Web3 Scams and How to Avoid Them

10/27/2022 15:10

Web3 is hailed as the Internet of the future. This is not far from the truth. The concepts behind Web3 are exciting, given the combination of decentralization (blockchain technology) and token-based economics. Unlike the traditional Web2, Web3 is an internet built on the blockchain, giving power and the right of ownership to users.

But, no matter how innovative the technology, concepts, or driving motivations behind a movement, there are always bad actors lurking to proffer off others, thereby hurting people. Scammers are everywhere, and Web3 is not an exception.

These scammers leverage this innovative technology and limited user knowledge to carry out harmful activities. Scams are not new to this space, and while they abound in Bull markets, it can hurt even more to fall prey during a Bear market.

There are recorded cases of protocols and dApps being hacked, but there are also a number of cases where individual people were scammed and had funds or digital assets stolen from their wallets. These scammers come with different strategies and schemes, across all Web3 verticals (DeFi, NFT, GameFi, etc) and through different channels (social media, texts, phone calls, etc). These schemes include, though not limited to: investment scams, harmful airdrops, fake/phishing sites, malicious links, impersonation, fake NFTs, and more.

Below we’ll dive into several, but don’t worry, by the end you’ll get some tips to help you make sure you don’t fall prey to one!

Investment Scams

This is a very common form of scam in this space. It comes in the form of shady Initial Coin Offerings (ICOs), fraudulent investment platforms that offer unrealistic Return On Investment (ROI), and often claim to help you mine cryptocurrencies if you invest a certain amount.

Harmful Airdrops

Airdrops are free digital assets (tokens or NFTs) distributed to the wallets of users. It is typically used as a marketing strategy by companies to attract users and reward early adopters. In most cases, users are required to connect their wallets to dApps or websites to claim these airdrops. There are many legitimate airdrops, but scammers also leverage this model to drain funds in a victim’s wallet once the user connects their wallet to a site designed to gain access to their wallet.

Fake Phishing Sites and Malicious Links

In this case, a fake website that is similar to the official one is set up. The unsuspecting user is tricked into believing that this site is legit. These websites are convincing enough that users will reveal personal information, passphrases, or other personal details. Once this is done, the scammer gains complete access to the victim’s wallet.

Impersonation

This form of scam is very common. These scammers set up social media accounts pretending to be a particular person (for example staff of a firm, influencer, etc) or an organization. Then, they contact people via calls or messages through these accounts in the guise of offering customer support, updates, and maintenance to, once again, gain access to personal information that will give them access to the victims wallet.

Fake NFT Scams

Here, the scammer makes a similar copy of an original NFT, mints it, and puts it up for sale on a marketplace. By doing this, NFT collectors are misled into buying these fake collections for the same or similar prices as the original artist would draw.

Keeping Your Assets Secure

While there are many forms of scams, there are also several measures to prevent scams and protect yourself from harm. And, though Web3 educators will always attach an NFA (Not A Financial Advice) disclaimer to their content, I beg to differ. I will give out financial advice in this regard. Yes, I’ll give out some essential financial advice in the form of keeping your assets secure.

NEVER SHARE YOUR PASSPHRASE OR PASSWORD WITH ANYONE

This, in my opinion, is the first and most important piece of financial advice. The passphrase to your crypto wallet is meant to be a secret. Guard it jealously and never share it with a second person.

Do not click on any suspicious or unverified links and attachments

Always look for a list of official links, especially if these are shared over a social platform, like Discord or Telegram. And, make sure to check how the link is written, whether it should be a .com, .io, or something else.

Admins will never DM you first

The staff of a crypto firm will never send you DMs (Direct Messages) offering support, requesting money/crypto, passphrase, or any other important personal details. All announcements are passed to the community through official websites and social media handles (Discord, Twitter, Telegram, etc). Always ignore and report any person or account that calls or sends in messages requesting your details, offering customer support, promising outrageous investment opportunities, asking you for verification codes, claiming that your account has been blocked, or telling you your details are required to unblock your account.

Always DYOR (Do Your Own Research)

Always carry out the necessary research and conduct due diligence before investing in a project. Perform checks, and inquiries, and make good use of the Internet to verify the authenticity of NFT marketplaces, Centralized Exchanges (CEX), Decentralized Exchanges (DEX), collections, websites, and every other important detail. Never plunge into a project due to Fear Of Missing Out (FOMO) without taking the time to vet it!

In the bid to explore and partake in numerous benefits of Web3 technology, we must take full responsibility for our financial safety. This is one of the benefits of the space; removing intermediaries to return full control over your assets. But, that also means you have to be more stringent and vigilant. Stay safe. Secure your assets.

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