Golden Encyclopedia | What is NFT swap order scam and how to avoid it?

Author: Onkar Singh, CoinTelegraph; Compiler: Tao Zhu, Golden Finance

1. What is an NFT swap order?

NFT swap orders are transactions in which parties exchange non-fungible tokens (NFTs).

NFT is a unique digital asset that can be verified using blockchain technology. Unlike cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH), which are fungible and have the same value, each NFT has unique qualities. NFTs can represent a wide range of digital content, including virtual real estate, music, movies, artwork, and more.

NFT swaps facilitate the exchange of NFT ownership between individuals or entities.

In this process, one party transfers ownership of one NFT to another party in exchange for another NFT (a combination of NFTs, cryptocurrencies, or other assets). These transactions can occur directly between parties or through decentralized exchanges (DEX) and dedicated platforms that support NFT trading.

NFT swap orders are typically placed based on predefined parameters agreed upon by both parties, including information about the assets being traded, the quantities involved, and any additional terms or conditions. As the NFT market grows, swap orders are critical to enabling the transfer of digital assets and collectibles between investors, artists, and collectors.

2. NFT Swap Order Scam

NFT Swap Order Scam involves scammers tricking victims into exchanging valuable NFTs for worthless counterfeits.

NFT swap orders, or custom transactions, involve the direct exchange of one NFT for another (or a mix of NFTs and cryptocurrencies). Swap orders offer greater flexibility than regular orders, which require using standard currency to buy or sell an NFT. This is often due to scammers taking advantage of the NFT hype, deceiving buyers, or abusing the irreversibility of blockchain transactions.

These fraudulent actors often hide behind the identities of reputable buyers or sellers and place trade orders promising to exchange NFTs with potential victims. However, they may replace the unique NFT with a fake or insignificant item, or disappear after acquiring a valuable NFT.

Consequently, counterparties must be thoroughly investigated before agreeing to any transaction to prevent falling victim to NFT swap order scams. A reputable NFT platform or marketplace with integrated verification mechanisms can help reduce the chances of doing business with dishonest people.

Before completing any swap order, users must confirm the ownership and authenticity of the NFT using smart contracts and blockchain data. In the emerging digital asset market, remaining vigilant, cautious and only trading with reliable institutions are key ways to avoid NFT swap order scams.

NFT Swap Order Scam vs. NFT Phishing Scam

It is important to understand that an NFT Swap Order Scam is not the same as an NFT Phishing Scam. NFT swap order scams involve false swap quotes in the market, tricking victims into losing a specific NFT. NFT phishing scams use fake websites or messages to steal wallet login credentials, potentially resulting in the theft of all assets within a compromised wallet.

Here is a summary of the differences between the two scams:

3. How the fraud scheme deceives NFT traders through swap orders

By creating fictitious NFTs that are similar in appearance to valuable NFTs, Swaps were then proposed to hide the true nature of the assets being exchanged, and the fraudulent schemes fooled NFT traders through swap orders.

Swap orders are often used in sophisticated fraud schemes targeting NFT traders. Scammers create fake NFTs to imitate expensive and well-known coins. They then list these fraudulent NFTs on reliable marketplaces, occasionally employing dishonest techniques such as manipulating information to make the listings appear authentic.

When a customer expresses interest, the scammer quickly fills the swap order. They place fake NFTs into buyers' wallets instead of sending real NFTs. Due to the similarity, customers are often unaware of the difference and mistakenly believe they are getting a real NFT and proceed with their purchase.

This scam may go undetected until the buyer attempts to resell or confirm the legitimacy of the NFT, at which point they realize they have been scammed. By then, victims may not be able to seek justice because the scammer may have disappeared or obscured their identity.

NFT traders should carefully investigate dealers and confirm the legitimacy of tokens before purchasing to prevent falling victim to such scams. Reputable markets with extensive verification procedures and cautious trading practices may help reduce the likelihood of falling victim to fraudulent swap orders.

4. Identify the red flags of NFT swap order scams

Many warning signs can be used to spot NFT swap order scams and ensure traders are protected from scammers.

First, be wary of sellers who promise to sell valuable NFTs at extremely low prices. Deals that seem too good to be true are often scams. You should proceed with caution if a vendor rushes or closes the deal under pressure without giving you time to do your homework.

Please proceed with caution if the artwork or details (metadata) of the NFT being offered look suspiciously similar to the official collection. This could indicate that the NFT is a replica. To verify legitimacy, please double check the details. Also, use caution when dealing with sellers on the market who have a poor or questionable track record or who refuse to provide further documentation or confirmation of ownership when asked.

Finally, if a seller insists on completing transactions outside of a reliable platform or escrow service, there may be serious red flags of fraud. To reduce the risk of NFT swap order scams, it is always important to prioritize completing transactions through reliable channels with buyer protection programs.

5. How to verify and avoid NFT swap orders

Confirming NFT swap orders is critical to preventing becoming a victim of fraud. Check the seller’s track record and past transactions on the market beforehand.

Smart contract addresses need to be double-checked to ensure they correspond to official, verified addresses for the intended NFT collection. Typically these addresses are provided on the project website or on a marketplace such as OpenSea.

Since scammers may use stolen or deceptive visuals, traders should never rely solely on images. A deeper examination of the details of the smart contract is possible using blockchain browsers such as Etherscan, which also show the history of the NFT and may help identify any suspicious activity. Choosing a reputable marketplace often adds an extra layer of security due to its review process and fraud prevention measures.

Traders should take precautions beyond fundamentals to guard against NFT swap order scams. Community discussions on forums or Discord can highlight warning signs that aren't always obvious from the exchange details alone. It is wise to double-confirm the time of your smart contract, as a recently generated smart contract may indicate the presence of a fraudulent NFT. People can also prevent falling victim to counterfeit NFTs by checking the contract page for typos or other inconsistencies. Therefore, spotting fraudulent NFT swap orders requires vigilance rather than simply accepting the visual representation of the NFT.