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Security Threats for NFTS and Possible Solutions

June 11, 2022

In a world that keeps evolving and technology keeps changing. Art captioning our feeling has led a new generation that loves art. A million pieces of artwork get created annually, and 1,000,000 of that artwork gets stolen.

According to the darknet, the stolen artwork market is valued at over 6 billion dollars annually. This number is due to the digital era where big tech has led to the sending of digital artwork, memes, tweets, music, and video in the form of GIFs and MP4.

Combating the losses has led to the introduction of non-fungible tokens. Non-fungible tokens (NFTs) have become a popular online investment in conjunction with Crypto-currency since they are more secure and authentic.

Most people ask themselves, what are NFTS, how are NFTs created, what are some threats they may have, are they secure, or are they fraudulent? This article will discuss and explain these concepts in detail.

Table of contents

Prerequisites

To follow along the reader should have:

What is an NFT?

A Non-fungible token (NFT) is a digital asset representing real-world objects like art, music, in-game items, and videos. We store NFTs in a publicly accessible Ethereum blockchain. NFTs cannot be traded or exchanged at equivalency compared to cryptocurrencies, and the tokens are unique.

Different contents such as digital arts, movies, and music records, have been converted into NFTs. The creation of digital NFT has exploded into the mainstream leading to the creation of Decentralized finance and Decentralised autonomous organizations. NFT allow the buyer to own the original item digitally. It contains built-in authentication, which serves as proof of ownership. NFTs owners may value the digital bragging rights almost more than the item itself.

The characteristics of the non-fungible tokens

The following are some of the characteristics of the non-fungible tokens:

  • Linkage to a physical or virtual asset. It expresses the immutable right of possession.
  • Verification of the history of ownership. An NFT has an inbuilt verification system that tracks the history of ownership of the digital asset.

Where to buy NFT

Do you ever ask yourself, where do I buy the NFT? I used to ask myself the same. The most popular sites to buy an NFT are follows:

  1. OpenSea: It has over 13.3 billion USD market value, the first and largest peer-to-peer marketplace for non-fungible tokens.
  2. Nifty Gateway: It is digital art online auction platform for non-fungible tokens.
  3. Rarible: Also known as RARI, it a software that allows creators to create and issue ownership of selling custom digital work. It links sellers with buyers who can select pieces they wish to purchase.
  4. Foundation: A creative playground for artists, curators, and collectors to experience the new creative economy.

Examples of NFTs

The following are examples of NFTs:

  • Nyan Cat GIF: On April 2, 2011, a 25-year-old, Christopher Torres of Dallas, Texas, posted the GIF animation of the cat and sold it for more than $1m. He uses the name “prguitarman” on his website LOL-Comics.
  • Jack Dorsey’s first-ever tweet: Jack Dorsey sold his first-ever tweet for $2.9m (£2.1m) to a Malaysia-based businessman.
  • CryptoKitties: CryptoKitties is a blockchain game on Ethereum developed by Canadian studio Dapper Labs that allows players to purchase, collect, breed, and sell virtual cats.
  • Cryptovoxels: Cryptovoxels is a virtual gaming world (Metaverse) powered by the Ethereum blockchain. Players can buy land and build stores and art galleries in this virtual world.

Understanding NFTs possible threats

The following are NFTs possible threats:

1. Cyber Security

NFT has resulted in cybersecurity and also fraud cases. With the advancement of new technologies, black-hat hackers have found a way to gain an advantage of the system. Many hackers tend to create fake stores with the capability to mirror the logo and contents of the original NFT store. These counterfeits may be passed off as the real thing and sold, leading to a user buying a fake NFT, which leads to copyright issues since there can only be one NFT. Last fall, Facebook announced its rebranding and creation of a Metaverse. The growth of the digital world, blockchain, and the metaverse have led to the emergence of the digital asset known as NFT.

2. Identity fraud

Cases of artists having their work sold by others as an NFT without permission have significantly risen. Many scam artists have set up unauthorized customer support channels and social media accounts that pretend to be the real NFT exchange artists and sell fake NFTS with their names. They also end up stealing customer information and compromising their accounts.

3. Vulnerabilities in the smart contract security

In 2021, Cross-Chain Defi Site Poly Network was the headline. The platform Poly Network was attacked, with the alleged hacker draining roughly $610 million in crypto. According to the report released, anonymous white-hat hackers or hackers successfully stole the fund by exploiting vulnerabilities in the smart-contract code.

Poly Network is an interoperability protocol for heterogeneous blockchains, which lets users swap tokens from one digital ledger to another. It is exchanged between several blockchains as users trade one cryptocurrency for another. Despite the recovery of the assets in 15 days, this incident proves that smart contracts cannot discard the risk of cyberattacks.

6. Editable metadata

Metadata is structured reference data that sort and identify attributes of the information it describes. Metadata is a prefix that mostly means an underlying definition or description; therefore, NFTs are digital assets that contain metadata that defines them. Editing the metadata of an NFT may destroy the rarity aspect of the NFT and can affect its value. A collector will now have a reason not to buy the NFT collection. It is like painting on top of the famous Mona Lisa a portrait painting.

7. Valuation challenge

Owners of an NFT may over-hype an asset to inflate the value, only to cash out. The other collectors will suffer from the subsequent decline in value.

8. NFT as a Security

After the Securities and Exchange Commission (SEC) demanded information on ceratin NFTs, it created a red flags for the NFT market.According to Cointelegraph, this also led to a fine of $100m issued to the crypto trading platform BlockFi for falsely labeling high-yield lending products as securities.

Possible NFTs security solutions (how to secure NFTs)

The following are the possible NFTs security solutions:

1. Multi-factor authentication (MFA)

It’s an electronic authentication method where a user is granted access to an application or website only after successfully presenting two or more evidence (code or factors) to an authentication mechanism.

A hacker can easily hack an NFT user account due to a lack of multi-factor authentication. MFA tends to lower cybercriminal attacks since it protects user data from being accessed by any other unauthorized third party.

2. Use a unique password for your account

Big tech companies emphasize on the use of a unique and strong password. NFT websites require you to create strong and unique passwords that are easy to memorize. For example, Jt5e-79P-B13^qS. To create a unique and strong password, use special characters, upper case, lower cases, and combination digits. In NFT or any website, do not use two or more similar passwords in which most of their characters are the same.

For example, Drakeyoungmoney34 or Drake youngmoney43 makes it easier for hackers to guess and remember that if one of these passwords is compromised, then it means that all of these passwords are at risk. Do not store your password on a password retrieving website, but write down your password on a clean piece of paper. It will help you secure your NFTs and crypto-wallets.

3. Avoid cold emails and downloading files from strangers

We all have received an email promoting a company or a document. The emails usually seem too good to be true since they are unsolicited. It is best not to interact with email or QR codes sent by a stranger since they are known to contain harmful malware or viruses. It may lead to a stranger stealing your password or mirroring your screen and later compromising your account by stealing your NFT or identity.

4. Smart contracts transaparency

A smart contract is a computer program or a transaction protocol that will automatically execute, control, or document legally relevant events and actions according to the contract terms or a legal agreement. Smart contracts play a role in NFT transactions and form the building blocks of any NFT platform. They remove the outcome and third parties; hence many enterprises use smart contracts in their daily operations because they prefer smart contracts which enforce and build trust in blockchain technology

5. Regularly update your software

The future of NFTs is getting brighter with time, and so is the raising security concerns. You must ensure the NFT software runs smoothly by regularly updating to the latest version of the software available for your device. It will fix the bugs in the driver software after the new update. It leads to reduced cyber threats.

6. Secure internet connection

Securing your internet connection at home is essential to protecting yourself from online threats and enjoying peace of mind when you go online. It lowers the risk of hackers getting in touch with your NFT accounts and your hardware wallets.

Software and hot storage crypto wallets

There are different types of wallets described as both software and hardware. The following are some of the top NFT wallets available right now:

  • Coinbase: It is an example of a hot wallet that offers an NFT supporting wallet service and allows the selling of cryptocurrencies. It has a user-friendly design interface that is easy to navigate and is an excellent choice for those getting started with NFTs.
  • Enjin Wallet: It is an ideal home for NFTs and crypto, allowing you to collect all your possessions in one place.
  • AlphaWallet: It uses the web 3.0 implementation that allows you to manage your tokens. You can also import your old wallets without backing up your private keys or installing any software.
  • Metamask: It is a crypto wallet and blockchain app gateway that allows you to interact with the Ethereum network. It is an easy-to-use, secure, and popular option for managing your Ethereum-based tokens and has over 21 million users.

Hardware wallet and cold crypto wallets

Hardware wallets are tools that enable cold storage of your crypto and NFT. It is a method that keeps your private keys private. The following are some of the popular hardware wallets:

  • Ledger Nano X: The Ledger Nano X is a Bluetooth-enabled secure device that offers an extensive capacity and an easy-to-use experience for crypto owners. It works best when paired with the Ledger Live smartphone app. It can send and receive over 1300 crypto assets and supports different desktop and mobile operating systems. It stores private keys inside hardware wallets chip and stores up to 100 applications such as Bitcoin, Ethereum, and Bitcoin Cash.
  • Trezor One: It currently supports over 1000 assets and works the same as Ledger Nano X. Despite the limitation on several coins, NFTS, and lack of Bluetooth capabilities, both Trezor and Ledger Nano X have other higher-end devices. The PIN protection directs you to their start page when setting up the account. It provides even more security and prompts you to use 2-factor authentication when verifying your purchase.
  • ELLIPAL Titan: ELLIPAL supports 41 blockchains and over 10,000 tokens. It is also IP65 rated waterproof and dustproof. It allows you to manage your accounts and connect to exchanges through your smartphone.

What does the future hold for NFT?

Despite the threats, people have created NFTS across the world. Many industries and even artists are hopping into the business to gain from this booming market. Metaverse galleries are coming in hot, and even Mark Cuban wants to bring NFT ticketing to the NBA to entitle buyers to lifetime front row seats at their tours.

The NFT space is fast-changing. With over $4.8 billion sold on OpenSea, the NFT market will boom and grow to greater heights. The future of NFT is full of possibilities, and the market will grow exponentially.

Wrapping up

The NFT market is still new, but it will keep growing due to the increasing demand. The investors will gain many profits in the coming years and reap the best rewards. For the newbies who want to join the NFT market, please make sure you pick the right wallet so you will be able to secure your NFTS because the market also has potential threats.

Happy learning!

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Peer Review Contributions by: Briana Nzivu