There has been a rise in the use of NFTs as a promotional tool, a means of exchanging collectibles, and making a profit. However, there are also scams aiming to bilk people and companies out of money.
People are making money off trading and investing in nonfungible tokens, quickly becoming the most popular digital asset. However, there are also a large number of scams aimed at stealing money from individuals and organizations.
In March of 2022, criminals posed as threats stole more than 600 million dollars from Sky Mavis. As the creator of the massively successful NFT game Axie Infinity, Sky Mavis is well-known. To steal money from people's digital wallets, the threat actors hacked their private keys and used those to make withdrawals. These types of NFT game scams are still carried out in 2023.
NFTs are being used for the following purposes by businesses, in addition to the trading and creation of NFTs by individuals in marketplaces:
- ownership of a domain name,
- customer promotions and loyalty programs,
- identification and documentation,
- supply chain and logistics,
- art, sports, luxury brands, or other forms of memorabilia, and
- real estate transactions
There are ways to conduct NFT transactions securely and avoid them so you can enjoy playing NFT games without being afraid of falling prey to various scams. You can find a full list of top NFT games here.
What Is An NFT?
A nonfungible token, also known as an NFT, is a unique digital asset stored on a blockchain. In contrast to other forms of cryptocurrency, these digital assets cannot be exchanged for one another and serve as an authentication method for ownership. Every transaction on a blockchain is recorded in a distributed digital ledger.
Each NFT is entirely unique and cannot be replaced by anything else. Some varieties of NFTs are presented below:
- image
- file
- cartoon
- virtual real estate
- pet
- video
- trading card
People buy NFTs as unique investments and collectibles.
The sale price of an NFT can easily reach millions. As an illustration, the digital artist Beeple could sell a single piece of NFT artwork for more than $69 million. Prices for other NFT collections range from the tens to hundreds of thousands of dollars. Examples include Bored Ape Yacht Club and CryptoPunks.
In the year 2021, sales in the NFT market totaled $17.6 billion.
What Is An NFT Game?
NFT games are simply those that utilize non-fungible tokens. They are more than just a way to store crypto-collectibles in your wallet; they include player interactions, the purchase of avatars and weaponry, and the potential to generate income from NFT games using the play-to-earn model.
It is anticipated that non-fungible tokens will play a significant part in the growth of the gaming industry. They make it possible for game designers to earn money from the games they create while also enabling players to earn money simply by interacting with those games. In addition, blockchain ledgers are utilized by NFTs to validate one-of-a-kind digital collectibles; this process is essential to the operation of NFT games.
One of the earliest games to include NFT characters is CryptoKitties, which came out in 2017 on the Ethereum blockchain and was one of the first games to do so. It allows players to buy virtual cats, add them to their collections, breed and sell them, and even sell off their offspring. This project represents one of the earliest attempts to use blockchain technology for activities under the recreation and leisure category.
Typical NFT Scams
Scams involving NFT either directly defraud victims of their money or attempt to obtain the credentials necessary to access the victims' digital wallets or cryptocurrency wallets. After being victimized by a scam, it is tough to recoup any money lost or credentials stolen from a digital wallet.
The following is a list of the more common types of NFT scams that you should be aware of and avoid.
Rug Pull
In 2021 and 2022, rug pulls became the most common type of scam. Propelled by the success of DeFi, these schemes have developed a new method of preying on naïve investors. With so much uncharted territory, it is easy for scammers to pose as legitimate businesses and take advantage of unsuspecting customers.
A rug-pull is a type of scam in which developers create much hype about an NFT but abandon the project after receiving significant funds from investors. While they wait for investor funds to pour in, these shady developers frequently use social media to cultivate an atmosphere of trust and excitement around their NFT. After that, once they have sufficient funds, they abandon the entire project and disappear with the money.
Swindlers frequently create fake versions of well-known NFT marketplaces, such as OpenSea, to defraud users. These websites can look almost identical to the originals, which means they can fool even a seasoned NFT buyer into spending a significant amount of money on a fake artwork that is, in reality, worthless.
The Frosties NFT rug-pull, run by two young men named Ethan Nguyen and Andre Llacuna, is a classic example of an NFT scam involving a rug-pull. They advertised their NFT by making several promises, some of which included giveaways, exclusive mint passes, and first dibs on a metaverse game. However, after receiving over $1.3 million in investments from various investors, they terminated their website and social media accounts.
Phishing
Even though phishing is an old con, many people still fall for it. A phishing scam usually consists of fake advertisements, emails, and pop-up windows that direct victims to a bogus website. After that, the fraudulent website will ask users for the private wallet keys to their digital wallets to access them. Swindlers can empty the digital wallet of any NFT collections or cryptocurrency held within it as soon as they get their hands on this private information.
Airdrop
Scammers spread the word about NFT giveaways on social media. Typically, the promotions will reward participants with a free NFT if they refer their friends to the website or sign up on the website themselves. When it is time for the winner to collect their prize, the scammers ask for information about the winner's cryptocurrency wallet so that they can send the NFT. However, instead of sending the NFT, they gain access to the account and steal any money or NFTs in the wallet.
Social Media Impersonation
Cybercriminals create online social media profiles to persuade unsuspecting users to purchase fraudulent NFTs. They make the appearance that their fake websites are legitimate by using social media accounts. The social media profiles attempt to give legitimacy to their fake NFT products and help to promote their con artist campaigns.
Bidding Scams
When someone tries to resell their NFT, they participate in a bidding scam. After receiving the highest bid, the scammer, who is also the person who placed the highest bid, will then exchange the cryptocurrency for one with a lower value. Although it may look like the highest amount, the value of some cryptocurrencies is significantly lower than the value of others. When you try to sell your NFT on the secondary market, you are frequently a victim of fraudulent bidding. Scammers will always place the highest bid when you put your NFT up for sale, so it is only natural that you want to sell it to them. On the other hand, these scammers can alter the cryptocurrency used for the bidding without your knowledge.
Investor Scams
As both parties to an NFT transaction can remain anonymous, investment scams are much easier to pull off with NFTs. Actors who pose a threat will fabricate a successful business to lure victims in. Then, once they have the money, they disappear without a trace.
After investors poured a significant amount of money into the evolving NFT project known as "Evolved Apes", the project developer, who wishes to remain anonymous, absconded with $1.3 million, equivalent to 798 Ether.
People who participated in a competition on the project’s social media platforms and were informed that they had won Evolved Apes NFT artworks have yet to receive the prizes promised. It was all a massive marketing scheme to raise funds for an eventual rug-pull scam that was going to take place.
Even though most people opt to purchase NFTs rather than directly invest in upcoming projects, keeping the possibility of falling victim to a scam like this in mind when investing in anything related to the cryptocurrency industry is essential. Educating yourself on the potential dangers of investing is necessary to protect yourself from common investment scams such as Ponzi schemes and rug-pulling.
Pump And Dump
Fraudsters artificially inflate the price of an NFT in a scheme known as pump-and-dump, which involves misrepresentation and dissemination of misleading information. As soon as the price begins to rise, they "dump" the NFT and vanish without a trace, leaving investors with assets that are no longer of any value.
In most cases, scammers utilize social media and celebrity endorsements for excitement about an NFT. They frequently invest large sums of money in the NFT, which drives up the price and makes it difficult for investors to ignore the asset.
Counterfeit NFTs
NFTs are primarily concerned with the generation of one-of-a-kind digital tokens. Unfortunately, plagiarism is rampant on a significant number of NFT platforms. Recently, OpenSea disclosed that more than eighty percent of newly minted NFTs produced with its minting tool were fraudulent. Therefore, there is a significant possibility that you will be purchasing a pirated version of the work of a legitimate artist.
It should come as no surprise that the value of your NFT will plummet the moment it is revealed that it is a forgery. Because of this, you need to ensure that an NFT is verified before making a purchase.
Impersonating A Customer Service Representative
Phishing is a type of internet fraud in which scammers pose as customer service representatives for online marketplaces that trade in NFT. They will most often contact you regarding an issue concerning your account through various social media channels such as Discord, Telegram, or Twitter. Then, under the guise of offering assistance, they will send you a link to fake NFT marketplaces requiring you to enter your cryptocurrency's private wallet keys.
Only respond to customer support requests from your legitimate NFT marketplace and the channels they approve. This is a good rule of thumb. If you have any questions, you should get in touch with the official customer support channels provided by your NFT marketplace.
Ten Tips To Avoid NFT Scams
Most non-fungible token (NFT) scams either attempt to steal cryptocurrency wallet information or trick people into buying fake NFTs. These cons can be avoided in several ways, including the following:
1. Keep Keys Private
Never give anyone else access to the information associated with your cryptocurrency wallet. Along with any recovery codes, these keys must always be kept secret. These passcodes are not relevant to anyone at any time for any reason.
Get a hardware wallet to safeguard your cryptographic keys. A hardware wallet is a device similar to a flash designed to store cryptographic assets for you. These are HD wallets, and when they are initialized, they generate private and public keys using mnemonic phrases or seed words.
Private keys should never be stored online, in the mail, or the cloud because these are the locations where they are most prone to being hacked. Many users regularly capture screenshots of their private keys, and these users' image albums are typically synchronized online. It would be best if you never did something like this because it poses a threat to the safety of others. Instead, put them away in one of the many other cold storage options.
If you do not have access to a hardware wallet, you can store your private keys or seed on an offline flash drive or hard disk drive for the time being. However, the only time any of these choices is secure is when an adversary cannot get their hands on them. Additionally, one can utilize offline drives that encrypt the data that is stored on them. You will be able to access your coins with an additional layer of safety if you do it this way.
Include your crypto recovery keys or private keys in your will, or discuss with the member of your family whom you trust the most how your key can be located if you pass away. I bring this up because there have been instances in which a person has passed away, and the inheritor has been left clueless about how to unlock the crypto wallet. However, if you have a significant amount of holdings, some people (even some trusted family members) may want to harm you to get their hands on that money. This puts you in a precarious position and puts you in danger.
2. Do Some Research On The NFT Vendor / Project Team
Look at the seller's account on the NFT marketplace to ensure it has the verification checkmark in blue before purchasing from them. Additionally, investigate the seller's social media accounts, explore any other listings provided by the seller, and look for any reviews that may be available online.
It is essential to have a solid understanding of the people behind the project and the length of time those people have been active participants in the NFT community. You can figure this out by examining the length of time that the accounts of the creators or developers have been operational. A well-known project may be more reliable than one in which unknown people are involved.
NFT Do Your Own Research (DYOR) is a popular activity of every investor before entering into the market.
A red flag may have been raised if the information on the project teams cannot be verified. Even the most anonymous developers of the NFT leave a paper trail behind in the community, even though the NFT system encourages anonymity. On the other hand, the fact that the identities of the project's developers are unknown does not necessarily indicate that the endeavor is fraudulent.
3. Take A Look At The NFT Transaction History
Be wary of non-traditional currencies that only have one transaction per day.
One of the most appealing aspects of NFTs and blockchain technology is their increased transparency. In case you forgot, a blockchain is a distributed digital ledger that stores information immutable and transparently that anyone can view.
Blockchain technology makes an entirely new and transparent method of conducting peer-to-peer business transactions and financial dealings possible, making it possible to determine who was responsible for the initial creation of an NFT, who has owned it in the past, and where it has been since. The transaction history provides NFT creators and collectors with several benefits, one of which is transparency, a great feature of non-fungible tokens.
The traditional method of purchasing and selling assets, as well as creating new ones, has several disadvantages that can be overcome with the help of the transparency provided by NFT transaction data.
When it comes to conducting business, having trust in the other party, regardless of who or what you are running a business with, is a significant factor in feeling at ease with your choices regarding purchases and sales. You can conduct business with the knowledge that you can trust the data provided by the digital ledger, also known as the blockchain because the blockchain displays all of the data from an NFT.
4. Do Not Click On Any Links Or Attachments That Look Suspicious
The sender is the first thing that needs to be investigated. If you are familiar with the sender of an email, you have a much better chance of trusting the message unless the sender's email account has been compromised.
The recipient list will likely contain malicious links when a message is sent to many people from a suspicious account. This necessitates double-checking the message's sender and recipient details. You shouldn't open anything in an email if the sender or the list of recipients looks odd or unfamiliar.
If the subject line of an email appears to be misleading and does not correspond with the content of the email, it is recommended that the email be deleted. In light of this, it is imperative that you verify both the sender and the subject line of the email to ensure that it is not a phishing attempt.
As was just mentioned, it is vital to thoroughly investigate the contents of any email that you receive, regardless of how innocuous it may initially appear to be. Check for any misspellings, particularly in the sender's email address, as phishing emails frequently attempt to impersonate other businesses with which you are already familiar. This is especially important because the email may be trying to emulate the company with which you most frequently interact.
Incorrect grammar and language that does not make sense are two more things that you should be on the lookout for. It is possible that the content was automatically generated for a massive phishing scam using this method.
Do not click on any links or open any attachments unless you ascertain the sender of the email you are receiving. This is a general rule to follow.
Many people have been tricked into believing that they are interacting with their bank when, in reality, the hyperlinks and attachments contain malware or attempt to steal their personal information. These people have been duped into thinking they are interacting with their bank.
On the other hand, this can occur even with senders that you are familiar with. It is best to refrain from clicking on attachments, especially if you weren't anticipating receiving one or the sender doesn't typically include files in their messages in PDF and.ZIP formats.
Hovering the mouse over a link is a quick way to look for suspicious ones. It is likely phishing if there are typos, a large amount of text and numbers, and inconsistencies between the hyperlink and its destination.
5. Social Media Engagement
Twitter and Discord are two of the essential platforms for developing NFT communities. You are welcome to monitor projects on these official social networks to observe how users engage with them through comments and chats. However, it should be noted that this is no longer an ironclad rule for determining whether or not a gaming project is genuine.
Some users will pay for fake followers and engagements to give the impression that their social media accounts have a larger audience. Because of this, you need to be wary of an account that was just recently created but already has many followers. However, some projects gain many followers quickly because they quickly become appealing and attract many people.
6. Project Roadmap
The objective of the project, as well as the result that is desired, should be outlined in the strategic plan. The plan should include actionable steps and benchmarks required to accomplish the objective. The road map needs to be unambiguous and straightforward to comprehend; it also needs to be adaptable and centered around the big picture and the solutions it brings at the same time; and finally, it needs to be flexible.
Even with a clear path in front of you, there is no guarantee of success. It merely divulges the objectives and goals of the project’s creator, but there is no guarantee that these will be accomplished. A red flag could be triggered by a strategy that appears to be overly ambitious or by a project that seems to be too good to be true. Putting money into any non-fiat currency game is a bad idea if you are unsure about how successful the game will be in the long run.
7. Compare The Prices Of The NFTs
Visit several trading platforms, such as Axie Marketplace, Mintable, and OpenSea, before purchasing an NFT to determine whether or not the prices are comparable. If the price appears significantly lower or higher than those on these reputable trading websites, the site in question is likely a scam.
On many fraudulent websites, NFTs that would typically sell for hundreds of thousands of dollars are instead offered for sale at prices that are a fraction of their actual value. For instance, the NFT Ape #493, part of the Bored Ape Yacht Club collection, can currently be purchased on Opensea for $149,113 (92 ETH). However, a fraudulent vendor will list a copy of this NFT for sale at a significantly reduced price, luring customers looking to acquire their own Ape NFT without breaking the bank.
You need to know how much an NFT is worth to avoid being duped into thinking you are getting a good deal when, in reality, you will be shelling out a few hundred dollars for a forgery of an original piece of artwork.
8. Keep An Eye On The Bids
When you try to sell your NFT on the secondary market, you are frequently a victim of fraudulent bidding. Scammers will always place the highest bid when you put your NFT up for sale, so it is only natural that you want to sell it to them. On the other hand, these scammers can alter the cryptocurrency used for the bidding without your knowledge.
Imagine that a scammer bids 20 Ether on one of your NFT works of art. You should anticipate receiving around $ 32,418.63 in this transaction (per the going rate at the time of writing). However, a shrewd con artist can switch out the cryptocurrency for fifty Dogecoin worth only more than $6,000.
To protect yourself from falling victim to one of these scams, you should always verify the type of cryptocurrency used to pay you and make it a point to refuse any offer that is lower than the one previously agreed upon.
9. Make Sure Your Passwords Are Secure
Secure passwords must be developed for NFT accounts as well as cryptocurrency wallets. Keeping NFTs safe can also be accomplished through the use of two-factor authentication. When someone tries to steal an identity, they will have a more challenging time if they have to use facial recognition or fingerprints.
10. Use NFT Exchange Markets That Have A Good Reputation
When it comes to deals that seem too good to be true, you shouldn't believe them. New marketplaces are springing up everywhere, and most provide only a low level of safety. Stick to exchange markets with a good reputation, such as OpenSea, Rarible, Mintable, Foundation, MakersPlace, and Axie Marketplace.
Conclusion
You should take all the steps when verifying the legitimacy of a gaming project because you should leave every stone unturned. Utilizing each of the strategies we have outlined for you, take your time to investigate the project, the people behind it, and the goal. Unfortunately, as more NFT projects get off the ground, scammers develop new methods to rip off gamers and investors. Keeping this in mind, you must always be on guard and ensure that any gaming projects you plan to invest in are transparent for 2022 and 2023.
