A great majority of individuals in the NFT ecosystem are warm, caring, and amazing people who share a love of disruptive technology, amazing art, fun games, and generating money. Sadly, the NFT market has attracted a large number of fraudsters due to its immature technology, lack of regulation, and the large amount of money that has entered the area. With the growing popularity of the industry and blockchain technology, there is a potential for scams and fraud. Here are some ideas to go over to safeguard individuals from such threats.
Understanding Ponzi NFT Schemes
A Ponzi scheme is one in which investors are enticed with the promise of high returns on their investment. Here scammers fraud new investors by using their money to pay out existing investors. This concept is now being used in the NFT space. For users to protect themselves from such Ponzi schemes, they should start with extensive research on any given project especially before investing in any new project. Any promise of a high return on investment is normally a sign of a scam.
Another type of financial fraud is the washtrading strategy. Scammers have started taking advantage of the popularity of NFTs to recruit novice investors. In this strategy, criminals join together to purchase up a huge amount of an asset and falsely inflate its value. They subsequently liquidate their assets at the new, higher price, leaving investors who purchased the assets “holding the bag”. Users can protect themselves against a washtrading scandal, they must first understand what it is and how it works. Look into the records of who is behind the initiative and what they have previously done.
Scammers are famous for creating false websites that appear similar to certain NFT marketplaces, claiming to be the official home of a project or an asset. They do this to trick consumers into purchasing such mentioned assets. In such cases, the relationship between the fraudster and the actual NFT page is misrepresented. As per the famous website OpenSea, more than 80% of the assets that have been published have shared their storefront contracts indicating fake collections, spam, or plagiarised work.
An important method of not falling for such fake NFTs is to always confirm NFT marketplace accounts, identities, and website URLs. Verification ticks against the names of merchants on all their social media platforms may be seen as a good sign to start with. If users are still unsure, contacting the artist or seller over social media to establish the legitimacy of a possible transaction is a good idea. Do not buy an NFT unless the authenticity has been established.
How to Help a Victim of an NFT Scam
Users to protect themselves in the new world of NFTs must learn about the scams out there and should take measures to avoid them. It isn’t easy for users to get their money back especially if they find themselves as a victim of some NFT scam. Nevertheless, this can be changed by doing some things right such as staying vigilant and being precautious. One of the methods of staying vigilant is by reporting the scam to the authorities or by contacting the original team involved in creating the NFT. Finally, warning everybody else by posting about the scam on social media may lead to users getting their money back.
NFT scams are gaining more prominence as the NFT ecosystem expands. Before investing in any NFT, those who want to protect themselves from these frauds should understand how thieves operate in the NFT marketplace. Keeping a track of the latest regulations and developments is also essential. Getting scammed on the NFT marketplace has become common. A lot can be done to keep the space safe by following certain simple rules. Starting with not revealing their wallet’s private key and keeping it safe from hackers. Next would be to avoid scam collections on marketplaces such as OpenSea by sticking to verified collections and authors or by looking for key features that all scam collections have.