With the development of the non-interchangeable tokens (NFT) market, the number of scams in this area has also increased. From fake projects to phishing attacks, attackers are finding new ways to deceive gullible investors. Grigory Osipov, Director of Investigations at SHARD, told ForkLog about the most common methods of NFT fraud and shared tips on how to protect your assets.
Types of NFT
Art objects
NFT art is traded on specialized platforms such as OpenSea, Raible, Foundation and SuperRare. One of the significant advantages of non-interchangeable tokens for artists is to receive royalties from each subsequent sale of their work.
The monetization of digital creativity has become possible thanks to the blockchain, which ensures the authenticity and uniqueness of works, which is important for collectors. NFTs contain metadata confirming authorship and ownership history, and can be sold and bought from anywhere in the world.
Artists collaborate with brands, musicians and other creative personalities to create unique NFT collections that attract attention and high prices on the market. The development of virtual galleries and exhibitions also opens up new ways to interact with digital art.
Popular collections of NFT art. Data: OpenSea.NFT Games
In games, NFTs are needed to create unique digital assets such as items and characters. In such products, each element is a unique token on the blockchain, which guarantees ownership and eliminates the possibility of forgery or replacement.
Users can earn real money by selling their in-game assets on external trading platforms. For example, in Axie Infinity, The Sandbox and Decentraland, players breed fantastic creatures, buy plots of virtual land and create content that can be sold to other users. This creates a new economic ecosystem within the metaverses where virtual assets have real value.
NFT Staking
This is a process in which NFT owners can "freeze" them on a specific platform or in a smart contract. For this, they receive rewards in the form of cryptocurrencies, other tokens, or exclusive privileges. Staking provides owners with passive income without selling assets.
NFT passes
These are digital tickets, which are unique non-interchangeable tokens. They are used to access various events such as concerts, sporting events, exhibitions, conferences and other events.
Unlike traditional tickets, NFT passes have a number of advantages related to their uniqueness, security and the possibility of additional interaction: access to VIP areas, unique content, purchase of exclusive goods.
What does the cost of NFT depend on?
Uniqueness and rarity. The more exclusive the NFT is, the higher its value. For example, unique works of art or rare in-game items may have a high value due to their limited quantity.
Popularity and demand. The value of NFTs can increase significantly if they become popular among collectors and investors.
Benefit. In the gaming industry, the cost of NFTs may depend on their application. Game items that provide significant advantages are almost always more expensive.
The market and liquidity. In active markets with a large number of buyers and sellers, prices can be higher and more stable.
Despite the popularity of NFT, there are no standards and regulations in this area, which opens up opportunities for scammers. Firstly, many users do not fully understand how the technology works. Secondly, anonymity and decentralization complicate the process of tracking scammers and holding them accountable.
https://forklog.com/exclusive/nft-ne-skam-tri-tezisa-v-zashhitu-nevzaimozamenyaemyh-tokenovNFT fraud
Rug pull
This is a type of fraud in which the promoters of the project actively promote it through social networks, and then suddenly stop supporting and take investors' money after the price increases. As a result, the cost of NFT drops sharply to zero, which leads to losses. This option includes cases where developers remove the ability to sell a token.
Phishing Fraud
It includes fake ads through fake websites and pop-ups that request keys to users' private wallets or 12-word seed phrases. After gaining access, the scammers appropriate all the victim's assets in the form of cryptocurrencies and NFT.
Bidding fraud
Bidding fraud occurs when investors want to resell the NFTs they bought on the secondary market. After they put the tokens up for sale, bidders can change their preferred form of payment to low-value cryptocurrencies without informing about it. This leads to losses for the seller.
Pumping and discharge circuits
They imply a situation where a group of intruders buys up NFT, artificially increasing demand. Unsuspecting investors, thinking that the asset has value, join the auction and place more bets. As soon as the lot price rises, the scammers sell the NFT at a profit, leaving buyers with useless tokens.
Overpriced prices
Scammers trade NFT among themselves at an inflated price to create the illusion of high demand for the asset.
Fake NFT
Fake NFTs occur when scammers steal an artist's work and exhibit a fake on a marketplace where they sell a counterfeit work of art at auction. Unsuspecting buyers purchase a token that has no value.
Investment Fraud
Due to the relative anonymity in Web3, attackers often create projects that seem viable, but then disappear with the collected funds of interested people.
The SHARD company has repeatedly encountered investment fraud in the field of NFT. For example, in mid-2023, an attacker gathered a group in the Telegram channel and offered to purchase non-interchangeable tokens, the cost of which, according to him, could grow significantly. Investors have invested several million dollars worth of digital assets in the project.
Initially, the fraudster gave interest to depositors from their own funds and from the funds of other participants, but then withdrew cryptocurrency through exchange services, bought expensive apartments in Moscow City, a premium Lamborghini car and moved to Dubai, stopping all payments. The victims contacted the police. During the next visit to his homeland, the fraudster was detained by law enforcement agencies, and a criminal case was opened under Article 159 of the Criminal Code of the Russian Federation ("Fraud").
In the cybercrime report for 2023, Chainalysis analysts identified an increase in NFT-related fraud as a trend. According to analysts, the "average check" of intruders in this area has grown to $ 3,000.
The global NFT market is expected to reach $80 billion dollars by 2025. This will have an even stronger impact on the number of cases of fraud with non-interchangeable tokens.
https://forklog.com/exclusive/ai/peredat-voobrazhenie-na-autsors-hudozhnik-i-programmist-artem-konevskih-o-suti-nejroiskusstvaHow not to become a victim of scams
Check out the creators of the project. Make sure that there are conscientious developers behind it with good reviews on social networks. If they have a lot of subscribers but low engagement, this may be a sign of fraud.
Protection of wallet keys. Never share your wallet keys in pop-ups or on suspicious websites. Always go directly to verified platforms for cryptocurrency transactions. Never use links from pop-ups or emails to enter private information.
Do some research before investing. Before buying, make sure that the NFT belongs to a verified account and a real artist. Check the contact information of the creator and his transaction history. If it is limited to a single date, it may indicate a fraudulent scheme.