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NFTs Explained: A New Chapter in Cryptocurrency and the Scams that are Sure to Follow

by Keylen Villagrana | Apr 16, 2021 12:00:56 PM

Cryptocurrency remains an unfamiliar concept for many consumers. Every new development triggers a wave of speculation and misinformation – it’s hard to keep up. The virtual currency’s most recent chapter arrived in the form of non-fungible tokens (NFTs), and it took social media – Twitter in particular – by storm.

NFTs were first introduced a few years ago. It wasn’t until recently, though, that they’ve become all the rage. Major celebrities and artists are now promoting their versions of these “digital trading cards,” helping NFTs bring in billions of dollars in the first quarter of 2021. Unfortunately, since large sums of money are involved, scammers are jumping at every opportunity to take advantage of misinformed consumers.

What are NFT’s anyway?

In the digital world, it is very easy to “copy” and “replicate” items. In theory, the moment you publish your own original content – say a GIF, an art graphic, or a meme – it is then owned by the internet. You don’t have much control over that item anymore.

That is why NFTs are breaking new ground. The keyword to focus on is “non-fungible.” It is completely unique; it can’t be replaced or easily replicated. Take the physical art world, for example. Valuable paintings by iconic artists like Van Gogh or Leonardo da Vinci have been reproduced, but the original is irreplaceable. It can only be owned by one person.

Now, the same concept can be applied to the internet, thanks to cryptocurrency. Its series of unique, complicated codes allow for the creation of digital assets, like non-fungible tokens. They can only be accessed using designated codes, and those are stored in a “database” known as blockchain technology. (Keep in mind that this explanation is in layman’s terms; there’s a LOT more to it.)

NFTs allow users sole ownership of that original digital asset – once purchased, you are the only person who possesses that intangible object. There are many intangible digital objects that can now be converted into NFTs. They can have an official owner and gain value over time. Think of them as collectors’ items in the form of JPEGs, GIFs, videos, or even tweets.

How do I purchase one and what are the risks?

Although NFTs are currently out of most consumers’ budgets, there is a likelihood they’ll become more accessible. They’re just ridiculously expensive at the moment because they’re fairly “new.” Purchasing an NFT is done using the cryptocurrency Ethereum, and acquiring Ethereum may mean spending actual dollars, assuming you know how to make that conversion.

For anyone interested in riding the NFT wave, there are some important considerations to keep in mind:

Know which sites are reliable. Right now, only a handful of sites populate the NFT marketplace. It’s logical to assume more will emerge soon so they can get in on the action. If you’re thinking of purchasing from a newer website, make sure you conduct as much research as possible. A quick Google and Twitter search can go a long way; especially Twitter, since that is where many consumers post crypto scams they’ve encountered to warn others.

Scammers are also luring consumers to fake, copied sites that look similar to the major players. Bolster reported an uptick in “the number of suspicious-looking domain registrations with names of NFT stores like 'rarible', 'opensea', and 'audius’ increased nearly 300% in March 2021 when compared to previous months.”

Sticking to the major players may be a safer bet for bypassing suspicious links luring you to fake websites.

Verify the NFT you are purchasing is the original, not a counterfeit or an impersonation. It’s a bit difficult to verify an NFT is actually the original from the artist, since it’s a new concept (even on big name websites). In fact, many artists have unfortunately had their creations turned into NFTs without their knowledge. Know that what you’re purchasing is authentic before going forward with payment.

Brand impersonators offering support on social media. Once scammers notice you are looking to purchase an NFT, you may receive an invite to join the “official group” of a well-known brand. Those groups claim to be where you can find support, as well as insider tips and insight. Many groups use the word “official” within their promotions, but you never know who is actually running them. This is a common tactic for scammers to carry out their schemes.

Click to read more about cryptocurrency scams.

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