Non-Fungible Token is one of the most prominent technologies that emerged with the advent of Web3. Becoming a crucial source of revenue for artists, NFTs have also lowered the barriers to entry for new and smaller artists and offered them access to the global market. NFTs have not only revolutionized the art market but are now serving major utilities for industries, including healthcare, real estate, insurance, entertainment, and more. Ergo, it becomes necessary to solve the vulnerabilities which come with decentralized technologies as the way forward for development.
In one of our previous blogs, we discussed how the web3 industry is dealing with rampant NFT theft, which remains one of the core problems faced by NFT artists and creators worldwide. Fraudsters and scammers have made it challenging to identify genuine NFT collections when forging them is as easy as a quick right-click and copy. While this issue is quite exhausting for NFT creators, the situation is also more or less grim for investors and NFT collectors.
Popular NFT collections, such as CryptoPunks and Bored Ape Yacht Club, sell for millions of dollars daily, which means millions of dollars are at stake when an investor decides to purchase a renowned collectible. But how exactly will an investor determine if he has bought it from an authentic collection and not a plagiarised one? In August 2021, a collector paid roughly $336,000 for a fake NFT after it appeared on popular street artist Banksy’s website. Fortunately, after reports emerged that the NFT was fake, the seller returned most of the money some eight hours later without offering a reason for their actions. While the collector in question was fortunate enough to receive his money back, that might not be the case for everyone.
There are several ways investors can determine the authenticity of NFTs. We have listed them for you as we believe the more trust and transparency there is in the system, the more growth we can observe for Web3.
For instance, if you see a CryptoPunk selling for 10 ETH, then the deal is likely too good to be true. At the time of writing, the price floor of CryptoPunks stood around 62.95 ETH, which is inconsistent with the price offered by the seller. Doing your own research while investing, especially in the web3 space, becomes more important because there aren’t enough regulations and laws in place to penalize fraudsters in the industry.
As a potential investor, verify the average prices, floor prices, and demand of an NFT collection and look out for any inconsistencies before accepting the deal.
Before jumping into a third-party deal, always verify the identity of the seller or the artist. While it’s a difficult process, since anonymity is given utmost importance in the web3 space, there are ways you can verify if the seller is genuine. Several NFT platforms verify the identity of artists and sellers to prove their authenticity. Make sure you purchase an NFT from a verified account by looking for check marks next to the seller’s name. Also, look out for fake blue check marks.
This is, by far, the most vital step to ensure that you don’t purchase a counterfeit NFT. Find the official website of an NFT collection and make sure that the NFT links back to it before making a purchase. A reliable website will include all the information about the collection, including its utility and a description of the project’s team. Investors can also do a Google search to see if there are similar-looking websites and identify the real ones through a quick domain check.
Social media channels, such as Instagram and Twitter, are often used by NFT projects to promote their collections. However, it’s easy to copy these channels as well. By doing a Google search, investors can find similar-looking social media channels and verify which one is authentic. For example, a popular collection will have more followers, most likely have a verification tick, and lists social links of the original artist of the project.
A reverse Google image search can go a long way in identifying copycat NFTs. To do a Google image search, you can download the NFT and upload it on Google to check for similar sources. If there are several similar-looking NFTs from multiple sources, then the NFT is likely fake.
Note that this step only applies to digital image artworks, and does not work for video, audio, and other categories.
NFT collectors can also look for red flags in NFT giveaways and scams hosted on fake social media and community channels. If someone from an NFT project is directly messaging you on social media platforms like Discord, Twitter, and Telegram, and luring you into a fishy website, then it’s likely fake. Look out for contact addresses on the platform and contact the artist directly if you are unsure about your potential purchase.
Industry players like OpenSea and Rarible are trying to combat digital theft by developing solutions that detect fraudulent listings. Our firm bitsCrunch has been developing a cutting-edge intelligence tool designed to identify and flag counterfeit NFTs using AI/ML-based advanced models. While these tools immensely help artists and collectors in identifying and flagging art theft, it certainly helps more if collectors do diligent research and become more observant before investing in the collectible.
bitsCrunch is a leading data analytics firm committed to building solutions that resonate with investors and collectors of non-fungible tokens and digital assets. Wash trading, inflated prices, and NFT forgeries are some of the most prevalent issues plaguing the industry. bitsCrunch provides an all-in-one forensic solution with customizable risk management tools that detect NFT fraud and provide detailed analytics on trending NFT projects.