Powered by blockchain and decentralized protocols, Web3 enables users to engage in trustless transactions, data storage, and computation. However, with this new frontier comes new challenges and risks. According to a Binance Research report, the monetary value lost due to hacks has risen exponentially from just under $1 billion in 2018 to over $3.5 billion in 2022. These alarming statistics highlight the need for individuals who want to participate in Web3 to take precautions and stay safe.
Understanding Web3 Scams
The Role of Private Keys
Private keys are the most important part of owning crypto assets. If lost or stolen, your funds will be gone forever. Make sure to back them up securely offline and never share them with anyone, no matter how trusted they may seem.
The Dangers of Phishing Attacks
One of the most common ways scammers target NFT collectors is via phishing attacks. They may lure you with fake airdrops to trick you into claiming or interacting with tokens. When you proceed with the claim, you interact with a malicious smart contract that secretly seeks permission to take your assets.
The Threat of Fake NFTs
Scammers frequently clone websites by making a slight change to the original domain name. Always look for the verified badge, check the number of items, volume and floor price, and use reverse image search on Google for counterfeit detection.
Protecting Yourself from Web3 Scams
Secure Your Private Keys
Store your private keys offline on paper. A scammer’s main goal is to steal your seed phrase or the private key to your crypto wallet. With it, they can log into your wallet from their own device and move all your funds and NFTs to their own wallet.
Use Reputable Wallets
You will need both a hot/online wallet and cold/offline wallet. For Ethereum transactions, use Metamask for the online transaction, then store the key offline with Ledger. For Solana transactions, use Phantom for the online transaction, then store the key offline with Ledger. You get the idea.
Enable Two-Factor Authentication
Two-Factor Authentication (2FA) is one of the most important security measures for protecting your wallet and funds. 2FA requires that users enter a code, which is sent to their phone or email account, in addition to their login credentials. Enabling this on anything Web3-related is recommended (Twitter, Discord, etc.).
Verify Smart Contracts
It is crucial to verify the integrity of a smart contract before interacting with it, as some contracts may contain malicious code that can cause you to lose funds. You can use tools like Etherscan or Cyberscan to audit the code of a smart contract and check for any potential vulnerabilities. If you want to take things even further, opting to learn how to read Solidity (common smart contract language) might be a good move.
Be Wary of Market Liquidity
When trading cryptocurrency or NFTs, it is important to be mindful of the market’s liquidity. Low liquidity can cause prices to become volatile, and your orders may not fill as quickly as you expect.
Conclusion
Web3 is a new frontier with immense potential, but it also comes with its own set of risks. By understanding the common types of scams and how to protect yourself, you can navigate the Web3 space safely and confidently. It’s all fun and games until you get scammed. Stay safe out there.
