Let’s Put A Stop To NFT Scams

In the last couple of years, NFTs have been ranking in millions of dollars in sales. Whether it’s a tweet from Jack Dorsey or a photo of a dog, one can’t deny that NFTs are taking over the market of digital assets. And it’s not just pictured as art, but also in videos, music, GIFs, etc. the list goes on. But when there is such a high demand for something, the other side of the spectrum is also true and this is, of course, scams.

Scams are everywhere in our everyday lives. We’ve been living with scams for as long as we can remember. The problem is that we’ve grown accustomed to spotting them. Unfortunately, we can’t say the same for NFTs just yet. We hear countless NFT collectors being defrauded or as a victim of theft. Doesn’t matter who you are, they are trying to get you. Let’s take a deeper dive into NFT scams so you don’t fall victim to this.

We also have something special at the end of the article that will blow your mind, so stick around.

Why NFTs Are So Vulnerable To Hacking?

We all remember the major hack that happened to Nifty Gateway, which is one of the most trusted NFT marketplaces alongside OpenSea. The hackers stole thousands of dollars worth of NFTs and transferred the ownership to their holdings, preventing the original owners from recovering their assets. The reason for this was the lack of two-factor authorization from the company.

Even though the security has been tightened, scammers and hackers have unfortunately become more effective since that first attack. It has only increased over the past couple of years. Let’s take OpenSea, in February 2022, this marketplace was hacked and attackers stole more than US$1,7 million worth of tokens. How did they do that? They used smart contracts to transfer the ownership to their accounts. The entire web3 is still relatively new, with many gaps available for hackers to enter. This was the same problem people have when web2 came onto the scene before we had so many blockers and defenses.

Crypto enthusiasts believe in blockchain security protocols because when the data has already entered the block, it can’t be altered or deleted. This means when the transaction has taken place, it’s recorded on the ledge by the use of smart contracts, which are permanently and publicly available. Blockchain technology provides you with NFT ownership. But if that’s the case, how is it possible for it to get hacked?

The process is simple. When a miner adds an identifier into the blockchain for a digital asset, it becomes an NFT. This can also be called minting. This is the only way a digital asset can become an NFT. The problem is the amount of energy being consumed to get this done, which is why miners charge a gas fee to cover the cost of the energy used. These gas prices can differ depending on the initial and secondary sales of the NFT. This can be anything from 3 to 15%.

So the entire process is still too expensive. This includes storing the NFT data on-chain. But as time goes on and the future of investing becomes more open-minded, storing the data on-chain will become even more worth it for the security it provides.

Types of NFT Fraud

There are many types of fraud with NFTs. Let’s inspect some of them to understand what to look out for.

1. The first, which is probably the most common one is the number of fake stores. For some scammers, it’s too easy to replicate certain popular marketplaces like OpenSea or Nifty Gateway. And while they’ll replicate the sites and make you believe that it’s the same one, they also load it with fake NFTs to deceive people. Always remember to double check the website, because the real marketplace might sell an NFT for 10 ETH and the fake one will sell it for 1 ETH just to steal your money.

2. NFTs have moved into the social media space and platforms like Twitter have official accounts selling NFTs, but here’s the problem. Scammers come in and copy the accounts to make them look like authentic accounts. They are then persuading people to buy their fake NFTs. With the copying of social media accounts, you also have artist impersonation. Where they might contact you through social media trying to sell you their artwork at a discounted rate, always check for some sort of credentials.

3. Discord has become the major hangout for anything and everything NFT. Communities connect and ask questions regarding any customer service. Now the scammers come a long and impersonate customer service agents in these communities. If you are worried about scammers catching you like this, there is an alternative way for you to join these servers instead of searching for them through Google. Go to NFT-certified websites or social media channels and join there. It’s almost impossible for a fake server to reach the level of followers and engagement you’ll find on the platform.

4. NFT fraud also comes as fake bidding. What fraudsters will do is bid on an asset using USDC, but they will change their profile picture to WETH. Now WETH has a much higher value than USDC, so anyone going through their bids and seeing that will immediately accept because they believe a big payout is coming. But seeing as the value was actually in USDC, they didn’t receive nearly as much. Always remember to take your time when going through your bids and seeing what currency they’re using.

5. Lastly, we look at insider trading. This is unfortunately one that can’t be avoided. The easier way to describe this is when someone purchases an NFT before it goes on sale. The only way to curb this is with stricter rules and having the ability for no one to buy something before it goes on sale. Leveling the playing field for everyone to have a fair chance at owning an NFT.

Introducing The Solution: Sunrise

Now we’ve taken you on the journey and showed you the various ways someone can scam you through NFTs and web3. But all of that is in the past, introducing the new NFT scam detector for web3, Sunrise. We told you we had something special planned. This is the future of security for the NFT space.

Because of the many NFT website scams that are all around us and having the ability to steal your money, this website detector can verify and recognize any trusted NFT website. This will decrease the chances of getting scammed tenfold. And did we mention it’s a Chrome extension, so no full-fledged downloading and signing up required? Just go to the Chrome store and search for sunrise and add it.

How does it work you ask?

It’s pretty simple. Three major sources coalesce the information. The OpenSea API, because OpenSea is one partner, CryptoScamDB or MetaMask, and the database. The database is something that was built as a configuration to map out Web3 sites and provide them with a trust score.

Upon installation, it then loaded this configuration into a background worker which provides you with fast, local, and private look-ups. During regular intervals, the look-ups are fetched and updated to keep the data fresh.

When a site is visited, the background script will look for an exact match and showcase the match if found. Letting you know if the site is verified or fraud. If the URL match can’t be found, the program will look for other signs of impersonation.

You don’t have to worry about privacy either. We know it is a big concern for many. Offline configuration is used, this benchmarks the design against privacy-centric extensions such as uBlock Origin. The browser activity or the sites you visit or don’t visit will never be sent without opt-in consent.

Sunrise works with all Ethereum projects which are listed on OpensSea. We are an official partner of OpenSea and use the OpenSea API to power this tool.

Final Takeaway

We’re not saying that you’ll never get scammed again, but with the help of these best practices and Sunrise, we have a fighting chance against the scammers. We must all just remember that NFT is still a relatively new concept with so much potential on the horizon.

The space is also relatively unregulated, which means cybercriminals can exploit the loopholes, so stay alert and always do your research before buying or investing in any NFT project. Let’s all work together to make the entire NFT space safe and fun for everyone without having to worry about scammers around every corner.