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Following their introduction to the general market in 2021, NFTs (non-fungible tokens) experienced a massive increase in popularity. The market for NFTs has undoubtedly experienced tremendous growth, with NFT sales reaching $25 billion in the previous year. NFTs have attracted interest from both new users and crypto enthusiasts simultaneously. How do NFT security recommendations apply to the new class of unique digital assets?
You cannot just jump into any NFT project because celebrities like Paris Hilton and Jay-Z purchase items from collections like Bored Ape Yacht Club and CryptoPunks. Hackers, con artists, and other nefarious entities have been drawn to NFTs because of their rising popularity and value. The various NFT theft and hacking incidents may impact users' incentives to invest in NFTs.
According to the darknet, the market for stolen art is estimated to be worth over $6 billion annually. This figure resulted from the digital era, during which big technology allowed people to send digital artwork, memes, tweets, music, and video in GIFs and MP4 files.
The development of non-fungible tokens was a response to the losses. Since they are more authentic and secure than fungible tokens, non-fungible tokens (NFTs) have become a popular online investment option besides cryptocurrencies.
Therefore, maintaining the security of priceless assets requires a detailed outline of NFT security recommendations and best practices. NFT security is an unavoidable priority because NFTs are valued at thousands of dollars, and some high-end pieces sell for millions.
In this blog, I will discuss some of the best practices you should adhere to to secure NFTs. I will also talk about the significant security risks for non-fungible tokens, perhaps the most significant.
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Non-fungible tokens (NFT) are virtual assets that can be tracked on blockchains, and each virtual asset has a distinct nature. NFTs' characteristics, unique qualities, minting quantity, and market demand affect their value.
A non-fungible token has the following key features:
- Connection to tangible or intangible assets, possessing an NFT entails ownership. The advanced "certificate of ownership" is another name for NFT in this context.
- To Check the ownership background. Physical items can be tokenized through NFT, which makes them trackable.
- NFTs can represent a painting, a football player, a meme, an emoji, or anything else you can think of. The rapidly evolving technology that can encourage further tokenization of the economy is non-fungible tokens.
Differences Between NFTs and Cryptocurrency
NFTs and cryptocurrencies are considered virtual assets; however, there is a definite distinction between the two. The primary distinction between NFTs and cryptocurrencies is that NFTs are uniquely created objects that cannot be swapped for another or traded. NFTs, in contrast to cryptocurrencies, are not required to have intrinsic value in money. NFTs are indivisible and cannot be divided into smaller tokens. The idea behind NFTs allows for the possibility of fractional ownership while still maintaining the integrity of the asset.
NFTs are generally not cryptocurrencies, but despite this distinction, they still pose serious security risks, the scope of which is likely to increase soon due to the growing acceptance of these digital assets.
How to Create NFTs
Anyone can create NFTs because they don't need any special training, especially those with previous experience using cryptocurrencies.
The selection of a blockchain network is the first step in the creation of non-fungible tokens. Even though Ethereum is still the most widely used blockchain today, other blockchains that support NFTs include Polkadot, Tron, Cosmos, etc. Before selecting a blockchain network, a project should know that some exchanges and wallets only function on specific blockchains.
Creators can publish their NFTs on Rarible, Opensea, and Mintable sites. To use these platforms, creators must first connect their crypto wallets to them. These non-fungible tokens are listed on a platform after the artists upload and sign their works of art using the cryptocurrency wallet.
Where to Buy NFTs?
Buying NFTs is a relatively straightforward process. Popular websites that sell non-fungible tokens include OpenSea, Rarible, Mintable, SuperRare, Foundation, etc. You must have some cryptocurrency assets in your wallet, the amount of which depends on the platform you select. Next, decide which NFT you want to get. Be aware that you will be required to pay a petrol fee, the amount of which will depend on the current network load.
How Secure Are NFTs?
The growing interest in NFTs has sparked lively debates about NFT security. The level of NFT safety needs to be higher to ensure the complete security of investors' assets because it is a novel technology.
Scams are one of the main NFT risks that threaten investors and projects. Malicious actors pose as well-known platforms, exchanges, or wallets to steal private information from users needed to access their virtual assets and compromise NFT security.
The potential purchase of fake non-fungible tokens is a significant NFT risk. Malicious actors may pose as well-known creators and offer for sale forged ownership documents. For instance, this Summer, a collector by the name of Pranksy paid 244,000 GBP for a fake Banksy NFT. As a result, NFT trading is responsible for a significant NFT vulnerability. Even artists are unaware that their works are sold without their permission. Since anyone can tokenize other people's content, the global blockchain community is forced to consider the issue of "Are NFTs safe" daily.
NFT security heavily relies on centralized platforms' capacity to safeguard the private keys of all assets kept on them. A significant NFT risk is users' failure to securely store their passwords and other private data, which allows malicious actors to steal users' non-fungible tokens even when platforms employ the most sophisticated security measures.
NFTs bought by lone art lovers may occasionally become unavailable. A user receives a reference to the artwork file when he buys an NFT. This artwork can be kept anywhere, not recorded in the blockchain. NFT platforms have the freedom to choose when to close their windows. As a result, even though the user's file is still present, it cannot be viewed.
The capacity of users to exercise critical thought is another factor that affects NFT security. Malicious actors enjoy planning fake giveaways that give away NFTs to users. However, users must send the required amount of cryptocurrency to participate in these giveaways. Of course, users typically do not receive any NFTs.
Are NFTs Safe?
Due to the lack of industry regulation, NFT security is the sole responsibility of the users.
NFTs Security Risks and Their Protection Techniques
Identifying Potential NFTs Threats
Potential dangers to NFTs include the following:
1. Identity Fraud
The number of incidents where artists' creations are sold as NFTs without consent has significantly increased. Scammers who sell fake NFTS under the names of legitimate NFT exchange artists have set up numerous unauthorized customer support channels and social media accounts. In the process, they steal customer data and compromise their accounts.
2. Cyber Security
NFT has led to cases of fraud and cybersecurity. New technologies have made it easier for black-hat hackers to take advantage of the system. Hackers like making fake stores replicate the NFT store's logo and contents. These knockoffs could be misrepresented as genuine articles and sold, resulting in a user purchasing a fake NFT and creating copyright issues since there can only be one NFT. Facebook announced a rebranding and the development of a Metaverse last autumn.
3. Editable Metadata
Metadata is organized reference data that categorize and pinpoint characteristics of the information they describe. NFTs are considered digital assets because they contain metadata that defines them. Metadata is a prefix that typically denotes an underlying definition or description. Editing an NFT's metadata could eliminate its rarity component and reduce its value. Now a collector will know why they shouldn't purchase the NFT collection. It is comparable to painting a portrait of the iconic Mona Lisa.
4. Vulnerabilities in the Smart Contract Security
The headline for 2021 was Cross-Chain Defi Site Poly Network. Attackers stole about $610 million in cryptocurrency from the Poly Network platform. The fund was successfully stolen by anonymous white-hat hackers, according to the report that was made public. They did this by taking advantage of bugs in the smart-contract code.
Thanks to the Poly Network interoperability protocol for heterogeneous blockchains, tokens can be exchanged from one digital ledger to another. Users trade one cryptocurrency for another, exchanging it across multiple blockchains. This incident shows that smart contracts cannot eliminate the risk of cyberattacks despite the assets being recovered in just 15 days.
5. Valuation Challenge
Owners of NFTs may exaggerate the value of an asset to profit by selling it. The subsequent value decline will hurt the other collectors.
6. NFT as a Security
A warning sign for the NFT market was raised when the Securities and Exchange Commission (SEC) requested information on specific NFTs.The crypto trading platform BlockFi was fined $100 million as a result, according to Cointelegraph, for misrepresenting high-yield lending products as securities.
Potential NFTs Security Solutions
These are some potential NFTs security solutions:
1. Use a Unique Password for Your Account
Large tech companies stress the importance of using a strong and unique password. NFT websites demand that you generate memorable passwords that are strong and unique—jt5e-79P-B13qS, as an illustration. Use special characters, upper case, lower case, and combination digits to create a unique and secure password. Never use multiple passwords with most of the same characters on NFT or any other website.
For instance, using Drakeyoungmoney34 or Drakeyoungmoney43 makes it simpler for hackers to guess and remember that they are all at risk if one of these passwords is compromised. Please write down your password on a blank paper rather than saving it on a website that can retrieve it. You can use it to safeguard your cryptocurrency wallets and NFTs.
2. Multi-factor Authentication (MFA)
This electronic authentication method needs a user to successfully provide two or more pieces of evidence (codes or factors) to an authentication mechanism before they are given access to a website or application.
The absence of multi-factor authentication makes it simple for a hacker to access an NFT user account. MFA tends to reduce cybercrime by preventing unauthorized third parties from accessing user data.
3. Smart Contracts Transparency
A Smart Contract is a computer application or transaction protocol automatically executing, controlling, or documenting legally significant events and actions. The foundation of any NFT platform, smart contracts are used in NFT transactions. Many businesses use smart contracts in their daily operations. After all, they prefer Smart Contracts that enforce and increase trust in blockchain technology because they remove the outcome and third parties.
4. Avoid Cold Emails and Downloading Files From Strangers
We've all gotten emails promoting products or documents. Since the emails are unsolicited, they frequently seem too good to be true. Since emails and QR codes sent by strangers are frequently known to contain dangerous malware or viruses, it is best to avoid interacting with them. It might result in a stranger intercepting your password or screen mirroring, stealing your NFT or identity, and compromising your account.
5. Secure Internet Connection
You must secure your home internet connection to safeguard yourself from online dangers and enjoy online peace of mind. It lessens the possibility that hackers will access your hardware wallets and NFT accounts.
6. Regularly Update Your Software
The future is promising for NFTs, but security concerns are also rising. By consistently updating to the most recent software version accessible for your device, you must guarantee that the NFT software functions without any issues. After the new update, it will fix the bugs in the driver software. Reduced cyber threats are the result.
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Other Common NFTs-Related Issues
Legal Issues Attributable to NFTs
Legal in nature, a significant NFT risk is sometimes called the IP (intellectual property) issue. On a decentralized blockchain, traditional intellectual property law does not apply. It is reasonable to determine whether the seller of an NFT owns it before purchasing. Malicious actors occasionally offer sale images of NFTs or mint NFT replicas. As a result, rather than receiving the intellectual property rights to these NFTs, a user merely purchases the right to use them.
Individuals have "the right to be forgotten" and the right to correct inaccurate personal data under laws governing data protection. However, due to the immutable nature of blockchain technology, a data controller cannot guarantee the realization of this right.
Non-fungible tokens are currently unregulated, but if they ever show signs of being regulated investments, their owners may be subject to domestic and international laws. Since these assets could otherwise be viewed as tokens or cryptocurrencies and are subject to financial regulations, the issuer must demonstrate their non-fungibility.
A third-party technology provider may work with NFT issuers to create non-fungible tokens. The minting agreement reached between these two parties must specify the providers' obligations and guarantee the protection of IP rights and personal information.
As a result, one of the leading causes of the high level of legal NFT security risks is the breakthrough nature of NFTs.
Smart Contract Risks in NFT
NFTs employ Smart Contracts to specify restrictions on the circulation of these digital assets and foster trust between parties involved in the trade of NFTs. The specified actions take place when specific conditions are satisfied.
The market has a significant amount of Smart Contract NFT security risks. An NFT seller may lose his assets if the ownership rights are not expressly stated in Smart Contracts.
Hackers can successfully exploit even minor vulnerabilities in projects that do not implement sufficient Smart Contract security measures and do not pass routine audits to steal assets. Attacks on Smart Contracts have significantly increased in recent months in the NFT community.
Reentrancy attacks are one of Smart Contracts' main NFT security risks. Attacks of this kind target Ethereum contracts' fallback feature. These functions carry out operations that other functions, such as those lacking supplementary data, cannot perform.
An Ethereum-based balance is mapped to the hacker's smart contract to start the attack. The "withdraw" command from the targeted smart contract is then called by a hacker using the fallback feature of their smart contract. Since the hacker can repeatedly use the "withdraw" command, the targeted smart contract can be exhausted if the transfer is made before the balance is updated. The person who sells NFTs is the target of reentrancy attacks.
Reentrancy attacks are primarily brought on by the abuse of Smart Contracts' function execution order. Therefore, any Smart Contract flaw could result in a significant NFT risk.
NFT cybersecurity: How to Secure NFTs from Hackers and Scammers
NFTs are virtual assets, so users must adhere to cybersecurity guidelines similar to those that apply to cryptocurrencies. Wherever possible, users should use multi-factor authentication. Hot wallets are to blame for many recent hacks in the blockchain industry. To avoid the dangers posed by cloud cybersecurity, users should try to store their long-term virtual assets on cold (hardware) wallets without connection to the cloud, especially when talking about a large volume of assets.
Users and investors should always confirm that the information they receive is from reliable sources because scams and phishing emails pose a significant NFT risk. It is necessary to contact the project team through other official channels if users need clarification on whether they are speaking with the project's authorized representatives. The users' capacity to independently verify each information they receive is crucial to NFT security.
Numerous NFT projects have established communities that connect tens of thousands of users or even more through communication channels. However, these platforms have become lucrative locations for con artists who send links, images, or advertisements with harmful code or other undesirable content. Therefore, users should refrain from clicking on dubious content posted by strangers.
If hackers steal passwords or seed phrases, users risk losing their NFTs. Using password managers or specialized software like hPass, which provides practical and secure storage for seed phrases, passwords, private keys, and other private data, is the safest way to store this sensitive data.
Additionally, it might make sense for users to use VPN services to encrypt their Internet traffic and mask their IP addresses to secure all transactions involving buying, selling, and managing non-fungible tokens. The VPN service trusted by white-hat hackers, hVPN, illustrates a VPN service that has demonstrated its effectiveness for users conducting activities involving cryptocurrencies.
It is appropriate to bring up the recently launched project OneArt (originally called ArtWallet), which aims to become a leading NFT&Metaspace ecosystem in the context of NFT security. The multi-chain wallet being developed by this project places a strong emphasis on security. The use of specialized solutions for storing NFTs may enable art enthusiasts enthusiastic about blockchain technologies to be confident of the security of their works of art because such solutions implement security measures using the best practices and knowledge of reputable security experts.
In general, NFT market participants should pay attention to the importance of cybersecurity in this emerging sector.
Despite being in its early stages, the NFT market will keep growing due to the increased demand. In the upcoming years, investors will profit greatly and receive the highest payouts. The NFT market has potential threats, so newcomers who want to join it should be careful to choose the correct wallet so they can protect their NFTS.