Web3 continues to expand at a breakneck pace, with its market capitalization growing to over $32 billion in 2023. However, where money flows, scammers follow. As we enter 2024, new and evolved web3 scams that all crypto users should be aware of have emerged.
In 2022 alone, the web3 space was rocked by 167 major security breaches totaling $3.6 billion in losses, according to the Global Web3 Security & AML Report.
This represents a 47.4% increase over the previous year. DeFi protocols and cross-chain bridges bore the brunt of the damage, making up over 60% of total funds lost.
By the midpoint of 2023, over $1.25 billion has already been lost to web3 scams and data breaches, according to CipherTrace, putting the space on track for over $3 billion in fraud losses this year.
With web3 developers concentrating more on fast growth and innovations, security has lagged. This has created prime conditions for hackers and scammers seeking to exploit lax protections and vulnerable users. As web3 continues to skyrocket in 2024, new attack vectors will emerge.
Let us dive into some of the scams of 2024.
Top Web3 Scams Proliferating in 2024
While scam methods are constantly evolving, some prevalent web3 scams include:
Celebrity Airdrop Scams
The 2020 Twitter hack proved that celebrity crypto scams are extremely effective. By compromising famous accounts, scammers impersonate icons like Elon Musk and promise fake crypto rewards to lure users.
Over $2 million was stolen in one such scam. These impersonation tactics continue growing more sophisticated, using deepfakes and social engineering, and with the rise of AI it is no telling how sophisticated it will become.
With intensifying crypto regulation, hackers shift towards targeting individuals rather than exchanges.
Fake Elon Musk giveaway where a man lost 10 bitcoins at 430 thousand Euro in less than 5 minutes, also more celebrities like Kim Kardashian who was paid 250,000 dollars to promote a coin without the users suspecting, and soon after the value plunges leaving most people stranded.
Expect celebrity scams to surge in 2024 as hackers improve spoofing techniques. These scams made up 15% of all web3 fraud in 2022. Losses could top $300 million in 2024 if strong countermeasures aren’t implemented.
Rug Pulls
Rug pulls persist as a dominant web3 scam in 2023. In just the first quarter, rug pulls drained over $300 million from crypto investors lured into sham projects, according to Chainalysis.
One devastating example is the Frosties NFT scam unveiled in February. The phony team gained trust in the community, promising metaverse land plots and other perks. But 48 hours after launching, they disappeared with $1.3 million from over 9,000 hopeful investors.
In 2022 alone, Rug pulls and exit scams robbed investors of over $2.5 billion, nearly 30% of all web3 fraud. The ability to launch new cryptocurrencies with little oversight carries huge risks.
Over 117,000 scam tokens entered circulation in 2022 alone, according to Tokeninsight.
Another concern is the DeFi platform AnubisDAO. Developers hyped plans for a high-yield protocol before abruptly wiping out liquidity pools in June. An estimated $58 million belonging to investors vanished overnight.
These cases highlight that scammers can easily dupe victims without oversight by fabricating teams, roadmaps, and hype for initiatives without the intention of following through. With over 85,000 probable scam tokens in circulation in 2023, rug pulls remain a constant threat.
Surging crypto and NFT prices again in 2024 will mean even higher stakes for rug-pull scams. Potential losses may breach $4 billion if more awareness and security are not properly introduced to inform the public.
NFT Art Fraud
While most associate NFTs with profile pictures and collectibles, over $41 billion worth of NFT art changed hands in 2022 as digital artists emerged.
NFT art fraud emerged as a massive issue in 2022 as the market ballooned in trade volume, according to WSJ.
Scammers took advantage by selling fake and stolen artworks to duped collectors. These thefts drained over $3 billion last year alone as security proved unable to keep pace.
And there was no relief in sight for 2023 as the NFT art market showed further exponential growth, already topping $25 billion in sales.
A string of high-profile collections have been counterfeited, robbing victims of millions. Even museum archives have been plagiarized and auctioned without consent.
Without better verification mechanisms, projections suggest NFT art fraud could steal $15-20 billion from collectors between 2022 and 2025.
Decentralized ownership tracking, forensic authentication protocols, and Web3 DMCA-equivalent takedown processes must be prioritized to redeem integrity in digital art markets overrun by pirates.
Social Media Impersonation
Scammers are now brute-forcing social media account passwords based on leaked database dumps, allowing them to hijack identities. With enhanced account spoofing methods, they can impersonate experts to spread fake news or promote scammy clients.
Account compromises surged 650% year-over-year in 2022. $1.2 billion was lost from deposit/wallet address spoofing alone, according to Chainalysis.
These trends are a harbinger of a rough 2024 where personal data weaponization thrives. Flawed password practices ensure this hacking strategy will continue succeeding. Multi-factor authentication and password managers provide protection, but less than 10% of users currently take advantage.
Cross-Chain Bridge Hacks
Cross-chain bridges allow transferring tokens between different blockchains, essentially stitching web3’s fragmented landscape together. But with over $18 billion worth of crypto now stowed within bridges, they’ve become high-value targets.
In 2022, over $2 billion was drained from cross-chain bridges as hackers exploited security gaps. Attacks on bridges made up over 55% of all web3 hacking last year.
As bridges hold the key to widespread adoption, security must keep pace with exponential growth. Current projections predict $200 billion will flow through bridges in 2024, potentially over $10 billion in losses if the current 1% breach rate continues.
Hardening these layers with formal verification and decentralized infrastructure is critical.
Avoiding Web3 Scams in 2024
With rampant scams set to claim billions in 2024, what can you do to protect yourself? While expanding awareness helps, caution is equally essential:
Research projects extensively to confirm legitimacy, audits, and doxxed staff.
Enable maximum account security everywhere with MFA, password managers, and cold wallets.
Verify links/handles/emails closely when contacted about crypto matters.
Question claims that sound too good to be true.
Web3 holds immense promise. But you must educate yourself on lurking dangers to circumvent tricksters aiming to capitalize on lapses in judgment. While no one is fully immune, exercising heightened vigilance, security smarts, and suspicious thinking is your best defense.
The web3 sector must also band together to enact reforms and safeguards to counter exploitative players sabotaging adoption goals. United, the community can weed out scams and fraudsters while bringing crypto securely into the mainstream. So stay alert out there as the next generation of the internet unfolds!
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