Are NFT Scams?
Labeling all NFT projects as scams would be an ill-advised generalization, as it is with many things.
What must be highlighted, however, is that the digital artwork practice’s relatively young framework lends itself perfectly to fraudulent behavior.
According to Josh Gilbert, financial expert and market analyst for global multi-asset investment platform eToro, the dangers connected with NFTs follow a similar pattern.
“Scams are not unique to NFTs, we see them in most areas of financial services, and many other parts of life. “Unfortunately, people will always seek to profit from new trends and emerging technologies,” Gilbert warns.
“It goes without saying that they are illuminating the space in a negative light.
However, I don’t believe it puts all NFT initiatives in jeopardy because NFTs are revolutionizing sectors and will have a significant impact on creators, collectors, and brands.”
It’s not a new concept to take advantage of naive investors. The difficulty for people interested in getting into NFTs is determining the project’s authenticity, which is not always easy.
NFT newbies are less likely to investigate a project’s history, making them an easier target for shady operators.
While not illegal, many fraudulent NFT marketing operations have some parallels to Ponzi schemes, according to John Hawkins, senior lecturer at the Canberra School of Politics, Economics and Society and NATSEM.
How To Identify NFT Scam?
So, how do you spot an NFT scam? Prospective investors should do a lot of research before getting started, not just on their desired project, but on the NFT business as a whole, as they should with any financial transaction.
Looking at the roadmap, who is behind the initiative, and the creators’ backstories are all smart places to start, according to investment expert Gilbert.
Most importantly, examine whether the project’s supporters, at least in part, are legitimate NFT collectors.
It’s not rare to fall victim to an NFT scam, but some projects are inherently riskier than others.
Even Justin Bieber found himself in hot water after purchasing a ‘lonely’ Bored Ape Yacht Club NFT for 500 Ethereum (about USD$1.29 million).
While the initiative was not fake or a hoax, the fact that the 27-year-old Canadian pop star was willing to spend seven figures on a JPEG that was supposedly only worth 104 ether (USD$208,237) sparked outrage on the internet.
How To Avoid NFT Scams?
NFT is a constantly growing space, so if you are a newbie or even familiar with the space, here are some key tips to reduce the possibility of getting ripped off.
Make sure to check the marketplace beforehand to list your NFTs. There are several marketplaces that promise very less gas fees (transaction fee to upload your NFTs), and even claim to rank your NFTs on their homepage, but in return, they ask you to connect your crypto wallet.
Once you do that the game is over. Only trade NFTs from a trusted marketplace like Rarible, Foundation, and OpenSea. Do not download any DApp which claims to be an NFT marketplace.
Understand that hackers are behind your cryptocurrency wallets—that store your crypto tokens and NFTs, so avoid clicking on any links, as they can also lead to fraudulent exchange sites.
Be smart with your wallet credentials and never share your seed phrase (recovery phrase) with anyone.