Non-Fungible Tokens (NFTs) are a form of digital cryptocurrency (it is a particular token generated by a dedicated smart contract) which represents a unique and unrepeatable unit of digital property, such as a work of art, a video, a tweet or anything else that can be digitally represented.
Thanks to their uniqueness and the underlying blockchain technology, NFTs are becoming more and more popular as an investment, both among art enthusiasts and general investors (hoping to find some real “blue chips”).
However, with the growing interest in NFTs, there are more and more scams related to this industry, which can put inexperienced buyers’ investments at risk, and in this article, we’ll explore how to protect your investment in NFTs by avoiding scam marketplaces and following some safe investment practices.
Common warning signs of NFT marketplace scams can include:
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Prices too low: Rare and unique NFTs can command high prices, so if an NFT artwork is offered for significantly less than market value, it could be a scam;
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Sellers unknown or with no history: before buying an NFT, it is important to check the reputation and history of the seller. If a seller doesn’t have a known history or reliable reputation in the NFT industry, it’s best to avoid buying from them;
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Promises too good to be true: If a seller promises high returns or rapid appreciation in the value of the NFT, it could be a scam. Investments in NFTs, like any other investment, present risks and there are no guarantees of returns. The case of gambling and related NFTs connected to the project promoted by Logan Paul broke out only recently;
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Certificates of authenticity missing or suspect: Original NFTs should be accompanied by official certificates of authenticity, if a seller cannot provide one or if it looks suspicious, it is best to avoid buying, and Italian law stipulates the content of these certificates of authenticity;
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Site for phishing: Phishing sites try to imitate reputable NFT marketplace sites to steal users’ personal information or money. It is important to always check the site URL and make sure you use only official and trustworthy websites;
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Suspicious communications: avoid clicking on links or providing personal information to people who contact you via email or private messages, especially if you have not requested them.
Keeping these warning signs in mind can help protect your investment in NFTs and avoid falling for marketplace scams.
When choosing an NFT marketplace, there are a few important criteria to take into consideration to make sure it is reputable, and your investment is protected:
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Reputation: The reputation of the marketplace is an important indicator of its reliability. Look for a marketplace with a good reputation and a history of reputable NFT transactions, and in this case a marketplace that has been active since at least 2020, if not earlier;
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Safety: Marketplace security is crucial to protect your investment. Make sure that the marketplace uses advanced security technologies, such as encryption and multi-factor authentication, to protect transactions and personal data, check even with a simple search with a search engine to find any news of attacks suffered;
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Transparency: A transparent marketplace will provide detailed information about its authenticity verification processes, valuation methods and NFT selection criteria. Furthermore, a transparent marketplace should have documentation and an active and participatory community;
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Verification of authenticity: Verifying the authenticity of sold NFTs is essential to avoid buying fake NFTs. Look for a marketplace that uses reliable authenticity verification methods, such as NFT certification, blockchain analysis tools, and verifications by industry experts, also before proceeding with the purchase it is always necessary to check and interface with the author of the ‘work to get feedback;
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Variety of NFTs- Make sure the marketplace has a large collection of NFTs, not only because it’s easier to find what you’re looking for, but also because a marketplace that is dedicated to a large collection of NFTs is more likely to make an effort to verify the authenticity of the NFTs;
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Services and support: Good customer service is important, especially when it comes to large investments. Make sure that the marketplace has a professional and available support team to answer your questions and solve any problems, and it is good to check the various social media of this platform to find any anomalies such as closed or non-existent social profiles.
So far we have seen the theory on what to do and check when we come across a new NFT marketplace, and now let’s move on to practice and analyze together a new NFT marketplace (Botsplit) that has contacted the famous international artist Juan Tardivo, and that has led to the discovery of this scam site.
We are scrolling through the various posts on Instagram and here comes a direct message from an unknown person, where he talks about the NFT sector:
Apart from the interlocutor’s macaronic Italian, we also notice a superficial definition of what NFTs are, i.e. simple images in jpeg format, which is far from its classic definition of a unique digital asset produced by a smart contract and which allows containing any type of information inside, such as images, texts, documents, audio, video, and more such as unlockable content or even other cryptocurrencies.
The conversation goes on, and the artist Juan immediately points out that he already has an NFT collection of his paintings on which it is possible to buy
Continuing reading, we learn that the sender uses a particular platform and lets us know that: “he is willing to buy at any price.”
One might ask why a person is willing to buy an NFT, already available on a marketplace, on another platform, and pay an indefinite and very high price for it.
Thanks to the data collected and the insights made, we can present the final results of our research on this platform and all the inconsistencies found and analyzed up to now.
As we mentioned earlier, one aspect that needs to be checked is the reliability of the platform, which also depends on its implementation and longevity, and to do this, in a very simple way, just go and analyze the domain registration, and here we see that it was registered just six months ago, i.e., in July 2022.
And this also affects its security as it does not have an exciting history of robustness as it is too short a period to see and analyze possible attacks that can also determine its closure.
Another detail that only a few people will have noticed is the blog part, as one of the first blog articles marks April 2022, and among other things, that eye-shaped symbol next to the date determines the number of views it has gotten that article in particular, which as can be seen from the image below, has just one view, which is the one made by us by analyzing the related website.
And this is already a big alarm, as it is one of the first articles and which, in theory, is always one that has many views precisely because it represents the beginning of a project, which in this case it does not have and which does not read anyone, revealing the aridity of movement on this site.
Let’s now analyze the social aspect of the project to analyze whether it has traction or not, and let’s start with Instagram, which has already reached almost 4 thousand followers with just a dozen posts.
And here we already have a second inconsistency because if there are almost 4,000 followers and people who know the project, why in the first blog article, do we only find one view and not at least a dozen opinions, if not hundreds of views?
What about the other social networks, here, we move on to Telegram, where we see that just 24 people are part of the related social network, and here too it seems quite strange to have about 4 thousand followers on a social network and just 24 people on Telegram.
Well, maybe not everyone uses this social network, and therefore they work with other social networks, such as Instagram or Twitter, which is essential for such projects.
And here, we go to the official page of the Twitter channel of this NFT marketplace, and here we can see what is shown under the light of the sun, namely that the project page does not exist, or rather it existed and was then canceled.
With all these elements in our possession, we can state with reasonable certainty that this marketplace is only a showcase for attracting unaware people, for NFTs of unsuspecting victims who could naively use them to sell or buy NFTs.
But let’s go back to the question we asked ourselves earlier, namely, why does someone have to spend more, “any price”, for an NFT that already exists on another platform?
Well, perhaps not everyone knows how existing NFT marketplaces work and the underlying technology, as for a marketplace to sell one of our NFTs, it must have access to it, and no one else can sell an asset, such as an NFT, which is located in our blockchain address, other than the owner of the private key, which in this case is us.
To be able to sell our NFT, it must be transferred to the marketplace through a smart contract which in turn will transfer possession of the NFT to the buyer, therefore on a technical level, there is an intermediary who “activates” when the condition of the smart contract, i.e., receiving X crypto for that asset, comes true and triggers the smart contract providing the buyer with the related NFT.
With this in mind, and explained simply, let’s see how criminals exploit and set up fake marketplaces where they have control of the smart contracts therefore, we are effectively giving away our NFTs to them when we put them up for sale, and it is always them when some NFT is sold without giving anything to whoever created the NFT, effectively realizing the scam for all to see.
Then, not having technical support to appeal to, in fact, we cannot contact anyone as these platforms then appear and disappear in the form of other names, proposing the same modus operandi and scamming other people and artists, proposing NFT purchases for stratospheric figures.
We conclude with the warning to always remain vigilant and attentive in this sector, especially since this sector can only appear to be easy to use and understand, and sometimes, especially for those who want to approach the world of NFTs, to rely on reliable and legally existing ones, to have support and physical and real people with whom to interact.
A simple recap You can find here in my video: