Hundreds of new NFT projects are either being launched or discovered every single day. With NFT’s increased popularity comes a plethora of new financial opportunities – and risks!
Scammers trying to take advantage of this market’s hype by preying on those who are not familiar with common scams in the NFT space today.
Joshua Reiher, founder of nft4noobs – the #1 fastest growing community for everything NFT related – shares his insights on how to avoid falling for common NFT scams.
PAY ATTENTION TO URLS REGARDING NFT
Ensure you are checking that website URLs match the official NFT project’s URL. Quite often, fake URL project sites will imitate a popular project’s URL whilst only changing the smallest detail that makes it undetectable from a quick glance. For example, never go to a website that ends in “.to” if the official website ends in “.io”. It is critical to ensure the URL matches the official project’s URL exactly.
PROTECT YOUR SEEDPHRASE
Your seedphrase is a series or words given to you once you create your web 3.0 wallet in order to access the crypto/NFTs within that wallet. Store this phrase privately offline somewhere that only you have access to and never, ever give this phrase to any website or program that is asking for it. No credible platform will request your seedphrase unless you are trying to restore your wallet. To best avoid this, never store your seedphrase digitally.
BEWARE OF PHISHING SCAMS
Quite often when browsing the internet, pop ups can ask you to connect your wallet to the pop up link in return for a free NFT. Live by the golden rule, if it sounds too good – it is probably because it is. If you were to connect your wallet to this pop up, you could find that your NFTs stored in that wallet will be transferred to the scammer’s wallet. This is a common phishing attack.
Scammers can also get access to your NFTs through “bots” (automated, conversational computer programs) or people who reach out to you via discord direct message about early mints/access to a NFT collection release. They may ask for your private wallet key, seedphrase or more to steal your NFT holdings.
Also, do not engage or click on any links people might direct message you even if they are “asking for help” or are part of a “support group”. This is most likely a scam or virus or worse. Be mindful for fake celebrity/influencer profiles imitating real celebrities or influencers.
RUG PULL PROJECTS
A “rug pull” occurs when an individual or team of founders create a NFT collection, promotes the collection, gains investment from the community (which drives up the collection’s price) and then, upon release of the NFT, the founders sell their NFTs (at the peak price) in exchange for cryptocurrency and abandons the project entirely. The price of the NFT collection then drops dramatically. This leaves the collection’s investors with worthless NFT’s. This is also known as a pump and dump scheme.
This can occur with celebrity endorsements. Celebrities can leverage their influence to increase investment within a project that has no real value or utility and shortly after the NFT collection’s release, the celebrities and founding team sell their NFTs for cryptocurrency and abandon the project. Again, dramatically reducing the collection’s value and leaving the investing community stranded with worthless NFTs.
In rare cases, this can also occur when a scammer uses multiple wallets to purchase a project’s NFTs, illegitimately inflating the project’s value and volume.
To best avoid this, you need to ensure NFT collection’s founders or creation team are public/doxxed. Ideally they have their LinkedIn, Twitter and social media accounts publicly linked on the project’s website. In addition, ensure to review the NFT’s transaction history, check for any red flags and verify the project’s roadmap is realistic and achievable.
When searching for a project on Opensea, it is easy to click a plagiarized NFT project as the scammer has minted fake copies of a NFT that has no real utility and is worthless. Ensure to do your own research into the origin of the NFT project, artists and minting address.
PROTECT YOURSELF WITH HARDWARE WALLETS
If you have over one thousand dollars stored in NFTs or cryptocurrencies, I would suggest you get a physical wallet to store these assets’ private keys to best avoid potential scams or hackers. I have witnessed hundreds of people get scammed for up to 6 figures because they refused to prioritize their asset’s safety.
Physical wallets can give an extra layer of security from scams or hackers as they store your private keys on the physical wallet, separate to the exchanges or wallets online.
Best rated hardware wallets include; Ledger and Trezor. Ensure you are on official hardware wallet’s websites as illegitimate websites can be scams. Never order physical wallets off Amazon.
For an extended look and examples of NFT and cryptocurrency scams, red flags for potentially project rug pulls and more tips to avoid phishing scams, check out nft4noobs. Joshua Reiher documents his extensive real world insights, knowledge and experience including his biggest mistakes, his best practice flipping strategy, his best security measures to avoid getting hacked and more.
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