaining popularity nowadays and people are showing a growing interest towards it. Even Big brands and celebrities have also stepped into the NFT world embracing the opportunity. In fact, the global NFT market is expected to reach a staggering $212 billion by 2030. While it’s growing on one side, it seems to have darker aspects on the flip side. With millions and billions swimming in the NFT market, it has become an ideal target for sneaky scammers. They take advantage of new trends targeting innocent buyers and investors leading to substantial financial losses. In fact, more than $100 million worth of NFTs were stolen in a variety of scams over the course of 2022, according to a report by blockchain analytical firm Elliptic.
These scams come in all types and forms, and here are a few that seem to top the list in 2023.
Rug pull scams
This is one of the newest threats in the market. Here’s how they work: Developers create a project promising attractive growth and bonuses. They hype that these assets will grow at an enormous rate and attract people through social media platforms by running attractive ads or through celebrity collaborations. After they have collected enough funds, they abandon the project and disappear with all the investors' money without any trace. These scams often happen quickly, but sometimes they’re slow burns, where they gradually cut down the updates, close all the modes of communication and later delete all the accounts and disappear into thin air.
Phishing
Phishing scams are made to hook your personal info to access your wallets. These pesky scammers send messages that seem to be totally legit, often pretending to be from an authentic NFT platform or creator asking for credentials to access buyers’ crypto wallets. Once they get access, they drain out all the money faster than we could say NFT. It isn’t just emails, but clicking on any unauthorized links could potentially lead to malicious websites that automatically breach the security of the visitors.
Airdrop Scams
Airdrop scams are like the fake freebies in the NFT market. Scammers often take advantage of the buyers’ eagerness and attract them with offers of free NFTs or Crypto tokens in exchange for personal information. They also ask for a small amount of fee to receive free tokens. But, guess what? Once you provide your information they drop your hopes by stealing funds, potentially engaging in identity theft.
Pump and dump Scams
A group of NFT enthusiasts buys an obscure NFT collection and artificially hypes it up to raise the price, making it look super popular. When a buyer dives in, hoping to join the group and bids, there comes the plot twist. When the buyer onboards and the bids increase, the scammers sell off the NFTs for a profit and exit the market, causing rapid market declines and leading to substantial financial losses for the investors.
Price Inflation
Price inflation scam is like a digital rollercoaster, where the scammers artificially blow up the price of an NFT by fake bids, or using bots. They tempt the buyer's interest by spreading hype across social media platforms. The buyers purchase these NFTs, thinking that they are snagging a masterpiece. But here’s the catch: Once the scam is successful, the scammers pull the curtain, the price crashes and the buyers are left with nothing.
Counterfeit Scams
At its very core, NFTs are about unique digital assets. But, scammers pose a check to this by creating fake content to sell in the NFT market. Scammers duplicate or replicate the authentic NFT creations and sell them, which buyers think are original, but actually it isn’t. It undermines the trust of the investors and the authenticity of the NFT ecosystem for which it is highly known for.
Pro Tips To Stay Safe From NFT Scams
Despite the increase in scams, it is paramount to be proactive and cautious to stay away from these fraudulent activities. Here are some insider scoops to stay smart and protect one from these crafty scams.
Research
First things first! Before investing your hard-earned money, it’s super important to do due diligence. Take your time to evaluate things and be sure of how authentic your NFT, seller or the marketplace is. Ensure that the creator or the seller has a solid track record before you make your purchase.
Opt for trusted marketplaces
To reduce the risk of falling prey to an NFT scam, It is highly advisable to create your crypto wallet on a reputable platform. Stick to well established and renowned marketplaces which poses a strict verification process, to safeguard your data and investments. So, whether you're buying, selling or trading, always stick to big players. They are a safer choice.
Secure your Wallets
Never share your passwords or seed phrases with others. Enhance the security of your accounts using two-factor authentication, which adds an extra layer of security to your accounts. It is highly recommended to store your NFTs in a secure hardware wallet rather than a software wallet to minimize the risk of hacking.
Keep track of market trends and pricing
Stay updated with the current market trends of popular collections and their pricing. By being aware of the price trends, you will be able to note any unusual price inflations which could potentially be scams! It is crucial to stay updated about the creations and their overall progress to make wise investments.
Avoid suspicious links
Be cautious of unsolicited messages or emails from unknown sources asking to click on the links offering free tokens or offers. Be skeptical about the NFT projects that promise high returns or have garnered sudden popularity without any history. If you find it fishy, better don’t click it! Double check the sender’s authenticity by verifying their email address or mobile number.
NFTs can be a great investment, but it also has its own risks. In this rapidly evolving NFT world, it is highly crucial to stay aware of the market trends, prices and potential scams to stay safe while NFT trading. Utilizing reputable analytical tools, marketplaces and forums one can gain insights which will be helpful in making informed decisions. DYOR and ensure that you follow all the protective measures before making a transaction.
Because, in the NFT market, it is always the survival of the smartest.
(The author is the Co-Founder & Chief Data Scientist at bitsCrunch)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.