NFT Scams: How They’re Hurting The Market
Read to be aware, learn new things, and know how to secure yourself from NFT scams.
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NFTs, short for Non-fungible Tokens, have made waves in the crypto industry as they open ways to tokenize a wide range of digital and physical assets.
NFTs allow creators to generate on-chain records of real-world assets that can be stored, readily verified, and transferred just like any cryptocurrency transaction. While NFTs aren’t assets alone, they represent absolute ownership of the underlying asset.
While the potential applications of NFTs are virtually limitless, its most popular present-day use case involves the representation of digital art and game assets.
Enabling an NFT-driven crypto economy are several dedicated NFT marketplaces on which users can mint their NFTs and list them for sale and auction.
Those looking to invest in or purchase these digital assets discover the ones they like by browsing through these NFT marketplaces and putting their money on their favorites.
Purchasing an NFT is similar to buying any crypto-asset with the private key of the associated NFT changing hands between the buyer and the seller.
The NFTs are stored in compatible crypto wallets, secured by a private key or a seed phrase. Anyone who owns an NFT should have complete access to the respective private keys, enabling them to transfer these assets to whomever, whenever they want.
Most NFT trades happen on a handful of popular NFT marketplaces. These include the likes of Mintable, OpenSea, Foundation, and more. All these platforms come with their advantages and a few drawbacks.
The choice of the NFT marketplace depends on the creator or the owner and their preferences like the kind of reach, transaction fees, minting fees, secondary market size, and more.
So, what could be the common differences between the NFT marketplaces that influence a seller’s or a buyer’s choice? Let us quickly compare the three leading marketplaces and list those subtle differences.
Starting with Mintable, it is an NFT marketplace that has been around since 2018. On this platform, users can mint NFTs and list them for sale, while collectors can discover and purchase the original NFTs and even resell them on the secondary market. Of course, most of these things can also be done on OpenSea and Foundation.
However, when it comes to associated fees, here’s where the differences lie, capable of making or breaking a deal. Both Mintable and OpenSea have the lowest fees of 2.5% for NFT transactions on their platform, while Foundation charges 5%, twice the price on the other two platforms.
In terms of minting options, Mintable NFT Marketplace offers more options in the form of gasless NFTs and printable NFTs with a fee of 5% and 10%, respectively. OpenSea matches the gas-free minting fees on Mintable but doesn’t feature printable NFTs.
Regarding accessibility, OpenSea has an edge as the application is available across all major platforms such as web, desktop, and mobile apps.
However, the royalty payments for creators for sale on the secondary market are capped at 10% on OpenSea and Foundation. On Mintable, the decision rests on the creator with no upper ceiling. This enhances the earning opportunities for creators as more people continue to trade NFTs they own for cash or other crypto assets.
The NFT market has registered rapid growth in recent times to hit the $3 billion mark, with a potential to reach an estimated size of $13.6 billion by 2027.
The growth in the market, combined with the high prices commanded by these digital assets, has become one of the favorite targets for cybercriminals. As people continue to spend a small fortune on each NFT, the number of attacks on NFT platforms and individual holders has recently increased, calling for more focus on the security of NFT infrastructure.
A few common threats faced by the NFT ecosystem include phishing and NFT frauds, crypto wallet security cracking, NFT theft and digital art scams, Redline malware scam, and more.
While good security practices like multifactor authentication, a cautious approach to dealing with strangers, and attention to detail help avoid most of these threats on an individual level, NFT platforms must take a more cautious approach to securing their infrastructure to ward off more serious threats.
Projects spend a lot of time and resources to create NFT ecosystems. However, most of them will gain widespread adoption, thanks to the prevailing demand among crypto community members.
However, security threats have the potential to play spoilsport, and if the platforms aren’t secured properly, it could lead to significant financial as well as reputation losses. These losses could cause irreversible damage in terms of adoption.
To avoid such a scenario, platforms should subject their DeFi and NFT smart contracts and resulting tokens to stringent tests and audits to detect possible weaknesses.
Few common items to be subjected to security audits to avoid breaches and attacks include crowd sale and token contracts, custom smart contracts, blockchain wallets and dApps associated with the NFT ecosystem, and the implementation of the underlying blockchain protocol itself.
By allowing professional cybersecurity auditors to dissect the codebase using a combination of automated and manual processes, including penetration testing, to identify all possible vulnerabilities, creators will get a clear picture of any shortcomings in their project.
A detailed NFT audit report will provide a list of potential vulnerabilities and possible fixes, which can be implemented before the project is thrown open to the public.
NFT audits allow projects to detect vulnerabilities surrounding block gas limit, broken URLs, data privacy issues, DDoS, front running, re-entrancy, external calls, ownership flaws, and more, helping them avoid costly mistakes that could cost a fortune.
Identifying and fixing the vulnerabilities will help them insulate themselves from possible attacks, keeping the user funds and assets and their reputation safe.
If you are an NFT project, don’t avoid a comprehensive security audit of our platform. If you are confused about the right approach, Hacken is happy to point you in the right direction.