The explosion of NFTs has brought a wave of new creators into the ecosystem. But do these creators really know about it? Is it safe to deposit and withdraw when buying/selling an NFT?
Are they there to bring real utility to the ecosystem? Or to easily make a profit on the backs of newcomers? We can legitimately ask ourselves the question in view of certain projects and Rug Pulls which are multiplying.
So how do you avoid NFT scams? First of all, we will have to fall into the meanders of influence marketing and cognitive biases.
What Is NFT?
NFT stands for non-fungible token. Let’s start at the beginning: what does non-fungible mean?
The adjective “fungible” is an economic term that refers to a good or an asset that can be exchanged for another good or other asset of the same value.
For example, a dollar bill is fungible because it can easily be exchanged for another dollar bill of the same value.
A “non-fungible” item cannot be exchanged for something of equal value. A plot of land is non-fungible, since each piece of land has its own characteristics, and finding another plot with exactly the same value is difficult, if not impossible.
Art is another example of a non-fungible asset, since its value is highly subjective. This is where NFTs come in.
An NFT guarantees exclusive ownership of a digital asset (for example, that of a work of art, a purchase in a video game, or a tweet – yes, a tweet!).
You can buy an NFT at a certain price, but the fact that it is non-fungible allows its market value to fluctuate.
Although NFT transactions are mostly done in cryptocurrencies (bitcoin, Ethereum, etc.), they are not cryptocurrencies themselves. Like dollars and other currencies, cryptocurrencies are fungible.
If you exchange one bitcoin for another bitcoin, both will have the same value. And you will always have a bitcoin of the same value in your wallet. Since NFTs are unique, they have no equivalent value and are subject to market volatility.
Types Of NFT Existing
Indeed, even if it seems easy to list the different types of well-known NFTs, the exercise becomes much more complicated when one seeks to extend this list.
Because a specific NFT is likely to belong to several categories, and therefore to intersect them.
Yes, NFTs are cross-functional. And therein lies the admirable potential of this digital technology.
We will discuss in this article a non-exhaustive list, but nevertheless representative, of the categories of NFT existing to date:
- Video games
- Domain names
The NFT Items Of Video Games And Metaverse
There have already been such items in the world of gaming for a very long time, whether it be skins or weapons for example, which you win or buy in the game.
The difference is once again in the very technology of the NFTs. Indeed, thanks to the smart contract, the creators of items make a given item unique, and this same unique item will have only one owner. All this is engraved on the contract of the NFT.
Before, everyone could get a rare skin or weapon, by farming them (successful quest, for example) or by buying them from the in-game store, with an unlimited number of owners.
With NFTs it is quite different: developers can create a unique collection of items, more or less rare, numbered and dated. And the smart contract will give the owner not only proof of this authenticity, but also the unique possibility of using it in the game.
Note in addition to this a technical feat now possible: an NFT item can very well, provided that developers integrate it, be used in a video game totally different and foreign to the original one. This creates endless possibilities in the gaming world!
Popular NFT Scams
Like cryptocurrencies, NFTs are blockchain-based crypto assets. They have unique identification codes and metadata distinguishing them from each other. But unlike cryptocurrencies, they cannot be traded or traded on par.
This is the reason why they are said to be non-fungible. This differs from fungible tokens like cryptocurrencies, which are identical to each other and therefore can be used as a medium for business transactions.
Basically, NFTs are unique tokens that exist on a blockchain and cannot be replicated.
NFT scammers will try to take advantage of inexperienced buyers and investors interested in the market, and unfortunately there have been a ton of reports about it this year.
People are starting to realize that a nicely laid out roadmap doesn’t have to mean success, and we’ve seen more and more the proliferation of flipping operations in the NFT world.
The practice of buying the NFT at launch at the base price and reselling it to try and get the biggest multiplier possible.
Like a listing on a new exchange, some NFT projects will see their Floor Price, the minimum price of an NFT in the collection, increase sharply when listed on the marketplace. The fastest can actually make a nice profit.
What is the problem in this case? The purchase phase has taken place. And so the team wallet received the funds spent by the buyers.
You are therefore not immune to seeing the members of the project leave with the wallet and therefore a nice profit. Let’s take a simple example: an NFT reserve of 10,000 tokens, an initial purchase price of 0.3 ETH.
If the team sells even a third of its reserve, i.e. 3,333 NFTs, then the team will have collected 1000 ETH. The equivalent to the current price of $2,500,000.
This easy money has obviously attracted a whole new generation of “creators” to this universe. But who says newcomers, also says new NFT scams. They make you want to buy and they fill their pockets.
In any case, we suggest you consider some of the most frequent NFT scams on the web. The list with descriptions is provided below.
Fake NFT Stores
Scammers frequently establish fake NFT stores by closely replicating popular NFT marketplaces like OpenSea.
These sites can look nearly identical to the originals, prompting even the most seasoned NFT buyers to spend huge sums of money on fake NFT artwork that actually has no value.
NFT Artist Impersonation
One of the simplest tricks in NFT scams is this: many digital copies of well-known works of art are generated and sold without the knowledge of the artists.
Social Media NFT Scams
Scammers would frequently duplicate genuine accounts like Larva Labs on Twitter, generating fake pages that look identical to the originals.
Scammers can persuade users of their legitimacy by using these fake accounts and then offer them fraudulent NFT artworks.
Customer Service Impersonation
Scammers frequently use fake NFT customer service websites to obtain sensitive information from unwitting NFT owners.
This is a fairly typical event on Discord. Crooks can ask for private information in order to “fix” any problem users have if they connect to one of these fake customer support servers instead of the legitimate one.
NFT Gift Scams
Fraudulent NFT social media accounts and Discord servers can run fake promotions, tricking users into believing they have won a major prize.
A fake NFT account will send a message to users, usually on Twitter or Discord, telling them that they have won an NFT in this scam.
Next, the user will be directed to a fake NFT page, where they will be asked to connect their crypto wallet and enter their seed phrase.
One way to avoid NFT scams is to first promote the usefulness of a project in which you want to invest. Indeed, it is now important that NFTs bring something to the ecosystem. For example, we are seeing the emergence of NFT lending platforms or even NFTs used to fight misinformation.
How To Avoid NFT Scams?
When Dealing With NFTs, be careful to avoid being scammed.
- Avoid visiting sites which you have doubts about, which you don’t trust.
- Never give out your pass or secret phrase.
- Always do your own research.
- Only transact with people you trust.
- Be aware of counterfeit NFTs.
- Don’t get greedy.
- Steer clear of brand impersonators.
Why Are NFT Scams So Popular?
One of the reasons why NFT scams are so frequent is that the NFT industry has plenty of assets and funds circulated in it.
Influencer marketing is used by all NFT projects to accumulate sales and, as a result, income. Simply. This is the very basis of making the project known by paying influencers to advertise it.
The technique itself is not reprehensible and is not, by nature, a negative point. Be careful, however, of the type of influencers paid to decline this marketing.
Like some dubious projects advertised by well-known influencers, some NFT projects are too. And that is the whole problem.
You should not blindly believe “crypto-influencers” on principle, but exercise even more caution with those who have nothing to do with the medium.
However, crypto trading is much less scamful compared to NFTs, and it is advisable to go in for trading instead of buying NFTs, as you never know if the NFT purchase is a scam or not.
Along with this, crypto trading is a possibility and guarantees ocean, while NFT is just a phantom, figuratively speaking.
Is There Any Certain Qualification Of The NFT In The Law?
To date, no regulation rules directly on NFTs, and despite its advantages in the field, the NFT is difficult to qualify from the point of view of intellectual property law.
From The Legal Viewpoint, Is NFT A Work Of Mind/Art?
The NFT cannot be assimilated to a work of the mind when its creation goes through a computer process that does not call for any originality and does not fall under a creative process bearing the imprint of the personality of its author.
Like tax law, the NFT cannot therefore be legally qualified as a work of art within the meaning of intellectual property law.
Is There Any Legal Support For NFT As A Work?
An NFT cannot be qualified as a support for the work either, as it only corresponds to a digital connection, a cryptographic link with it.
Precisely, the underlying digital work will be fixed on a support which is the digital file. It is this digital file, the support of the work, which will be recorded in a blockchain. The NFT is then only the means of access to this digital file.
Can An NFT Be Certificated By Authenticity?
The NFT can be characterized as a certificate of authenticity, a document which makes it possible to certify the paternity and the integrity of the work.
However, it is not an absolute certificate of authenticity since the issuer of the NFT may very well be confused with the true author of the work.