Non-Fungible Tokens (NFTs) are defined by Time magazine as “computer files combined with proof of ownership and authenticity.” These assets backed by blockchain technology can be anything that takes digital form, including artwork, music, sports cards, and even memes. But while NFTs use blockchain technology to establish proof of ownership like Bitcoin and Ethereum, NFTs work differently and cannot be exchanged like-for-like. If you’re interested in the realm of NFTs, you should prioritize cybersecurity to ensure your assets or tokens are not stolen during transactions or storage. Here are the top 7 things you should know about securing NFTs:
1. Issues with hardware wallet support
NFTs, cryptocurrencies, and other digital assets, are most secure in hardware wallets. However, not all marketplaces allow the use of hardware wallets, leaving clients with no other choice but to use a software wallet.
2. Smart contracts complications
While NFTs contain smart contracts, they are not for the purpose of validating an agreement between a buyer and a seller. Rather, smart contracts within NFTs are for authenticating that the asset is original and, therefore, exists for royalty provisions.
3. Private key issues
Since a private key is essentially a password, it is susceptible to the same security threats as hacking and phishing schemes. A cybercriminal would only need to steal an NFT owner’s private key and, with it, assume ownership of the NFT.
4. Trading on online marketplace security risks
An escrow contract trading model can help increase security when passing ownership rights of an NFT when trading on an online marketplace. However, the model also carries risk because cybercriminals can hack the escrow contract. Another option is to use the intermediary operator model. However, there’s also the risk that the intermediary may steal the tokens.
5. Decentralization principle violations
NFTs are stored in escrow on the trading platform when they are published and transferred to the wallet. All this activity happens outside the blockchain, making all transactions invisible and, therefore, unsafe for all parties. To avoid this, use trading platforms that do not have access to private keys.
6. Metadata threats
Hackers, or even the NFT creator, can change the NFTs metadata and render it worthless. A solution to this is to forbid editing of the metadata in the smart contract and use token agreements that prohibit the changing of the metadata_url.
7. Rise of NFT phishing schemes
Just as we saw a rise in social engineering and phishing attacks focused on cryptocurrency, NFT scams are now also everywhere. Use cybersecurity best practices to protect yourself from NFT phishing attacks, such as never clicking on links or attachments from unknown sources, using strong passwords, using MFA such as FIDO2 and adding extra layers of protection to your devices. Be vigilant with your wallet credentials and never share your seed phrase with anyone. Also, be on the lookout for fake NFT websites, fake offers, fake technical support, fake giveaways, and rug pull scams.
To continue the conversation on securing NFTs, get in touch with specialized experts.