The Most Common NFT Scams and How to Avoid Them
Non-fungible tokens (NFTs) are an exciting opportunity taking the digital world by storm. Although the market fluctuates, it drives millions of dollars in cryptocurrencies each year. The NFT market, which was worth around $3 billion this year, is expected to grow to $20 billion by 2028.
NFTs are undeniably a lucrative asset, which is why so many people have their sights set on the market. But it's not just you who's paying attention — so are the scammers. There are so many people looking to take advantage of NFTs, but there are an equal number of people looking to take advantage of you. And no one is safe. Last year, Banksy's website was hacked and a fake NFT was purchased for over $350,000. Scammers made NFTs of digital artist Qing Han's work soon after she died and sold them to unsuspecting supporters. Popular NFT-based game Axie Infinity was hacked and scammers stole over $600 million from Sky Mavis.
Don't let all of this scare you away from NFTs, though. Instead, learn to recognize the most common NFT scams and what you can do to avoid them.
Rug Pull Scams
One way to get the rug pulled out from under you is to fall for this scam, which is when scammers promote a fake NFT collection or project. They lure potential buyers in by flooding social media with their promotion and promising buyers they'll make a lot of money. After people purchase the NFT, the promotion goes away, the value drops significantly, and the scammers remove a person's ability to sell the token.
Artist Impersonation Scams
Just like in the examples above, scammers have pretended to be notable artists like Banksy and Qing Han to sell fake NFTs to buyers. They replicate their work, hack into their websites and social media profiles, and even create fake accounts with the artist's name to look even more authentic — these accounts have even been verified before too.
Pump and Dump Scams
In this scam, a large group of scammers buys up a lot of cryptocurrencies, which drives up the price of the assets. After the price is pumped up, the group immediately sells (or dumps) their assets and gets paid, while everyone else loses out on profit.
Bidding Scams
Some NFTs are worth less than others, which is the inspiration behind bidding scams. If someone is selling their NFT, a scammer will be the highest bidder and then switch out the higher-value NFT for a lower-value one. Incredibly easy to pull off, but tricky to spot.
Airdrop Scams
Scammers will share a fake promotion on their social media channels in this scam and offer a free NFT to anyone who spreads the word about their promotion to their friends. When they go to claim the prize, the scammers will ask them for their cryptocurrency wallet information. Instead of sending the NFT to their wallets, they access their wallets and steal whatever money is inside.
If you know what scams to look out for, you'll have better success navigating the NFT market. Good luck and stay safe.