Are NFTs scams?
NFTs aren't scams, but some scammers take advantage of NFTs. Learn how to protect yourself from NFT and crypto scams.
The short answer is that no, NFTs are not scams. But just like any new space, including the early days of the internet, Web3 has also seen its fair share of scams. The good news is that with some knowledge, they’re not hard to spot. Here are some common types of crypto scams and how you can best avoid them.
What are phishing scams?
The goal of a phishing scam is to make someone give up personal information that will allow a scammer to steal money or assets from them. Often, someone operating a phishing scam will impersonate a legitimate website, institution, or individual in order to manipulate them. It’s been common in the past for phishing scams to occur over email or even phone, but in Web3, it’s also common to see them on social media. Watch out for purposely misleading links that contain slight URL misspellings or variations. A scammer may create a fake link, pretending to be a legitimate crypto platform or artist to snag your information as soon as you try to connect your wallet somewhere. You may receive emails claiming that your wallet was hacked, or that someone has acquired your password. These scammers hope that you’ll be so alarmed that you won’t think about checking the legitimacy of the source.
Always check links before clicking, and always make sure that someone is who they say they are. Be particularly wary of email attachments. If an offer sounds too good to be true, it probably is.
What are rug pulls?
Some projects are hyped up and then dumped by their creators as soon as people have bought in. Rug pulls can be thought of as sophisticated pump and dump schemes. The creators of rug pull projects promise rewards, utility, or value that they can’t back up to their audience, then sit back and watch people buy in at inflated prices. Once a significant number of people are invested, the creators take the money and run.
A rug pull can happen when inexperienced creators abandon a project, but they typically occur when the creators of a project intend to scam their audience. It leaves the buyers with a valueless token because the creators have disappeared. In some cases, the project creators might even write smart contract rules that make it impossible to sell a token, or create hundreds of Twitter or Telegram bot accounts to promote their project. You might hear some victims of this scam saying that they “got rugged.” If a project seems fishy, try running it through Token Sniffer.
What are copycat collections? What is copyminting?
Sometimes, scammers will create an NFT collection that looks almost identical to a well-known project and trick people into buying it. It’s like buying a bootleg DVD or an imitation designer bag: It may look similar, but it won’t have the same value on the secondary market, and it won’t give you access to community channels. These are copycat collections.
In other circumstances, someone may simply save a copy of the media attached to a non-fungible token and mint it as if it’s their own. Aside from being direct art theft, it will not carry the same value as the original token, just like copycat collections. This practice is called copyminting.
How do you look out for copycat collections and copyminting? If you want to verify the origin of an NFT, you can check the provenance of a token on either a marketplace or on blockchain explorers like Etherscan. This allows you to compare the wallet addresses in a token’s history with the legitimate wallet addresses that should be associated with a token. You can also search marketplaces and social media for the legitimate pieces of art and for news about scammers.
Learn More About Crypto Scams here.