NFT Whitelisting: Legit or Fraud?

If you’re an NFT collector – or even just a casual observer of this crazy, explosive trend – you might have noticed a new thing in 2022 called “whitelisting”.

Whitelisting is a way for NFT project creators to reward their most dedicated followers with early access to new NFTs. As you might expect, “whitelisting” for certain projects can be extremely lucrative and therefore competitive.

The whitelisting frenzy has also spawned new, trickier scams. Hell, sometimes the whitelist itself is scam.

So let’s start from the beginning:

• What is a whitelist?
• Why do the creators of NFT projects do them?
• How to understand that the whitelist is a scam?

Let’s dive into the wild world of whitelisting.

What is NFT whitelisting?

The white list is the “VIP list” of the NFT project.

It includes the most loyal, committed and engaged followers of the project, often selected by the NFT artist himself.

In addition to the bragging rights, the #1 perk of being whitelisted is that you get the first cash on new NFTs. Artists first offer new NFT drops to whitelisted members of their community, often for free or at a heavy discount.

Whitelisting is also transparent. As you can see from the Funny Dwarf discord, “WL” is one of the first things you see:

Now, you might be surprised to know that some NFT creators don’t even offer a discount on their whitelist. If the project is popular enough, the creator knows that being first in line is incentive enough.

This is because the ability to buy an exclusive NFT at “MSRP” – and then immediately sell it on the secondary market – can be extremely lucrative.

Why is it so important to be whitelisted?

Generally speaking, there are two types of people trying to get whitelisted:

• People who sincerely believe in the project.
• People who are trying to get exclusive NFT early to make a profit.

The latter group has been on the rise since a Chainalysis report found that “Users who whitelist and then sell their newly minted NFT make a profit 75.7% of the time.”

In contrast, non-whitelisted users profited from NFT sales only 20.8% of the time.

Here’s how it happened:

In any case, I’m not here to say that NFT scalping is right or wrong. I am here to report and make sure you are not a victim of a scam.

So, to help set up your NFT fraud radar, let’s delve into the “why”. The better you understand the basics of whitelisting, the faster you can tell when something is wrong.

Why do NFT creators use whitelisting?

Whitelisting doesn’t just create hype – it also has several technical features. In total, there are four main reasons for the existence of whitelists:

1. Reward early supporters

As already mentioned, one of the main reasons for the existence of NFT whitelists is to identify and reward the project’s biggest fans. As a creator, you can rely on your whitelist to provide input, support, and help spread the word.

2. Create free marketing

It is not uncommon for NFT projects to lay out some basic social media requirements in order to earn a spot on their whitelist. They may ask you to follow their accounts, post/tweet about the project, etc. – pretty harmless things.

But sometimes the requests can be a bit stressful – like asking you to post something. every single day leads to the mint. But more on that later.

3. Fight spam

From a technical standpoint, whitelisting helps fight spam by “pre-screening” buyers before release. Before whitelisting, it was much easier for bots — and bad guys with multiple accounts — to collect every NFT for scalping, long before the real backers of the project had a chance.

This is why one of the requirements for any whitelisting is to verify your personal information and your wallet address.

On the other hand, it’s nice to see how the NFT community has come up with a blockchain-based scalping solution – perhaps something that Best Buy could adopt when the PlayStation 6 comes out…

4. Prevent “gas wars”

Finally, whitelisting helps prevent gas wars where everyone tries to create NFTs at the same time, causing traffic jams on the Ethereum network and unnecessarily raising transaction fees.

Instead, the whitelist creates an ordered queue of people waiting to receive their booking at predetermined time slots, often referred to as “waves”. A whitelist can help organize 10 waves of 100 NFTs, each lasting a few hours, to keep network traffic low and fees reasonable.

This covers the “why” behind whitelisting so you know what to look for in a legitimate one.

Are NFT whitelisting legal? Or a scam?

NFT whitelisting is not inherently a scam. In fact, most of them are legal and very useful.

Whitelisting helps energize the community, support the creator, and protect everyone involved from scams and bots.

At the same time, the introduction of whitelisting has also given rise to an entirely new type of fraud. And with $7.8 billion worth of cryptocurrencies and NFTs stolen by scammers in 2021, more will surely follow.

Whitelisting scams usually follow the same pattern: you get a direct project disagreement message saying you were whitelisted, and as a next step, you have to follow a link to enter more information.

To illustrate this, here is the exact message sent out by the scammers in the BAPE NFT odds who scammed 20 users out of between $275 and $550 each:

As you can see, the message may look quite legitimate. Heck, it might even come directly from the moderator or the project creator himself if they are involved in the scam.

But here’s how you can tell it’s BS.

4 signs a whitelist is a scam

If you receive an unexpected message that you were whitelisted, consider it a scam until you can prove otherwise.

Start by looking for these four red flags.

Oh, and if you find one or two of those red flags on the How To Whitelist project’s own channel, the project itself could be one big scam!

1. You can actually buy a whitelist spot

If a creator, discord moderator, or just some random user claims that you can buy whitelisting with a small Ethereum bribe, that’s bullshit. Legitimate NFT creators do not compress or manipulate their community in this way.

2. You are asked to share incriminating personal information

The scammer may say that in order to verify that you are a human (i.e. not a bot), you will need to enter detailed personal information such as your full name, phone number, address, and even your SSN. Do not do that. It’s most likely just a phishing scam, but people fall for it because it’s sounds logical.

3. You are asked to share your private key

Your private key is like your bank account username and password rolled into one. Never ever, Ever Share. Your public key is all you will ever need to receive cryptocurrency.

4. You were whitelisted by an unverified source

Perhaps the most obvious sign that you are being scammed is that the message you received did not come from a moderator or project creator.

What to do in all these cases if you think you’ve spotted the bad guys in action?

I think I noticed whitelisting scam. Now what?

Let’s say you’re on the project’s discord and think you’ve spotted a scammer.

Apart from being ignored, what should you do to help the community?

If the scam message not come from the creators of the project, report the scammer to them as soon as possible so they can investigate, block the scammer, and warn the community accordingly.

If the scam message did come from the project creator or NFT project moderator myself could be one big scam. Specifically, it could be a “carpet trick” in the making, where scammers trick people into investing in a cryptocurrency or NFT project and then disappear with their money without delivering the goods.

• In that case, try searching on Google.”[project name] scam” to make sure it has already been exposed as a scam.
• You can also see what people are saying about the project on various NFT subreddits (r/NFT, r/NFTsMarketplace) and consider posting warnings there for others.
• Finally, you can file a report with the FTC. Depending on the nature and extent of the fraud, the FTC may refer it to another agency for enforcement.

But rest assured, scammers do not always manage to get away with it. Just ask Ethan Nguyen and André Llacun, who each face up to 20 years for pulling the Frosties NFT rug:

bottom line

If a project you follow has a whitelist, don’t worry – it doesn’t mean it’s a scam. In fact, whitelisting helps improve a project’s chances of success by increasing hype and fighting fraud.

But the whitelist concept It has spawned new fraudulent schemes, so you should be vigilant.

Featured image: mundissima/Shutterstock.com

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