NFT Scams - Most Common Scams in the NFT Space

As the popularity of NFTs (non-fungible tokens) continues to grow, so does the potential for scams. 

This blog article examines popular NFT scams and offers suggestions for avoiding them. We'll also discuss the future of NFT scam prevention and how to report one.

A Closer Look Into NFTs and Their Popularity

The past year has seen a surge in the popularity of non-fungible tokens. These digital assets are unique, and nobody can replicate them, making them ideal for collectors and investors.

You can think of non-fungible tokens as digital assets that run on a blockchain. They are unique and cannot be replicated, making them ideal for collectors and investors alike.

You can use NFTs for a variety of things, including in-game products, virtual real estate, and digital art and collectibles. This flexibility has made them hugely popular in recent months, with the market for NFTs exploding in value.

There are a few critical reasons for the popularity of NFTs. First, they offer actual ownership of digital assets. As opposed to conventional assets like equities and bonds, you cannot replicate NFTs. They, therefore, appeal to investors and collectors who seek out unique and priceless assets.

Second, NFTs are highly liquid. You can easily find them on the secondary market, making them much more accessible than other types of investments.

If you're thinking about investing in NFTs, it's essential to do your research and understand the risks involved. NFTs give risk-takers a novel way to benefit from the digital world.

The Most Common Scams in the NFT Space 

If you're reading this article, chances are you're interested in non-fungible tokens. You probably know that NFTs have taken the digital world by storm, and there's no sign of them slowing down anytime soon.

However, as with any new and exciting technology, some try to exploit unsuspecting victims. This is especially true in the world of NFTs, where scams are becoming more and more common.

In the subsections below, we'll take a look at some of the most common scams in the NFT space. We'll also provide some tips on how you can avoid becoming a victim of these scams.

#1 - The "Ponzi Scheme" Scam

First of all, a popular fraudulent scheme in the NFT world is the so-called "Ponzi scheme." It's when someone uses new investments to pay previous investors, giving a false impression that there are actual returns. 

Ponzi schemes first appeared well before NFTs came around. The name comes from Charles Ponzi, an Italian businessman who ran a similar system in the early 1920s. 

Now, there are countless NFT-related Ponzi schemes out there. But how can you spot a Ponzi Scheme? First of all, if it sounds too good to be true, it probably is. Secondly, you should always do your research before investing in anything. If you're unsure, reach out to someone you trust for their opinion. 

#2 - The "Get-Rich-Quick" Scam

The "Get-Rich-Quick" scam is a widespread phenomenon in the NFT community. It works like this: someone will create an NFT and then claim that it is worth a lot of money. They will then try to sell the NFT, saying that you will make a lot of money from it.

Most NFTs are worthless, and their sellers are scamming consumers. So, if you're considering buying an NFT, do your research first and ensure it is worth something. Otherwise, you could end up losing a lot of money.

#3 - The "Fake NFT" Scam

More advanced scammers often succeed in the so-called "Fake NFT" scheme. Here they create a new, usually very cheap, ERC-721 token with little to no originality behind it. 

They sell this "NFT" as a rare and desirable commodity, typically by bribing celebrities to tweet about it. 

As unsuspecting victims buy up the token, its price rapidly increases. The scammers then sell their tokens for a considerable profit and disappear, leaving the victims with worthless ERC-721s.

This scam works because of the lack of regulation in the NFT space. Since anyone can create an ERC-721 token, there is no guarantee that the token you buy is worth anything. 

As such, it is essential to do your research before buying any NFTs. Be wary of all NFT collections "hyped" without a good reason.

#4 - The "Exit Scam"

Another (un)popular move in the NFT world is what's called an "exit scam." When a platform or artist vanishes, they take all the NFTs (and the money used to acquire them).

It's a pretty big problem and does not have an easy solution. The best way to protect yourself is to only buy NFTs from platforms and artists that you trust.

If you have doubts, research or ask in forums and groups before buying. The rule is pretty simple: when something seems too good to be true, it probably is.

#5 - The "Phishing" Scam

Last but not least, the classic "Phishing" scam has grown in popularity among NFT criminals. This scam involves a fake message or email from a crypto exchange, wallet provider, or other business. 

The message typically contains a link that leads to a fake website designed to look like the real thing. The goal is to trick the victim into inputting their login credentials, which allows criminals to steal their funds.

So, how can you protect yourself from this type of scam? First and foremost, never click on links in emails or messages from sources you don't know and trust. If you can’t say whether a message is legitimate, contact the company directly to inquire. 

Finally, make sure you're using a secure and up-to-date antivirus program to protect your computer from malicious software. Let us tackle the topic in the next section for more information on this fundamental matter.

How to Avoid Being Scammed in the NFT World

The world of NFTs can be a minefield, and it's easy to get scammed if you're not careful. Here are some tips to help you avoid falling into one of the scams mentioned above.

Do Your Research

This one is crucial. Before buying or investing in any NFT, research to ensure you know what you're getting yourself into. There are a lot of scams out there, so it's essential to be aware of the risks.

Be Cautious of Promises of Quick and Easy Money

If something sounds too good to be true, it probably is. Be wary of anyone promising quick and easy money from investing in NFTs.

Don't Send Money to Someone You Don't Know

This should be obvious, but it's worth repeating. Never send money to someone you don't know, no matter what they're promising in return.

Be Careful of Fake NFTs

There are a lot of fake NFTs out there, so be careful when buying or investing in them. Do your research to make sure you're getting the real deal.

Keep Your Private Keys Safe

If you're holding any NFTs, keep your private keys safe and secure. If someone has your private keys, they could steal your NFTs.

Trust Expert Auditing and KYC Services

SolidProof, QuillAudits, Identity.com, and others offer auditing and KYC services in the NFT and crypto industry.

Before investing in an NFT collection, check whether the project has obtained certifications from reputable auditing and KYC services.

Use a Reputable NFT Marketplace

There are several NFT marketplaces, so select a reliable one. Some popular and well-established NFT marketplaces include OpenSea, Rarible, and Mintable. Some famous crypto exchange platforms – such as Binance – have also decided to enter this market.

Tips for Buying and Selling NFTs Safely 

Buying or selling NFTs safely and securely requires a few precautions. Here are some tips:

Make sure you're using a reputable platform: There are a lot of different platforms out there that allow you to buy and sell NFTs. Some are more reputable than others, so do your research and choose a platform you feel comfortable with.

Familiarize yourself with the risks: Like with any investment, NFT trading does not come without risks. Make sure you understand these risks before buying or selling an NFT.

Know the value of what you're buying or selling: Just like with any other asset, you should know how much an NFT is worth before buying or selling it. Do your research and familiarize yourself with the market before making any decisions.

Only by following these tips can you be assured of a safe and secure experience when buying or selling NFTs. So make sure to keep them in mind the next time you're looking to do so.

The Future of Scam Prevention in the NFT Space 

The market for scam prevention in the NFT space is growing. This is not surprising given the increased number of scams that have taken place in recent years.

Some teams are finding new techniques to combat NFT scams. Therefore, this field will probably only increase in significance.

The future of this sector looks very bright. There is a great deal of potential for companies that can provide practical solutions to the problem of scams.

Many approaches can help anyone prevent scams. There is a lot of room for innovation in this area. For instance, several companies are developing new ways to verify the authenticity of an NFT. This is essential in preventing scams, as it will help ensure that people only buy genuine items.

It is also vital to be aware of the different types of scams. There are several different methods that scammers use to try and dupe people. It is essential to be mindful of these to avoid them.

How to Report an NFT Scam if You Fall Victim to One 

Scam reporting varies depending on the platform you use. Using Twitter, you can report the fraud by visiting the scammer's profile. Click the three dots and select "Report," followed by "It's a scam." Other social media platforms usually allow you to complete the same procedure.

If you want to move to a more official level, there are other operations you may consider. For example, you can report the scam to the Federal Trade Commission by visiting their website and filing a complaint.

You can also report the scam to the National Consumers League by calling their fraud hotline.

Closing Thoughts - The Importance of Prevention

NFT scams are a problem that is probably here to stay. However, there are many steps that you can take to protect yourself. You must be aware of the different types of scams and familiarize yourself with the market before making any decisions.

Many companies are also developing new and innovative ways to prevent scams. This is an important area that is only going to grow in importance. So make sure to keep an eye out for new solutions that are under development.

If you fall victim to a scam, do not waste your time: report it so that others can be aware of the problem. These steps can help protect yourself and others from falling victim to NFT scams.