NFT scams and how to stay alert
Non-fungible tokens are the most searched topic on any search engine as it melts in most of the theories created in today’s world. The topic is so famously lavish that it can fit in any shape imaginable. Blockchain evangelists say non-fungible tokens and cryptocurrencies are already transforming the internet, how we bank, how we transfer money, how people pay for goods, and even how we socialize online. As part of today’s digital economy, Non-Fungible Tokens (NFT) are all the rage. These tokens allow users to trade them and make money. Art, images, GIFs, music, video game items, collectibles, memes, and virtual fashion are digital assets. An NFT allows creators to add code to their works so that they can share their creations without fear of piracy and allows their supporters and fans to pay for their work through royalties and sales directly.
Small businesses are also considering NFT projects for their marketing campaigns. These include customer loyalty and promotional tools. And loyalty programs. The NFT industry is profitable, in fact, the global industry; with so much money on the line, NFT scams are now everywhere. NFT scams you should avoid before purchasing these tokens. Online investing scams do indeed happen and cost victims a lot of money. In some NFT marketplaces, scammers are creating what looks like authentic sites to dupe visitors into sharing confidential information like their crypto wallet key. There’s no real way to get the money back since they’re not responsible for it. There are many ways to dupe the general public into making silly mistakes and losing a lot of money. Here are some of the common malpractices to be aware of and possibly avoid being caught in a storm of scams.
A frustrating experience can be had when buying NFTs. One might be worth millions, but another may be worth nothing. In addition, some appear to skyrocket in value after a flurry of trades for no discernible reason. A frustrating experience can be had when buying NFTs. One might be worth millions, but another may be worth nothing. In addition, some appear to skyrocket in value after a flurry of trades for no discernible reason. Chainalysis reports that some of this activity is caused by what is known as ‘wash trading.’ In this century-old practice, buyers and sellers conspire to inflate an investment’s value artificially and indicate that outside interest is there. Both buyers and sellers may be linked together. The Commodity Exchange Act of 1936 banned wash trading, and the IRS prohibits taxpayers from deducting losses from this type of trading.
Wash trading is a strategy for inflated valuations of NFTs by ‘selling’ them to a new wallet that also controls the original owner, according to a Chainalysis report. Since some of the most popular crypto-wallets don’t require identity verification, it is relatively easy to make multiple accounts and trade NFT back and forth
Rug pulls are scams in which promoters of a project hype it up through social media channels, then suddenly stop supporting it after the project’s price has spiked. Investors in NFT lose money when the price of the NFT falls to zero. There is also a variant where NFT developers remove the ability to sell tokens, where purchasers cannot sell since the developers have removed this ability from code.
Precations: The first thing to look for is whether the developers have received positive social media reviews for the project. A large number of followers with low engagement is a red flag. Using burner wallets, you can commit a limited amount of money to a particular purchase. Crypto can be used for transaction fees, so your risk is also limited.
Pump-and-dump schemes involve artificially inflating the value of an asset while making false statements or misrepresenting investor demand. This scheme is particularly common with small or obscure cryptocurrencies and NFTs that lure investors by touting the opportunity to participate in a coin that could have huge potential later. According to the federal government and most states in the United States, stock market scams using similar manipulation are prohibited, but crypto investors lost millions of dollars last year to pump and dump schemes
Phishing scams involving NFT involve fake websites and pop-ups that ask for wallet keys or 12-word security seeds. If scammers get their hands on your wallet’s keys, they will hack into your wallet and deplete its crypto and NFT collection.
Never give out your wallet’s keys in pop-ups or suspicious websites. Enter your wallet’s key information directly onto verified websites rather than using links, pop-ups, or your email.
The purchasing of NFTs for resale in second-hand markets results in bidding scams. If they list their NFT for sale in an NFT market, bidders may switch your preferred currency for low-value cryptocurrencies without notifying you, resulting in you losing money.
Precaution: Double-check the currency used before selling.
Copycat NFTs are one of the tricks to potentially influence and attract users who are new and know little about the marketplace. A scammer steals an artist’s work and posts a fake on an NFT marketplace to sell fake artwork. Unsuspecting buyers will make a purchase on an NFT that is worthless. Before investing in an NFT from any marketplace, make sure that the NFT you are buying comes from a verified account and that the artist is who they claim to be. Legitimate sellers of NFT will have a blue checkmark beside their usernames.
The scam is a variation of phishing in which hackers pose as customer support representatives for blockchain marketplaces and contact unsuspecting buyers through Telegram or Discord. Scammers use a fake link and official-looking website to trick users into divulging personal information and accessing cryptocurrency wallets.
Overall, users must check and be updated with the knowledge and latest news about any particular NFT project and always do their research and active before investing real money in the Nft market. Day by day, the new scams will increase, and it will be too late to stop them before a lot of users have become prey to this type of trick.
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