In recent times there have been reports of many NFT Scams, Frauds these have been started as the technology is brand new and many people are unaware of it and as its popular, that’s playing well for the scamsters/fraudsters to use it and, there is some onus on people who jump on any new kid on the block to reap benefits at an early stage but this actually plays a bane to them.
Do you know there are more than 20000 ‘s Crypto’s present and out of that 9000 plus are dead or inactive as of 2022. The tiktokers, YouTubers, and other influencers play a vital role in impressing the market.
Nearly $9 million have been minted through wash trading and laundering though NFTs are peaking up and exploding according to experts. According to some other reports people are buying their own NFTs to drive up their NFTs prices.
Let’s look at How NFT Scams Work
Bubble Market
It is a sort of thing that is selling for more than its expected prices and in fact, it doesn’t have that price and use practically. In short, this can be defined as a market trend where the market goes up in a swing, and no one wants to miss that out (FOMO), the faster that goes up, the faster it slides down and those who enter the market in the downtrend they are the biggest losers and its almost impossible to recover from this kind of bubble market trends.
Examples of these bubble markets were Tulip Bubble in the early 1700s, & in 2000 it was Dotcom Bubble, in 2008 there was Housing Bubble, it is almost impossible to predict this kind of bubble say the experts. But some infer the market can be guessed by looking for these traits, i.e investing just for the sake of investing or for the fear of missing out and investing just to go with the flow of the market which is flouting the basic market rules. Does this all apply to NFTs too? Many questions remain unanswered.
Phishing
This one is the most common type of NFT scam that users fall for. It is extensively used to empty the user’s wallet who is totally new to the NFT world. Most of the web 3 wallets like Meta, ask to use the recovery phrase for final authentication, which needs to be stored somewhere safe, but if someone somehow gets to know the recovery phrase, and can use copied recovery phrases to empty their wallet by cloning it. Eventually, access to all the funds is got through the site.
Now you might think how the heck in the world is that possible, so the answer is they will clone pop-ups replicating exactly as that of the meta mask and their users might get conned into believing that it is actual one to enter the recovery phrase and once if it entered and boom all the wallets and info is just swamped.
So phishing is like making an exact clone of the original and making them trust it is original and then getting all the details by making them click on the fake links and we end up losing the info as well as the money in the account.
This happened when Opensea had served notice to users that their servers would be down for maintenance for some hours for updating so they had to be delisted and relisted once again, some scammers got the opportunity and used it by mailing users for which the fell, thinking they are from the original site by asking them to relist by a single click and, many got conned for this and incurred huge losses.
Grey sites
In these types of NFT scams, The address of the NFT is saved in the Blockchain smart Contract Address which tells about the owner of the NFT, it can be said it is used to authenticate the owner. But the catch here is it doesn’t guarantee of the internals of the asset which can be changed/modified and that doesn’t fall under the smart contract of blockchain. Assets aren’t traded actually, here they are constant. In NFTs, only the owner changes. From this, We can infer that NFTs aren’t saved on the blockchain.
NFTs aren’t saved on blockchain as it’s very expensive. To save data of 500kb on the Ethereum blockchain will cost us around 20k dollars, So maximum NFTs are converted into links before selling, and sometimes links might become bad links or corrupted and incur huge losses.
Bidding Scam
Some sites host this kind of NFT scams Auction and some users list their NFTs here where auctions are carried on, and the bidders here can switch the currency with lower value currency without the owner’s consent and without letting him know, this is a catch or we can say loophole with which the scammers use it to there advantage when trade is between currencies. Opensea recently has introduced USDC stablecoin of $1 which initially used to be Ethereum to curb this kind of NFT scams.
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NFT Theft
Its been recently reported that hackers have been able to steal $360k of bored ape yacht club NFTs, where the hacker spoofed the community name and identity of the manager. The more people join NFT bandwagon more the prices will skyrocket, doesn’t that sound like Multi Level marketing kinda one? So there are concerns over NFT after the hacking of NFTs has occurred.
Art Theft
According to stats from DeviantArt, DeviantArt is the largest art gallery online. They carry out weekly tonnes of scans and what they look for matches the NFTs with that of the artwork that it has stored in the repository and if they find a match they alert the original artists and ask for confirmation if it’s them who has made the NFT of your art. They just want the artist to know if his art is copied and pasted as NFT. Thereby trying to stop Art theft NFT scams.
The DeviantArt protection alerts that have been for NFT infringement are growing every month according to reports.
Giveaway Scams
The latest one is the FTX Bankruptcy, Giveaway scams, and Fake website apps, Defi rug pulls all the sites and the account will be closed once the rug is pulled.
Giveaway scams, here the scammers use the social media account of influencers or celebrities to announce the giveaway scams & discord servers. The scammers make you believe that you have won something and ask you to go visit a fake NFT site and will ask for sensitive details of your wallets and once the user falls for it and shares wallet details boom it’s all gone from your wallet.
Airdrop Scam
Malicious tokens are sent to account holders which would lead to fake websites when searched. Once you connect your Metamask then all of the funds will be duped. So always go for authentic sites.
Signal Scams
This is the trickiest of all NFT scams, 99% of signal providers are fake and they always target the new users who have joined in. The signal traders group keeps an eye on you and they will be watching for the new users as they don’t know much about it and are in always a hurry to earn quick bucks. They gain the trust first of these kinds of users and then they will lure you for the subscription-based model and then spoon-feed and then pump and dump, they are most done using telegram groups.
Another type of NFT scams that the users are falling for is Customer support, It’s like receiving messages and DM’s from fake accounts & they impersonate and behave like they gonna help you and trap the users who give the wallet details thinking they’re customer support personnel. They always keep track of people asking for help regarding issues and help, in community help pages and they target and trap that kind of users by directly sending DM’s to them and asking for sensitive info from them and once given it all over.
To everyone’s surprise, scammers and hackers have even created similar-looking fake Market Places that even experienced users find difficult to find out.
Many NFT fans have lost millions who bought real estate sales in video games. One might argue why the heck one would buy land virtually but that’s how it is. Let alone that, heard of insider trading? No? That’s not only related to the stock market, yes that’s even happening in NFTs too, where even before it was open for public auction it was sold and the start-up even admitted to that and it was on the open sea.
Typosquatting
This kind of NFT scams, Many a time happen when we may mistype a letter from the URL while browsing, the hackers are well aware of the misplaced finger behavior happening often and they used it to their advantage and they make a similar URL, making us land on their website unwillingly and that’s well enough to utilize for there creepy work to scam us by redirecting or asking to download some malware kind of thing that results in data theft.
Ponzi Scams
These scammers make people believe that if they miss out they will be losing out fortunes and will hence make their future to play on the mind to get them on board.
This kind of NFT scams happens at the start of any new concept as it is easy to lure when it’s new and there are no regulators set at the beginning. Ponzi schemes as always since ages people have fallen into these kinda schemes only the schemes and only products have kept on changing keeping the scam the same.
BUT scams are gonna happen as people fall for tricks of easy money making like recently a 12-year-old made $300k dollars in 10 hours selling NFT, these things will lure and some might even be genuine but it all comes with risk.
Rug Pull
Rug pull or swindle scammers scam the public, these models are made to stake their interest in the networks and the currency remains locked and the owner gets periodic payments as interest. As here the investors have locked their currency in the network through the smart contract the scammers jump in here and steal the funds with no chance of getting it recovered. Once people start trusting the escalating NFTs and start pumping money into them the rugs are pulled.
Pump and Dump
This type of NFT scams is done by creating fake demand and supply strategy and once they take demand to the top level and when people start buying like mad they dump and close all the accounts. The same thing was done by many altcoins, as of now 9000 plus altcoins have been inactive.
As in ICO Initial coin offerings, it is the same as IPO which is a company or here in case an initial coin asks for capital to expand itself to different zones in return the investor is lured for getting high returns in currencies. So it is for the investor to perform proper checks before finally committing as the wisest to have fallen victim to this. The same thing happens with the NFTs, recently an opensea scam happened wherein the NFT which was about to be released for public bidding was all gone before anyone would know.
Environmental Concerns
The environmental impact that the minting of NFT and the figures are astonishing, the energy that’s been said is just unimaginable. 163,486 KgCo2 and 176,773 kWh that’s the ecology costing blockchain even though the figure is debatable as the other side says it’s blown out of proportion.
Conclusion
So to stop all this there is only one way that people should be aware of the fact that there is nothing sort of magic formula to earn tonnes overnight and there’s nothing called quick bucks without hard work and unless people get proper knowledge, should not get indulged in this kind of things unless required knowledge is got. As the initial phase of any money-making tech, there are always dubious scams, and because these scamsters always make use of the public weaknesses to make money, and obviously on the other side it is the greed of the people too, to get rich overnight that gets them duped and they will realize only when everything is gone.