How to avoid Escrow Scams: Featuring Cardano Multisig Services

2022-08-15

Recently some members of the community have publicly detailed how they lost their NFTs to scammers through the use of escrow services. Such news is disheartening and shows that scammers never stop. This piece is a result of those stories and is meant to highlight the service available to you to prevent this from happening.

You may have heard to avoid escrow at all cost and this is true; some of the community members who were scammed knew this too but acted out of character and went along with it anyway. There is one way to avoid being caught by scammers who are looking for your assets and that is to use the blockchain technology as the trustless third party to facilitate your trade. Before we dive into how to safely sell or trade your assets here’re some quick information points on how these community members got tricked into giving away their assets:

  • The potential buyer said that the site on which the seller wanted to sell the NFTs was not working for them
  • The potential buyer brought the moderator from Discord into the discussion i.e. they selected them
  • The seller did not check the validity of the moderator
  • The scammer sent the seller a web address to use, that they recognised, but it was a clone site with only a slight change in the name

As you can see, in these situations, the buyer is the one who designated the method/venue of the sale. If you are selling your assets you should be the one who sets the method and location for the sale. Two ways to avoid these scams:

Regarding Discord Escrow Scams - Always double, triple, quadruple, quintuple (ad infinitum) check if you’re ever going to use a 3rd party that you don’t know as an escrow. Preferably, don’t. The days of Discord escrow should be long behind us and such a service is not necessary now we have smart contracts and multisig transactions.

Regarding Clone/Fake Site Scams - Always double and triple check a website’s name, then access it from a known and trustworthy link, for example, the link on their official Twitter profile. Then, if they’re giving you a link to a specific page on a website, copy the slug from their link and paste it onto the end of the official site that you’ve already loaded up and see if it works. If it doesn’t ❌❌❌ it’s a fake site and they’re trying to scam you.

Public announcements out of the way, there are many services out there for you to use to swap your assets where the blockchain is your trustless third party, and these can help prevent you from losing your assets. Here we’re going to show you those services.


Services for Facilitating Asset Trades in a Trustless Manner

There are two methods of exchange where the blockchain acts as your trustless third party for exchanging assets. These are Multisig and smart contract.

Multisig Services

Multisig stands for multiple signatures. A transaction can be built using any number of UTxOs (what your wallet displays to you as the specific assets they contain) however the wallets containing the UTxOs must sign the transaction to validate it and send it off. So you and the other party input the assets you’re going to send and then BOTH sign the transaction to confirm that you agree to send and receive the assets entered into the application.

The services that offer this means of transaction display both your assets and the other person’s assets, and lock them, before you sign the transaction. This means you know exactly what you’re trading and what for. If you don’t agree with the assets put on offer then you can simply cancel the trade and nothing happens. Once both parties sign the transaction the assets are swapped in a single transaction. No third parties, just a simple exchange of assets at the same time; like simultaneously giving with one hand and receiving with the other.

There are two websites that offer multisig services on Cardano.

AtomicSwap

Fee: 2₳ (1₳ Per Person)

Listing: AtomicSwap

AtomicSwap has been open sourced for all users to review the code. It can be found here.

Trading Tent

Fee: 10₳ (5₳ Per Person)

Listing: Trading Tent

Smart Contracts

If you don’t want to perform your trade through multisig you can do it via smart contract. This, currently, only works for NFTs exchanged for ADA and involves you listing your assets on an NFT marketplace and then sharing the link with the buyer so they can buy it through the marketplace. Yes there will be a small fee involved, maybe even the deduction of royalties too, but this is a small price to pay for the trustless security of a smart contract. There are many NFT marketplaces built on Cardano, below is a list (the names are clickable).


A Final Word

Scammers are usually after big ticket NFTs and some of these, such as Spacebudz and DEADPXLS have smart contract marketplaces on their website for their NFT collections (the Spacebudz marketplace is open sourced here). However, just because you’re not selling a big ticket asset doesn’t mean that the buyer is legitimate. Verify.

One of the great benefits of blockchain technology is privacy, of which anonymity is a privilege. Bad actors use this to their advantage which is why we have to stay vigilant in case they are trying to fool us. Remember, if someone is offering to buy your assets do it on your terms, not theirs, make sure you’re the one to provide the link for the place of exchange and, as always, verify, verify, VERIFY.