Are NFTs Scams? | AirNFTs

An in-depth look at why people think NFTs are scams and how to protect yourself from different types of fake NFT projects.

In 2021, the NFT market announced a total market cap of over $40 billion, with endorsements from celebrities like Snoop Dog, Mark Cuban, and others. Whether they support Fungible tokens (NFTs) or not, investors from different industries cannot ignore this new trend. However, despite the rapid growth of NFTs, there are still many criticisms and questions about their legitimacy. This guide will provide an in-depth understanding of the value of NFTs to help you respond to those who think NFTs are scams.

‍‍Why do people think NFTs are scams?

Since their inception, many people have viewed NFTs as an old-fashioned scam in high-tech guise. They see them as expensive JPEG files, a terrible idea and full of problems.

Here are some reasons:

  • NFTs are illiquid and volatile: many people buy NFTs without understanding the consequences of illiquidity and invest money they can’t afford to lose.
  • Environmental impact, as the most popular NFT markets, runs on the Ethereum blockchain, which uses an energy-intensive mining protocol called proof-of-work,
  • They are only valuable as tools for money laundering, tax evasion and investment fraud. While the integrity of blockchain technology is not questioned, NFTs can perpetuate fraud. For example, a number of artists discovered that their work was being sold as NFT on NFT marketplaces without their consent.

At AirNFTs, we believe that instead of calling all NFT projects scams, people should broaden their understanding and provide more details on the diversity and future use cases offered by NFTs.

NFT is everywhere, there is tremendous potential beyond digital artworks and untapped in the NFT market. We talked more about the Future of NFTs in a previous article but here are some interesting examples:

  • Medical records and authentication: NFT ledgers can store a person’s medical records without compromising confidentiality,
  • Intellectual property and patents: NFT tokens allow users to prove ownership of a piece of content,
  • Game industry: NFT’s integration into the gaming industry is a popular use case that will most likely be part of the future of gaming. Play-Win is booming, although it is only a small subset of the massive online gaming market. In-game NFT elements combine usability and collectability for players.

Before generalizing all NFTs as scams, it’s best to make a clear distinction between the concept itself (what an NFT is) and the malicious actors creating these scams.

How do NFT scams work?

NFT scams work by stealing your crypto wallet’s login information or making you believe you’ve successfully bought or sold a legitimate NFT. Many cybercriminals are attracted by the monetary value attached to these digital assets, so they adapt the usual hacking methods such as phishing to break into cryptocurrency users’ accounts and steal NFTs. We will discuss this in more detail below.

How to recognize an NFT scam?

They fall into several categories, let’s look at some of them:

1. Carpet pulling or fake NFT projects

It is literally a scam run by the illegitimate NFT creators. In simple terms, a Carpet Pull is when a scammer lures you into what appears to be a legitimate NFT project. Immediately after its launch, the developers abruptly leave and disappear. Unfortunately, they take all your money and run away. Even though you still own coins, tokens, or NFT, it’s already worthless at this point.

Only buy NFTs from trusted NFT marketplaces like AirNFTs or OpenSea where artists are verified and have complaints and refund procedures.

2. Plagiarism or fake NFTs and art theft

Scammers sell digital images without actually printing the NFTs. These projects are often accompanied by social media campaigns, promises of incredible value, and little information about the NFT creator. While the money comes in, the scammers wait for their exit. Buyers get something, usually a JPEG attached to an email, and the scammers disappear with their money and email address. This scam can be devastating to a wide audience, as NFT verification is not straightforward for inexperienced buyers.

As always if you’re buying an NFT, do your research. Check the seller’s account verification. On AirNFTs this is a blue verification badge. Follow the seller on social media and also check his background on NFT marketplaces. Also search for complaints. If the artwork was stolen, you’ll likely find traces of its true owners online.

3. Phishing scam

Phishing scams are nothing new, but in the complex world of NFTs and crypto, it can be easy to fall for them if you’re new to the technology. New NFT offers are popping up in rapid succession and it’s easy to get caught up in the hype. Scammers often ask for your security details or your wallet address. Never willingly give out information and never give out your 12-word seed phrase – and ideally keep it offline on a USB stick.

To stay safe, only share your wallet information with sites you trust and never provide details when asked. Provide details only when you visit a site, without linking to an email or Twitter post.

How to avoid NFT scams?

Due diligence is required. We discussed this in more detail in our previous article on “How to verify the authenticity of an NFT”. Here are some of the things users should consider:

  • Never click on suspicious links or attachments,
  • Create strong passwords for your wallets and NFT accounts,
  • Enable two factor authentication,
  • Verify NFT creator’s account and social information,
  • Never share your seed/recovery phrase.

Should you invest in NFTs?

Not all NFTs are scams, but you should know that there is no inherent value or benefit behind most of them. Some do this, especially in crypto games, but most NFTs are collectibles that cannot provide you with passive income if they are not traded. As an investor, you need to understand the value of the underlying asset NFT represents before you buy it.

closing thoughts

When you buy and sell NFTs, they protect you from scams, price increases, etc. You don’t have many safeguards to protect. People are often scammed by buying and selling illegitimate NFTs from an organization claiming to be a verified NFT project. You should trade NFTs on secure NFT marketplaces such as AirNFTs and always do your own research before investing in an NFT project.

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