- To save yourself from NFT fraud or scam, it is advisable to double-check its authenticity in all possible ways.
- Dealing in NFTs through Web3 companies’ is beneficial because the risk of getting scammed is near zero.
Understanding NFT Frauds: Recent NFT Frauds
Recent instances of NFT fraud have come to light, the latest being the Banksy scam, where fake Banksy NFTs were listed on OpenSea and were sold for nearly $350,000. Next, there was the Evolved Apes NFT scam, where an anonymous developer named Evil Ape stole $2.7 Million worth of NFTs listed on OpenSea.
Apart from this, there have been larger scams that have garnered wide media coverage, but there is no shortage of smaller scams that go unnoticed. Malefic actors in the NFT market have found it to be a lucrative space. They have consistently been capitalising on the loopholes in the system without showing any intention to stop.
The majority of these frauds occur due to Rug pull, which derives particularly from DeFi. Here, crypto developers disclose the launch of their new digital asset and hype it to increase its value.
After the launch, when investors have invested their money into the project, the project is pumped and dumped while the issuers vanish and abolish their existence by deleting their website, social media handles, discord, telegram, and even LinkedIn.
This doesn’t necessarily mean that all the failed projects were a result of Rug Pull. Some projects fail because the owner can’t handle the business and due to overspending and exhaustion of funds, they are compelled to shut down the project. Think of it as a start-up that got shut down due to an inappropriate business model.
These “frauds” give a lousy reputation to NFTs in the blockchain space. The Web3 technology provides a safe haven for its NFT developers to list their projects in case the industry becomes mainstream.
How are Web3 Companies Tackling This Issue?
The issues presently faced by users in the NFT space are hacks and scams. It means that users may lose or have their digital assets stolen if they lose their identity.
These issues can be dealt with by Web3. Since all the transactions on Web3 are recorded on a blockchain, the likelihood of NFT fraud is near zero. NFTs contain information on the location of the artwork that the holder is looking for.
Fraud is nothing but improper research, reckless approach towards the project. This results in NFTs being labled as scams.
Verifying the authenticity of a pre-NFT creation is complex and cannot be controlled by NFT creation because NFTs are merely files that store the artwork. Hence, if you buy an expensive 1/1 artwork, the only way to check its legitimacy is by;
- Confirming the identity of the creator is of the utmost importance. You can either check for their verified badge, authenticated documents, or simply get on a call with them, especially when you’re investing a large chunk of money.
- Another way to confirm the legitimacy of an NFT is by looking at its previous sales. If the NFT has been sold in a considerable amount then it is most likely to be genuine, especially when a sale has been made to a known person.
- Additionally, you can double-check the contract code with the one you saw on the website, collection, or discord and verify other parameters as well. Pro tip: wait for others to do the checking, don’t be the first one to take the risk.
Conclusion
NFT fraud remains a significant concern in the blockchain space, but Web3 companies are taking proactive measures to mitigate risks. With transactions recorded on the blockchain, Web3 technology offers increased security and transparency. However, users must remain cautious, verify creators’ identities, and conduct thorough research to ensure authenticity and avoid potential scams.
