Moneymaking potential in cryptocurrencies and NFTs is touted across the web, but the potential for digital highway robbery is just as great. Thatās why itās a good idea to armor yourself with information about how to avoid the many dangerous dark alleyways found along the blockchainās supposed paths to wealth.
Scams can take many forms, from fake investment opportunities to phishing attacks. For example, āWeb 3 Is Going Just Greatā
reports that in May 2022, a crypto project was launched with the title āDay of Defeat.ā The project's developers called it a āradical social experiment tokenā that promised, āto give holders 10,000,000X PRICE INCREASE.ā This meant anyone who purchased $1 of the token would receive massive rewards.
By the time the tokenās price plummeted by 96%, investors had purchased $1.35 million worth of coins. Unfortunately, the scammers took all the liquid assets with them. It was a classic ā
rug pull.ā Thatās an apt term to describe what happens when investors are lured to a new crypto investment opportunity only to have the developer pull out and usually vanishāwebsites and social media accounts deleted or locked. Rug pulls arenāt that new, but cryptoās widespread adoption has provided plenty of opportunities for the sufficiently motivated to create new ones.
In June 2022, actor
Seth Green fell prey to a classic phishing scam focused on his Bored Ape Yacht Club (BAYC) NFTs. After Green bought legit Bored Apes, someone sent him a phishing email disguised as an alert about sketchy activity on his OpenSea account, where his apes were stored. He followed a link from the message to a site that looked enough like OpenSea to fool the Robot Chicken co-creator into typing in his login information. But as is usually the case with a phishing scam, Greenās info was sent to a command and control server where it was accessible to whoever built the fake login page.
In no time, hackers had grabbed some of Greenās most valuable NFTs and sold them to another account. As a result, the actor had to
pay at least $260,000 to get his Bored Apes back.
While Seth Green was getting in on the latest thingāas Hollywood creators like to doāyou can take steps to reduce your risk of falling into the trap that ensnared him.
Here are six to start:
Do your research
person using MacBook proPhoto by Austin Distel on UnsplashBefore spending a dime, examine the account offering the NFT or tokens. Does the marketplace offer verification? Opensea, for example, verifies accounts with a blue checkmark. It requires specific benchmarks for verification, stating that an account that owns ācollections with at least 75 ETH of volume soldā may qualify if they also āmeet other criteria like minimum activity levels and social presence.ā Ensure youāre buying from a seller with a checkmark.
Use reputable platforms
Bitcoin wallet in 3D. Feel free to contact me through email mariia.shalabaieva@gmail.com.
Check out my previous collections āTop Cryptocurrenciesā and "Elon Musk" . Photo by Mariia Shalabaieva on UnsplashCrypto and NFT purchases generally require setting up a digital wallet. To that end, there are plenty of sites offering crypto wallet functions. Still, only the ones that have been around for a few years (Coinbase, for example, launched in 2012) and have real name recognition can guarantee that they at least take security very seriously. Known and generally reliable sites offering wallets include Coinbase, Trezor, Metamask, Public.com, and Ledger. Of course, those arenāt the only ones; theyāre a good place to start.
Use the walletās security settings wisely
two pink padlock on pink surfacePhoto by FLY:D on UnsplashGood wallets have the kind of security protocols we might expect from our banks or email accounts. For example, using two-factor authentication is a must, especially if you donāt want to end up paying through the nose for apes youād already purchased, like Seth Green.
Look for rug-pull red flags
woman sitting on bed with MacBook on lapPhoto by Victoria Heath on UnsplashThese include mysterious, anonymous developers. If you research projects on Twitter, for example, there are frequent mentions of ādoxxedā developers. In this context, doxxed just means the devs are telling potential investors who they are, likely with an open, transparent, and consistent web presence that goes back further than just a few months. Be wary of new social accounts and examine websites and white papers describing the project and its purpose. If they are vague or the sites seem thrown together (multiple pages with no content or TBAs), be very wary.
Be suspicious of 'pie in the sky' promises regarding profits
10 and 20 us dollar billPhoto by Alexander Schimmeck on UnsplashIf you refer back to āDay of Defeat,ā the project that rooked investors to the tune of $1.35 million, one of the easiest methods of spotting a possible scam is right thereāthe promise that those who purchased tokens would see a 10,000,000X increase in price. CoinTelegraph puts it succinctly in their recommendations about taking care with crypto and NFTs: āIf the yields for a new coin seem suspiciously high, but it doesnāt turn out to be a rug pull, itās likely a Ponzi scheme.ā
Look for skewed numbers
turned on monitoring screenPhoto by Stephen Dawson on UnsplashAccording to Matthew Callahanāfounder and CEO of Delphi, a Web3 consulting agencyāother red flags to watch out for include projects where the number of āTwitter and Discord follower numbers seem disproportionate to their engagement.ā That is, small numbers of users contrasted with active, vocal engagement can suggest sock puppetry at work. Callahan also suggests that āadvertising the project on Twitter/Instagramā could be a red flag. Why? A paid ad campaign could indicate an attempt to obscure a lack of organic engagement. The account isnāt relying on word of mouth so much as paid views, which artificially boosts its profile, obscuring the fact that thereās āno real community engagement on social platforms.ā
Frankly, there is still no surefire way to avoid all online scams. The key is to be a little paranoid, ultimately. Keep your digital head on a swivel, check all corners, and donāt go big at the start. Extra vigilance will improve your chances of not getting scammed into oblivion.
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