Precautions when Investing in NFT
protections and precautions to keep in mind when investing in NFTs. Starting with personal level protections!
Personal Level Protections
1. Keep Your Logins Private and Safe
In the NFT and crypto world, your crypto wallet stores important information that you should keep to yourself ONLY. If someone with malicious thoughts gets your seed phrase or private key, they can access your wallet and remove the NFT and crypto that you hold.
2. Do not interact with suspicious NFT seller/buyer/users
Scammers usually use suspicious messages, texts and/or emails to get your credentials and login information. This method is called phishing and scammers can download malware to your devices if you interact with them.
Protections Regarding NFT
1. Check the Properties of the NFT
When deciding which NFT to buy, you should always check the background of the NFT. The properties of an NFT is a great way to confirm if the NFT you are looking is legit or not. Scammers may try to upload a fake copy of popular NFTs to get people to buy it. However, the properties of an NFT is something that they cannot replicate yet.
2. Buy NFT From Trusted Sources
The best thing you can do to not get scammed is to buy NFTs from verified seller and websites.
Website
The obvious way to verify if a website is legit or not is to use well known NFT platforms such as OpenSea, Binance, Rarible etc. In addition, a transaction fee is usually present. This fee varies and depend on the platform you are using but 2.5% is the rate platforms usually charge. If the fee is too high or low, it might be a scam so beware!
Users
To verify the seller on these platforms, below are 3 things you can check:
1. Check For Verification
Similar to social media platforms, official sellers on popular NFT platforms will have a verification tick to prove that they are a trusted seller.
2. Seller’s social media account
It is impossible that all legitimate NFT sellers are verified. Therefore, you can also check the seller’s social media accounts to see if they have a decent fan base, which can sometimes indicate their legitimate. One thing to keep in mind is that followers on social media can be bought nowadays and therefore is not a clear indication of whether the seller is legit or not.
3. Seller’s sales stat
A well-established seller will usually have many NFTs sold and therefore, checking their page stat allows you to determine if this seller have been here for a long time or is the account recently opened.
3. Understanding the Risk of Investing in NFTs
Remember that NFTs cannot be liquidated easily. If you are trying to make profit from investing in NFTs, this might be a problem. In addition, the market of NFT is very young which make the NFT market very unpredictable and have a lot of uncertainties.
Disclaimers: The information on this site is for general information purposes only. It is intended to be used by virtual assets investors, but it does not constitute professional advice, whether legal or otherwise, and does not purport to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content. LITELAB@HKU does not accept responsibility for any loss that may arise from accessing or relying upon the information contained on this site.