Biggest Security Concerns Around NFTs

The first known non-fungible token was a short video clip minted on May 3, 2014. Since then, NFTs have grown rapidly from amusing trifles to serious stores of value.

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In 2021, a work by the artist Beeple sold for a whopping $69.3 million. That was just a portion of the estimated $40 billion valuation of the entire NFT market in 2021.

Whenever any type of industry or asset class puts up those types of numbers, criminals are sure to follow. As a result, the NFT market is increasingly under attack, from everyday scammers to increasingly sophisticated hackers. In fact, according to research firm PrivacyHQ, fully half of NFT owners have lost access to one or more of their digital collectibles at some point.

With that in mind, here are some of the biggest security concerns currently surrounding the NFT market.

In about three hours in February 2022, more than $1.7 million in NFTs were stolen from OpenSea users via a simple phishing attack. Users were asked to sign online contracts allowing them to trade tokens, but vital portions of the authorizations were left blank. This allowed scammers to complete the forms and transfer NFT ownership from the original users.

Just as with any financial asset, you should never sign incomplete forms or respond to unsolicited email requests without directly contacting the supposed sender.

Although NFT markets now trade billions of dollars worth of NFTs, both the asset class and the marketplaces themselves are just in their infancy. While security protocols are in place, hackers are constantly looking for sources of weakness.

As centralized platforms, the marketplaces store lots of vital information about users and can be vulnerable to a variety of attacks. If you use the same password on multiple platforms and hackers access it on an NFT marketplace, you can be vulnerable to the loss of additional information.

As NFTs are a relatively new type of asset, many users have questions about how they operate. This can make support networks an easy target for hackers. By posing as legitimate support staff, scammers can lure unsuspecting users to fake networks or other websites and then ask them to share their screen or provide personal identifying information that can then be used to commit theft.

One of the most fascinating aspects of the NFT market is that nearly anything can be turned into something of value. The first tweet from Twitter founder Jack Dorsey, for example, sold for $2.9 million — a sale that made many artists fans of the NFT tweet market.

But even that market has proven vulnerable. One scam involves a tweet bot that automatically converts tweets into NFTs, which scammers could then immediately claim ownership over. In essence, if someone posts their own original work of art as a tweet, they could lose control over whatever they post if a scammer gets hold of it.

NFTs don’t have traditional paper trails that you can follow to prove ownership of your asset. When you buy a home, for example, legal title passes to you and is filed as a public record.

Although your NFT purchase is logged on the blockchain, your actual asset doesn’t exist there — just an identifier showing you made the purchase.

In fact, in states like California, it can be questionable to say that you actually “own” an NFT, as what you really own is a license to use the NFT. In that sense, NFT ownership is a bit more nebulous than you might be used to with other financial assets.

If you buy an NFT of a work of art, you don’t physically take possession of the actual artwork. In fact, you likely don’t even “own” the underlying art, just the digital image that you purchased. This makes it hard to know whether you truly have a unique possession.

If you buy an original Picasso, for example, you’ll know you own it because you will have it in your hands. With a digital work of art, however, scammers can create illegal online copies and sell them to numerous individuals. Not only would you not own a unique NFT, the original artist might eventually track you down for owning an illegal copy.

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