NFT scam

7 MIN READ
Cryptocurrency
29 May 2024
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NFT scam

Intro

Many people have heard that buying NFT is an incredible opportunity to make good money. This is partly true, but equally often mentioned is the fact that the entire NFT industry is one big bubble that will burst one day. We can agree with both opinions, but there is one indisputable fact - most NFT projects are scams, and now we will tell you why!

What is NFT?

NFTs, or non-replaceable tokens, are digital records of ownership and authenticity stored on the blockchain and associated with a specific multimedia object. These records are not just multimedia files such as GIFs or JPEGs, but public information records that are associated with the corresponding files. In essence, NFTs are more akin to certificates of ownership and certificates of authenticity than multimedia objects themselves.

Unlike fungible assets such as dollar bills or stocks that can be swapped for each other without changing in value, NFTs have unique characteristics that make each token unique and impossible to replace.

What is the point of buying NFTs?

Examples of scam among NFT projects

Let's imagine that the company Nike released a limited version of sneakers, namely 5000 pieces, and those who buy these sneakers, in addition to the unique model, will get a tour of the factory Nike. On such sneakers will definitely find a buyer! Or another situation: suppose Da Vinci still lives in our world, and he decided to paint 2000 unique paintings in digital format. Naturally, collectors will want to buy a painting by such a famous artist.

Actually, the whole point of buying an NFT lies in two key points: either you like what owning this NFT gives you (like access to a private Yacht Club in the case of Bored Ape), or you realize that these NFTs will be in demand and you can resell them for more.

However, herein lies the catch that scammers take advantage of. They can easily create the appearance of "exclusivity" NFT, offering a variety of chips and features, but in the end, the buyer will get an empty wrapper. Hence the main thesis for today: the majority of all NFT projects are scammers.

How does it work?

scam among NFT projects

So, how does an NFT scam scheme work? In fact, it is quite a costly, long and laborious process, because it is no different from creating a really strong project. Scammers create a unique collection, recruit an active audience in their social networks, create working websites and may even attract large partners - all in order to create the appearance of a "unique and active project". Scammers have to take such great pains because absolutely all self-respecting marketplaces, before pouring the project, thoroughly check it. As soon as scam-NFTs pass to the marketplace, it's up to the scammers to maintain activity for a couple of weeks and abandon the project, leaving with a profit.

The main danger is that even if you check the project thoroughly, you can not be sure that its developers will not slip away with your money. In most cases, this is exactly what happens, and buyers, instead of the promised uniqueness of NFT, get only a beautiful picture, which has as much value as any random picture from Google.

Examples of scam among NFT projects

Let's move from theory to practice: let's look at real examples of various collections that showed potential but turned out to be a scam.

Satori

Satori

This promising project was released in 2022 and gained quite a lot of popularity. The project was worked on for more than a year. The authors gathered a powerful community, drew 5555 NFTs, held activities, drawings, meetings and so on. Satori even partnered with many other collections. For buying NFTs, investors were promised access to 3 analytics bots at once, one of which can check other NFT collections for scams. The funny thing is that Satori ended up being a scam themselves.

The collection was released on the Magic Eden platform, which has some of the highest listing requirements. The price at the start reached 2 SOL, and after a week began to gradually decline, now it is fluctuating at 0.025 SOL.

Satori scam

The authors of the project earned more than 320,000 dollars, and abandoned the project a week after its release, the result you see for yourself. Even the Twitter of the project remained, but the activity in it 0.

Monkey Hype

Monkey Hype

A collection released amidst the hype surrounding Bored Ape. You can find and buy it on the OpenSea Marketplace, but we do not recommend it.
This scam machine initially looked very suspicious.

The social media audience was at its peak only 3000 people. For strong projects, this indicator should be at the level of 40-80 thousand and higher. Nevertheless, many investors bought the NFT data.

If you look at the sales activity on OpenSea you can see for yourself that the project is dead. At the moment someone even bought the picture for 113 ETH, which already pays off all the costs of creating the project. And what do we have now? A price of 0.003 ETH and empty promises of developers that will never be fulfilled.

Monkey Hype scam

That's clearly not what investors were counting on, wanting to resell the NFT for more money.

Vincent

Vincent scam

It's a similar story to Satori. Audience at peak - 3000 people. Price at the time of release - 0.05 SOl, average price now - 0.0086 SOL.

Vincent

Only the authors of this collection received Xs.

Alpha Hounds

Alpha Hounds

Audience on twitter - 6000 people. The price at the start is 0.5 SOL, the price now is 0.0075SOL.

Alpha Hounds scam

The last post on Twitter is dated January 7. The project is dead, authors not found.

Calco The Hero

Calco The Hero

Audience - 9000 subscribers. Price at the start - 0.05 SOL, price now - 0.0095SOL.

Calco The Hero scam

At the same time, the project's website is still functioning, but no one has received the promised Xs.

Crowdsurfers

Crowdsurfers

Audience - 9000 subscribers. Price at the start - 0.05 SOL, price now - 0.0068 SOL.

Crowdsurfers scam

The Henchmen

The Henchmen

Audience of more than 10000 subscribers. Price at the start - 2 SOL, price now - 0.009 - 0.013 SOL.

The Henchmen scam

The project was released around the same time as Satori.

The list can be continued endlessly, but the outcome is always the same - investors did not get the promised Xs. The reason for such depressing statistics is the artificial hype around the collections, as well as the unwillingness of developers to continue working on their project. And, of course, no one will ever reimburse the losses incurred by investors.

How not to fall for fraudsters?

How not to fall for fraudsters?

Determining whether a project is honest or not is not easy. To avoid risks, you should follow certain rules that minimize the likelihood of being cheated in the NFT world.

1. Make sure the NFT project has at least two channels of communication and a significant audience

If a project does not have links to its website and Twitter on the marketplace, it is most likely a fraudulent scheme. Moreover, not only are they scammers, but most likely inexperienced, because creating a website requires financial outlay, and tweeting without followers is meaningless.

2. Be skeptical of any promises of an NFT project

A lot of NFT-projects promise you golden mountains, passive income, instant success and even fictitious discounts like "buy now, the next issue will be more expensive". Remember: any project will tell you anything as long as you pay. No one can guarantee whether a project will deliver on its promises. Can a project change its promises after fundraising? In most cases, no.

3- Don't waste your time on Whitelist if it doesn't promise free NFTs

Many NFT projects offer participation in the so-called Whitelist. This means that you help the project to attract more users, for example, by advertising it on your social networks, and in return you get the opportunity to buy NFTs at a small discount before the official launch date. However, you should keep in mind that in the short term, many projects may have NFT prices adjusted in the market, and this correction is most often downward. For example, you can buy an NFT at a discounted price for 100 dollars, but a week after the sales start date, its price may drop to 5 dollars. Why does this happen? Because that's what the market decides, and people start panicking, selling their NFTs at discounted prices in an effort to minimize their losses. So someone might buy for 100 and sell for 200, and someone might not be so lucky and sell for 5 dollars.

4. Don't buy NFTs at the start of the sale

In most cases at the start of the sale, the price is set by the seller. Price correction can occur within 2-5 days. While you may have the opportunity to make "X's" in the first few hours, there is also the risk of losing everything altogether. Our advice is simple: if the NFT is not free, it is better to wait, analyze the market and the level of confidence in the project from professional investors. If the NFT was received by you for free, of course, you can catch the wave and sell immediately, but keep in mind that hundreds of thousands of other people are also trying to do this, for them it is a job, not a one-time event.

5. The best NFT is the one you get for free

Some projects start distributing NFTs for free at the beginning of the sale. This can be a limited number or an entire collection. This is exactly what happened with CryptoPunk. However, no one can promise you that the collection will be even 10% as successful as the punks.

NFT scam: thoughts from the Cryptology team

Despite the booming NFT industry and its potential to redefine digital art and ownership, NFTs have also become fertile ground for scammers. Fraudulent schemes are not uncommon in the crypto world, and unfortunately, NFTs are no exception to this rule.

To protect yourself from potential scams, it's especially important to double-check all information multiple times. This means scrutinizing every offer, paying attention to details, social media, and the team behind the project. You should be especially wary of projects you haven't heard of before.

Also, when buying an NFT on a marketplace it is very important to know who and what you are being offered: you should check the seller, as well as their transaction history and reputation in the NFT community. However, checking a seller's reliability should not be limited to their past. It is important to make sure that all aspects of the transaction, including the NFT itself, its origin, value and uniqueness, match what is claimed. Scammers often use elaborate schemes to defraud buyers, they may fake websites, write fake reviews and copy artwork.

Also, by no means buy NFT when the collection is at a high, for fear of not being able to do so later. This is an area where, if you want to make money, you should only act after weighing the pros and cons.

Ultimately, in the NFT field, as in any other area of investing, awareness and vigilance play a key role in securing your investment. NFT is an area with strong potential, after all, we've all heard of Bored Ape CryptoPunk or Merge, which are quite lucrative to invest in. However, you should keep in mind that if an offer seems too good to be true, it's probably a scam.

Frequently asked questions about scamming in the NFT industry

Are all NFT projects scams?

No. There are some really strong collections, however most of the NFT is really a bubble.

Is there any way to protect yourself from scammers?

Yes, you can reduce the risk of falling for scammers if you check all the details of the project, from audience activity to studying the authors' biographies. However, this still does not provide a 100% guarantee of safety.

Is it worth buying NFT or is it better to bypass them?

You can purchase NFTs from well-known projects such as Bored Ape, however, if you are interested in another project, it is better to research it twice before making a purchase.
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