In December of 2021, an art piece called “The Merge” set the record for the highest price piece sold publicly by a living artist. While the art that traditionally fetches high prices tends to be oil paintings or sculptures, this $91.8 million dollar piece exists entirely on the blockchain. “The Merge” is one of the many art pieces of its kind that’s exploded in popularity; known as non-fungible tokens, or NFTs, these digital assets act as a certificate of ownership for certain images and videos.
But with any new technology, the question has to be asked: are they safe?
NFT Cybersecurity: Vulnerabilities That Could Put Users at Risk
While NFTs are protected against some types of cyberattacks, they still have their share of vulnerabilities. The security of your NFTs is dependent on where your wallet is stored; some marketplaces are more vulnerable than others, with centralized platforms storing user keys within their own systems. If that system were to be compromised, any user data stored within could be accessed by cybercriminals.
NFTs are also exposed to the risks associated with smart contracts, and programs that operate specifically on a blockchain. Because smart contracts are the foundation for NFT design, any vulnerabilities within those programs leave users exposed. One of the most popular NFT projects, CryptoPunks, experienced this issue in 2017. A bug affecting their smart contract programs prevented the transfer of Ethereum into seller’s wallets, meaning scammers could receive NFTs without paying for them.
These vulnerabilities are only a few of the issues presented by the cybersecurity capabilities of NFTs. As with many other items of value, hackers have found a number of ways to infiltrate valuable accounts and steal the assets within.
Common NFT Hacks and Issues
The ways hackers have found to compromise NFT security vary greatly; some involve using advanced modern hacking techniques, while others use methods as old as the internet itself.
- Phishing: One vulnerability the blockchain will never be able to account for is simple human error. Hackers will send NFT owners a link to a fake crypto wallet website, usually asking them to log in to fix an issue with their account. Once the credentials are entered, that hacker now has access to the user’s encrypted wallet and all assets (including NFTs) contained within.
- Proving Ownership: With the difficulties associated with storing images on the blockchain, many NFTs are actually owned through image identifiers. This means that when you buy an NFT, you don’t actually own the image. This has led many to purchase fake NFT image identifiers; the scammers run away with the money, while the user is left with a useless image URL.
- Identity Fraud: As with all cryptocurrency-related technology, there are a number of scams that can force users to leak sensitive data. This goes beyond the account details of your crypto wallet; with marketplaces like Coinbase, where extensive information is needed to set up an account, users have experienced frequent identity theft scams. NFT marketplaces are no different, and anyone operating within them should be careful who they share their data with.
How To Secure Your NFTs
Securing your NFTs starts with choosing what type of wallet you’ll be using: hot or cold. A cold wallet can bring a much higher level of security, as these have no connection to the internet. The only way to steal NFTs from a cold wallet would be to physically access the hardware. The issue with this option is that most NFT transactions take place through hot wallets, and it would be difficult to transfer your collection offline if you ever plan to sell any of your tokens.
A hot wallet, which would allow you to buy and sell, exposes you to the same hacks present any time you access the internet. Make sure to keep close track of your login credentials, and never share sensitive information with anyone. If a leak does happen, make sure to run an identity threat scan as soon as possible. These can help you identify what has happened to your information, and stop hackers before they can commit identity theft.
NFTs and Crypto: Different Technologies with Different Cybersecurity Capabilities
As two of the most prominent blockchain technologies, NFTs and cryptos often get thrown together. While both are digital assets, NFTs can’t be traded or replaced by one another, so trading them is far trickier. Fortunately, less trading usually means more security, as the number of interactions with the asset is reduced. As time goes on, the cybersecurity levels of both technologies will grow; for now, NFTs could be a less vulnerable investment, as long as users take the time to secure them properly.