Non-fungible tokens (NFTs) are unique digital assets existing on a blockchain, with distinguishing identifiers and metadata. NFTs are enjoying a resurgence in today’s digital economy, with rare pieces exchanging hands for head-turning fees. On the other hand, scams abound since so much money is at stake.
The increasing NFT scam epidemic
The cryptocurrency market recently gained popularity, with NFT sales exceeding $24 billion in 2021. According to Moti Levy, DeviantArt’s Chief Operations Officer, the surge has coincided with an increment in fraud activities. DeviantArt is currently scanning different blockchains for any signs of fraud. Since it began operation in September, it has recorded more than 90,000 fraudulent NFT transactions.
The NFT marketplace operates on a decentralized financial framework that makes central authority regulation redundant. The arbitrary regulations play a role in the rise of NFT-related fraud cases. NFTs are inherently simple to create and market, making them one of the most accessible and straightforward markets, even for fraudsters.
The blockchain has transformed global markets, but it remains immature and poorly regulated. Recently, the Wall Street Journal called for market regulation, which might reduce fraud and stabilize markets. While cryptocurrencies were created to be decentralized, it is apparent that skilled creators and collectors are not getting the best experience.
In January, hackers stole NFTs worth $2.2 million from Todd Kramer, the NFT collector. OpenSea lost an estimated $1.7 million in an alleged phishing scam in February. According to Check Point Research, MetaMask users lost over $500,000 last fall in a targeted phishing assault.
Most prevalent NFT scams
NFTs scams are old cons operating on new Web3 technology. Many scammers go to great lengths to access users’ digital assets. The most sophisticated scams are often difficult to detect and may last for months or longer. Here are some of the most prevalent NFT fraud tactics.
Rug pull
A rug pull is a fraudulent scheme where developers advertise their project to generate traction and pull out investors’ funds, leaving them with worthless images as NFTs.
These projects frequently debut on well-known platforms or tout celebrity endorsements to attract investors. According to Chainalysis, a firm that studies and analyzes blockchain trends, investors lost almost $3 billion to these scams in 2021.
Wash trading
Wash trading predates the NFT boom, with buyers and sellers conspiring to inflate an asset’s value to create the illusion that there is genuine external interest. The manipulators are sometimes the same person or company. Wash trading makes an NFT appear more valuable than it is. Last year, investors lost more than $9 million to NFT wash trading.
Pump and dump
Last year, crypto investors lost millions of dollars to pump-and-dump schemes. Pump-and-dumps are a standard feature of penny stock frauds, where the value of an asset is artificially inflated through fraudulent claims and misrepresenting investor demand.
These fraudulent schemes entice investors with false promises and long-term prospects. Phishing, catfishing, fake NFTs, fake NFT airdrops, investor frauds, and hacking incidents across NFT marketplaces are other examples of NFT scams.
How REV3AL resolves NFT scams
The tide appears to be shifting in the fight against NFT frauds. Developers and crypto enthusiasts identified the current issues and may have a reliable solution through REV3AL technology.
REV3AL operates on cutting-edge security technologies that protect against counterfeiting. The underlying technology allows NFT artists and creators to verify the validity and maintain the value of their assets. The technology also aids IP owners in validating copyrights.
REV3AL protects creators and collectors by facilitating NFT authentication before payment. REV3AL technology also has a significant impact on the long-term value of digital assets.
According to the project’s whitepaper, the cutting-edge technology offers an NFT solution by providing multiple layers of authentication. The tools are also operational off-chain and on-chain. It provides self-verification solutions to make digital assets tamper-proof and protected against misuse.
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