10 ways to avoid getting scammed with non-fungible tokens
Non-fungible tokens are one of the biggest new developments in the world of cryptocurrency, but they can also be one of the most confusing and fraudulent to understand. If you’re looking to buy non-fungible tokens, you need to be careful and make sure you’re paying the right price, getting exactly what you want, and that the seller isn’t trying to scam you out of your money or break any laws in their jurisdiction. Make sure you know what steps to take to avoid getting scammed with non-fungible tokens by following these 10 steps.
1) Be aware of the value of your token
Keep in mind that if you’re collecting a large amount of NFTs, they won’t necessarily be worth as much if they can’t be traded on marketplaces or used for other purposes. There are plenty of NFTs that were created specifically as collectibles or non-tradeable art pieces. Also, keep in mind how your collectibles relate to games. For example, there could be an NFT attached to a smart contract that represents an item within a game. If that game has no marketplace or economy at all, then your collection is probably just an aesthetic choice—not really an investment.
2) Know what you know about the issuers
There are a few things you should know before investing in a new NFT. First, do some research on who is issuing it. If they have a track record of shady dealings or are just new, there’s no telling if they will make it or not. You also want to consider how much funding they’ve raised and how many people work for them. When dealing with large amounts of money, these factors could mean life or death for your investment. If you have time on your hands, do some digging around yourself; don’t rely entirely on what an issuer says about themselves.
3) Beware of famous people
When we talk about influential people in crypto, it’s easy to forget that when they put their stamp of approval on a project, it can be incredibly convincing—even if they didn’t actually vet it. Take Ian Balina, for example. He was one of ICOs biggest cheerleaders on Twitter, and his follower count is massive. Unfortunately for investors who trusted him blindly and invested in scammy projects like Bitconnect and Celer Network (which had been publicly called out as a potential scam), he didn’t catch those red flags before promoting them.
4) Look into new exchanges before using them
Scammers often create their own fake cryptocurrency exchange website, complete with a convincing UI and wallet address. These fakes will then proceed to steal your coins by asking you for private keys or other sensitive information before sending you crypto that’s been bought from an unsuspecting victim. If you’re thinking of buying crypto from a new website, do some research first—there are lots of people out there who can help you verify whether an exchange is safe or not. If it seems too good to be true, it probably is!
5) Don’t fall for pump and dump schemes
While not necessarily illegal, pump and dump schemes are considered unethical by many in crypto. These are a very popular form of NFT scam. The scammer creates hype around a cryptocurrency (often via paid articles on sites like Steemit) which leads to an influx of new investors. This sudden increase in demand then leads investors with FOMO (Fear Of Missing Out) buying up large quantities of said token — giving rise to a pump — hence why it’s called pump and dump scheme. Unfortunately, new investors don’t realize that other investors are exiting at that point, which leads them buying into nothing more than vaporware; leaving these newcomers feeling deceived and scammed as soon as they start looking into what happened.
6) Do your research on wallets
If you’re using a new wallet that isn’t well-known, do research on its security. There are many different types of wallets. For example, there are hot wallets and cold storage wallets. Hot wallets can be accessed from any computer connected to the internet while cold storage is not connected to any devices (or a network) so they cannot be hacked into by an outside source. Be aware of what kind of wallet you want your cryptocurrency stored in and how it will affect your access and security before purchasing them.
7) Watch out for scams while browsing online forums
First, it’s best to stick to reputable forums. Generally speaking, a website will be more trustworthy if it has been around for some time, if it has a lot of users and if there is a strong community built around it. The ERC721.Tech forum is an example of one that might be worthwhile joining since there are plenty of other professionals who are interested in discussing NFTs. If you have any trouble finding a specific topic on forum websites, try using Google to search for your query using quotes; you can often find related topics that way.
8) Read the terms and conditions of any website you use
It’s important to read each website’s terms and conditions, as well as its fine print. Some might come off as benign, but there may be serious repercussions for not adhering to them. For example, if you win a NFT from a website giveaway and then decide to sell it on an exchange, some websites say that you must wait until after a certain amount of time before selling your token. The idea is that your free giveaway token was actually intended for promotional purposes and not meant for resale at all. Depending on how serious those restrictions are, they could potentially interfere with potential profits you make from selling your token.
9) Keep track of your transactions at all times
Although most cryptocurrency transactions can’t be reversed, there are instances where funds can be frozen. Most exchanges aren’t designed to hold your funds indefinitely, so there are some risks when it comes to sending funds for trading. For example, Coinbase states that Coinbase will generally not support a market order if we detect extreme volatility or irregularities in pricing or other activity. In addition, third parties like Coinbase will also charge you a fee for using their service as an escrow holder. So while purchases and sales of cryptocurrencies have become more reliable over time, it is still important that you keep track of all transactions at all times by yourself.
10) Recognize phishing sites by their URLs
Another common scam is phishing, where a scammer tries to convince someone (usually an ICO participant) that they are participating in an ICO by giving them a fake website URL. As always, if you can’t access a URL from your regular browser (and not something like Google Chrome’s incognito mode), then something is probably wrong. If you get a link from somewhere and it sends you somewhere else entirely, then again: That’s almost certainly going to be a scam. Double check every link before clicking on it.