Non-fungible Token - NFT, a unique and irreplaceable crypto asset is an emerging term in the financial world these days. Everyone is curious to know about this new form of digital asset that is getting sold at unbelievable prices. So what is this NFT, it's a digitalised form of any real world object like art, music, videos, GIFs, games, collectibles, digital avatars, documents etc tokenized to become non-fungible. These crypto assets are traded with cryptocurrencies and the value of these NFTs depends on the seller and the buyer. The popularity of these NFTs can be explained by examples like twitter founder transformed the first tweet into a NFT and sold it for $48 million. A New York Times column is made into NFT and sold for half a million dollars for charity purposes. Now there is a film series ‘The Degen Trilogy” is coming to feature the Bored Ape NFT collection. The list of these examples is endless and enchanting. Let's dig deeper to understand the science behind these NFTs, what they are, how they are traded and also security issues related to these crypto assets.
Non-fungible tokens - NFT exists on ethereum blockchain as unique tokens that authenticates ownership of digital products. NFT’s are created or minted with a digital signature that cannot be exchanged for one another, this digital signature is used to authenticate the ownership. For example, if you own a drawing, you can use it to make an NFT. The NFT that represents your art comprises information such as,
You become the owner of this token, which is stored on the Ethereum blockchain. The blockchain ensures that your data is never tampered with, thereby giving you copyright. Hence, NFT is a crypto asset that allows holders to confirm their ownership with their digital authentication.
When these NFTs are traded sometimes they get exposed to cyberattacks, in the latest Axie Infinity, a blockchain-based NFT game was hacked by $625 million, making it the second-largest crime in history. There are many reasons for these security breaches, let's explore how this can happen.
NFTs, like any other developing technology, come with their own set of risks. Scams and malicious attacks are two of the most common NFT hazards that investors face. The ability of decentralized platforms to preserve the private keys kept on them is critical to NFT security. Even if platforms adopt modern security measures, a substantial NFT risk is associated with users' failure to securely store their private keys and passwords, resulting in the stealing of their private keys.
NFTs are typically Smart contracts that reside on a blockchain network. The contract records the item's unique qualities and also it keeps track of the current and previous owners. One can even program their NFTs to pay royalties to the creator each time it changes hands.
If the ownership of the assets is not properly defined in the smart contracts, the seller's asset may be lost and also hackers can easily exploit minor weaknesses to steal assets when projects fail to deploy proper smart contract security. This is why before deploying NFT on blockchain, auditing the smart contract with an auditing firm is very crucial. The firms will identify the risks and provide feedback that can be used to fix the identified vulnerabilities. The firms will also ensure that the correct precautions are taken to ensure the security of the smart contracts.
At BlockChainSentry we are trying to resolve the most pressing need of offering a tool that can automate vulnerability management and help in developing secured smart contracts.
Apart from smart contract security, it is critical to adhere to safety precautions to protect your digital assets. The following are some of the best practices:
NFTs are virtual assets, users should have multiple ways to access their accounts and change their passwords regularly. Users should also enable two-factor authentication, which needs not just their password but also a secondary piece of information to access their accounts, such as a one-time code or a text message. Hackers will have a harder time gaining access to users' accounts using two-factor authentication, especially if they already have their credentials.
Scams and phishing practices have harmed users' and investors' money. As a result, it's critical to double-check any information you get before acting on it. This verification procedure can take some time, but it's well worth the effort.
It may also be fair for users to employ VPN services to encrypt their Internet traffic and IP addresses to secure all NFT-related activity.
Keep all of your credentials and passwords in a physical format to avoid data breaches and reduce the chance of someone gaining access to your NFTs by storing them offline.
Adopters and doubters coexist in the world of innovation. Whatever side you're on, NFTs are a fascinating new way of owning digital assets. However, the value of cybersecurity in this new economy should not be taken for granted by NFT participants.Contact BlockChainSentry's Smart Contract Vulnerability Management team right now to learn more about data security and how to keep your NFTs safe.