During the last couple of years, cryptocurrencies and NFTs were one of the biggest trends on social media. They represent a complicated form of financial technology that got the attention of mainstream news media and even had a commercial air during the 2022 Super Bowl. How does it all work? And is it something that I should worry about? We’re going to break down some of the questions you may have about this technology and highlight some of the controversial issues surrounding the social media craze.
What are cryptocurrencies and NFTs?
Cryptocurrencies are a form of digital currency created for use on the Internet. GetKidsInternetSafe previously published the article “What is Bitcoin anyways?” that goes in-depth on the subject, but we’ll cover some of the basics here as well.
Bitcoin and other more recent cryptocurrencies like Ethereum and Dogecoin were created to have a decentralized form of currency that was not tied to banks or other financial institutions following the 2008 housing market crash.[1] Cryptocurrencies are not stocks but they are often traded in a similar way because of how much their value can fluctuate over time. All cryptocurrencies are managed using a type of program called a blockchain, which is a publicly viewable list of all transactions and activity done with a specific cryptocurrency. All transactions made on a blockchain are verified by the other users, which makes it impossible for anyone to make changes to old transactions without that change being corrected immediately.
Non-Fungible Tokens, more commonly referred to as NFTs, are another technology created using blockchains. NFTs function like serial numbers attached to virtual data and are used to show ownership and authenticity of that data similar to a deed or certificate. They cannot be copied, substituted, or subdivided, and they’re used to create a unique digital object. The most common form of NFTs is images, but the technology can be used for music, videos, documents, or anything else that can be stored digitally.
How did NFTs become so successful?
NFTs are a technology that has been around since 2014[2], but they were brought into the media spotlight in March 2021 when digital artist Beeple sold an NFT collage of his artwork for 69 million dollars.[3]
The trend exploded in popularity afterward, with the next series of major sales coming from original creators of various early internet viral memes selling their creations as NFTs for tens or hundreds of thousands of dollars[1]. In the digital art community, NFTs were also heavily marketed to artists as a solution for online copyright infringement and art theft.[2]
Major investors like Elon Musk[4] and Mark Cuban[5] began to invest in cryptocurrencies, and celebrities like Matt Damon[6] and Larry David[7] have acted in advertisements for the new technology, with one of them playing during the 2022 Superbowl. NFTs had become a lucrative business model in only a couple of months, but this surge in popularity did not last for long.
The Technical Problems with NFTs and Cryptocurrency
As NFTs and cryptocurrencies both began to receive mainstream attention and thousands of new users, various technical problems began to hamper their success. Despite the early successes in March, by June 2021 the market had already dropped by 90%.[1]
Slow speeds
Blockchain technology is not a quick or efficient system for handling monetary transactions, and if a user tried to use their cryptocurrency to make a purchase, they would face wait times of 30 minutes to several hours in a queue before their transaction would be approved[8].
Security Problems
Due to unaddressed security risks in their programming, NFTs became notorious for being stolen by hackers.[9][10] Because blockchains cannot have their history changed, and because they’re unregulated by the government, if your NFTs were stolen this way there was no way to recover them.[8] NFTs also don’t have any inherent connection to copyright or trademark law, so your digital ownership only extended to the NFT program itself, not the artwork that it was connected to.[2]
Another problem caused by the lack of regulation was that the artists who had been the target of early NFT marketing were facing more art theft problems than before. There were no protections to prevent somebody from creating NFTs using another person’s art, and many artists found that their art was already being sold on cryptocurrency apps without their approval or knowledge. In some cases, NFTs were created using artworks from deceased artists without consulting the artists’ families.[11]
Environmental Problems
NFTs and cryptocurrency are also horrible for the environment. Because the process of operating and interacting with a blockchain requires hundreds or thousands of computers to be operating all at once, they consume extreme amounts of electricity. Conservative estimates for the total amount of electrical energy consumed and CO2 emissions caused by cryptocurrency rival those of mid-sized European countries.[12]
The Financial Risks of Crypto
The largest problem with cryptocurrency and NFTs, however, is that most projects were intentionally made to scam people out of their money. These digital assets only have value because of the amount of real money that is inserted into them by investors, and unlike banks or the stock market, they don’t generate additional wealth over time.[13] To make a profit with cryptocurrency, it has to be sold to somebody willing to spend more money on it than what you originally purchased it for.
“Pump-and-dump” scams like this are not only common but encouraged in many cryptocurrency communities as a way to make quick profits.[1] Most artists who began selling their art as NFTs were selling at a loss after transaction fees and costs associated with creating the NFTs.[14] The cryptocurrency apps which handle these transactions are aware of these practices, and many of the security problems mentioned earlier were neglected because their creators profited off of the transactional fees.[10]
How to Protect Yourself and Your Family from Cryptocurrency Scams
While the trend of cryptocurrency and NFT projects being advertised has gone on the decline, there are still pushes for the technology to be used in other parts of the web.
Here are some things you can do to help protect your family from cryptocurrency and NFT-related scams:
Keep an eye on new internet products and services that talk about NFTs, Ethereum, Bitcoin, blockchains, and Web3.0. These are all buzzwords that are commonly associated with each other to help sell the idea of cryptocurrency on social media.
Sign up for the FREE GKIS Connected Family Screen Agreement, which covers the basics of preventing digital injuries and opens a forum of discussion for you and your family to discuss internet safety.
Take a look at the How to Spot Marketing and Cybersecurity & Red Flags Supplements for the GKIS Connected Family Screen Agreement, which can help you to stay safe against identity theft, hacking, and scamming strategies common on the internet.
Thanks to CSUCI intern Brandon Bishop for researching the history of cryptocurrency development and authoring this article.
I’m the mom psychologist who will help you GetKidsInternetSafe.
Scams can cause extreme financial and emotional distress to victims and their families. With technology, scammers have become more creative in accessing their victims by offering quick clicks and false credibility. Even young teens that navigate effortlessly online have a hard time distinguishing legitimate situations from scams. To help you and your family avoid becoming the victims of a scammer, I interviewed “William”* who shared his mother’s story. She was an educated professional that fell victim to multiple scams over five years. You won’t want to miss the true story about what happened to her. If your family hasn’t taken steps for increased awareness and cybersecurity, you’ll want to check out our Cybersecurity & Red Flags supplement. The perfect compliment to our free Connected Family Agreement, you can take the extra steps you need to protect your loved ones right now. Our guide offers tips to avoid hacking, scamming, malware, and phishing and is a must-have for today’s modern family. Today’s GKIS article shares the story of an elderly woman victimized by scammers, the types of scams to look out for, and tips on how to avoid becoming a victim yourself.[1]
*Names were changed to protect the privacy of the victims.
What are scams?
A scam is a dishonest scheme to cheat someone or steal money. With the help of technology, scammers have been able to target their victims in more creative, easier, and faster ways than ever before. According to an FBI report, 2020 scams resulted in a loss of over 4.2 billion dollars. With more baby boomers retiring and the pandemic resulting in more at-hone isolation, I suspect those losses rose in the last few years.[1,2]
Who Scammers Target
Although anyone can become a scam victim, research has shown that scammers tend to target kids, teens, and the elderly. A study conducted by the University of Iowa confirmed that a certain area of the prefrontal cortex of the brain is responsible for processing information and solving problems – tasks that help people consider whether information is true or not. Young people tend to be vulnerable to scams because this part of the brain is still developing, and older individuals are vulnerable when they demonstrate poor technological fluency, are isolated, or suffer from a decline in problem solving ability.[3]
The Story of William and His Mom
William is a middle-aged man who generously shared his story with us about his elderly mother, Mrs. Thorn, who was scammed out of tens of thousands of dollars over a five-year period. Despite his best efforts to protect and rescue her from the scammers, he struggled to keep her safe. Once one scammer got ahold of her and convinced her to send money, many other scammers started approaching her too. William suspects that the scams were somehow linked as if they shared her information with others. Below are some of the scams she fell victim to.
Different Types of Scams
Charity Scams
William described his mother as a generous individual. She was a nurse in Japan during the 1950s, and, after she retired, she continued helping others by volunteering at church and other organizations. As she got older, she would receive postcards in the mail from different charities, a common scam targeted at elders. Although her income from social security and savings was not a lot, she began “donating” money to those she perceived as less fortunate than herself.
Piecing together what happened with his mom’s checking and bank documents, William found that she initially sent small amounts of money ranging from $5-10. Once the scammers had her on the hook, however, they would groom her for larger and larger “charitable” donations.[4]
Lottery/Sweepstakes Scams
Another scam that William’s mother fell victim to was the lottery/sweepstakes scam, which also commonly targets elders. These types of scams claim that the victim has won a large amount of money or other prizes such as a new car. Once the victim is excited and eager to collect their prize, scammers require that they pay a fee or taxes. As the scammer reaches out with details, the victim often adopts an illusion of intimacy, meaning they feel they have a personal, caring relationship with the scammer. This false intimacy pulls the victim in deeper, often eliciting more and more personal information from the victim.
William confirmed that Mrs. Thorn spoke to the scammers about his efforts to block their access and protect her safety. Mrs. Thorn’s scammers not only instructed her not to tell anyone because it could be a nice surprise for her family, but they also offered specific suggestions on how to work around the safeguards her son put in place. They seemed to play on her wishes for independence and worked to create and escalate conflict between her and her son.
Our GKIS Connected Family Course can help you close screen risk gaps and improve family cooperation and closeness. If you have school-age children at home or love somebody who does, check it out. Not only does the course offer amazing safety home setup tips, but it helps parents create fun dialogues for better, healthier parent-child relationships.[4]
Government Impersonation Scams
William noticed that some of the scams his mom was involved with may be linked with others. For instance, to pay the taxes of her “prize,” the scammer would set Mrs. Thorn up to talk to an “IRS agent.” These types of scams are known as government impersonation scams which are types of very popular imposter scams. According to the FBI, government impersonation scams typically involve the scammer impersonating a government official who threatens to arrest or prosecute victims unless they pay a fee. William shared that they even tried to trick him with false threats of prosecution and arrest unless he agreed to cooperate.
Dr. Bennett shared that immigrants can easily be targeted with this type of scam as well. She shared a story of a colleague who was a Chinese immigrant who worked as a software engineer. This victim’s scammer posed as a member of the Chinese government and threatened the safety of her family if she didn’t pay overdue fines. The scammer demanded that she not tell her friends and family and immediately pay. She lost over $150,000 that was never recovered before she realized she’d been scammed.[4]
Phone Scams
William explains that although his mother’s scams initially started by mail, they soon turned into phone calls. He allowed me access to his mother’s journal which included notes on the people she spoke to and what they had asked her to do. Her notes reveal that she would talk to the same people over and over and eventually trusted them more than her own family and friends. The scammers were very persuasive and would instruct her how to wire funds to unfamiliar places and people, even going so far as giving her directions to wiring locations that her son had not blocked yet. William spent countless hours visiting banks, local wiring locations, and friends begging them to not help his mom transfer money or provide transportation. Although he spoke to his mom many times, he found that the scammers would get to her anyway with relentless pressure and creative arguments.
Scammers have no limits.
It was not until William caught his mom almost wire transferring $200,000 that he finally got the information he needed to gain conservatorship over Mrs. Thorn. By then, the scammers had even instructed her to how to send money from q reverse mortgage loan on her home to complete the transaction!
William said the scammers had no shame and would even help her find ways to continue participating in the scams even after he took steps to stop them. He shared that they would pressure her with false deadlines and threats, making her so anxious that she would rush into performing workaround instructions. Her journal reflects moments of intense anxiety as she tried to complete the complex transactions.
To emphasize how far scammers would go, he shared that, after he lowered his mom’s allowance to $25 a week and there was not much to get from her anymore, they still tried one last thing – the 976 phone scam. According to William, this is a scam where you call back a number with an area code of 976 and get charged a huge per-minute fee. The longer the scammer keeps the victim on the phone confused and anxious, the more money the scammer gets.
Avoid Being Next
William shared that his mom was scammed out of about $70,000 before it stopped. If it was not for her son’s compassionate and tireless commitment to protect her, it could have been far more. Other popular scams include shopping scams and job opportunity scams. If you are worried that bad actors can access your family members, check out our Screen Safety Toolkit. Our resource guide is perfect for those that need smart tech tools for filtering, monitoring, and management.
Tips to Outsmart the Scammers
Contact your phone carrier and internet service provider to research helpful tools for blocking unwanted and unknown calls, texts, and emails.
Remember, if it sounds too good to be true, it probably is.
Don’t act immediately, take a moment to research the situation and talk to someone who you trust.
Don’t give out personal information like your name, date of birth, social security number, address, or usernames or passwords. Legitimate organizations will not text, call, or email you to obtain private information.
Don’t complete forms from an email link. Instead, go directly to the website of the company you are dealing with and complete the business from there.
Call the company directly to confirm the request was legitimate before you offer information or complete forms. The IRS communicates through US mail, not by telephone or email. Call 800-366-4484 to report IRS-related phishing attempts and fraud.
Be sure to keep up with device updates for security patches, delete unused and unwanted apps, and change your passwords frequently.
Review your credit card statements regularly to catch unauthorized charges and periodically review your credit report.
Consider freezing your social security number for new financial transactions with Experian, Equifax, and TransUnion to escape identity theft.
Lastly, Google “scams” or a quote from any communication that may be a scam to learn more about the common scams that may target you.
Scams are no joke. Once you become a victim, serious damage can occur that can take years and years to repair. Check out our other GKIS article Child Identity Theft is on the Rise. Protect Your Family Against Cybercrime, to learn more about how fraudulent purchases made with your private information can change your life
Here are some other related articles offered on our GKIS website for more information on hacking, scamming, malware, and phishing. Learn more about the dangers of online to be prepared for anything that comes your way.
