Nonfungible Tokens (NFTs) – Safety And Security Still Needed (Part III Of IV) – Technology

Last week, the founder of a crypto startup revealed that $1.7
million worth of nonfungible tokens (NFTs) were stolen from his digital wallet. He was
forthright, stating “[f]ound out the likely root cause for the
exploit, it’s a targeted social engineering attack.” The
victim is not alone; there have been many similar instances over the past few
months.

Social engineering is “the psychological manipulation of
people into performing actions or divulging confidential
information.” In the world of crypto and digital assets, it
has been a successful exploit to fraudulently obtain NFTs
especially as various trading platforms have emerged, unregulated,
to earn exorbitant profits through transaction fees.

Last year, the NFT market exploded to over $40 billion and has
turned into the next gold rush as consumers flood the market and
platforms expand offerings. As of the date of this article, the
most expensive NFT ever sold fetched an astounding $91.8 million. Crypto
crimes have exploded too, accounting for $14 billion worth of
blockchain transactions.

It is unclear at this point if NFTs are a short-term
“fad” or a strong long-term investment, but whenever
there is money being traded at such a large scale, cyber criminals
are sure to get involved. As previously noted, laws, regulations
and industry standards are likely coming to this decentralized
space known as Web3.

The value of an NFT stems from its unique code and its inherent
“smart contracts.” Each NFT is unique and
noninterchangeable. This means that no two NFTs are ever the same.
Another way to conceptualize this idea is to consider the Mona
Lisa. Just because a picture of the Mona Lisa is taken, printed and
hung does not make it as valuable as the original.

The Mona Lisa has value because it was created by a well-known
artist and is unique. There will only ever be one Mona Lisa, just
as there will only ever be one of each individual NFT. Put another
way, NFT creators can derive value from their NFTs through the
unique characteristics of each individual NFT.

NFTs are also being purchased for a variety of real-world
applications including as movie tickets, as real property, and as membership to
exclusive clubs. NFTs can also be used for numerous
“virtual” applications, such as authenticating digital
artwork and collectibles, and online gaming.

As the number of thefts and scams rises, so does the need for
regulation and legal oversight. As we mentioned in the opening
article of this series, a recurring theme of the Cryptopia event
was that laws, regulations and industry standards are coming, and
that’s not necessarily a bad thing.

For now, users of the various platforms should create strong,
complex passwords for their accounts, and be sure to maintain
different passwords for separate accounts that can be used for
crypto exchanges, crypto wallets, and NFT marketplaces. Users
should also enable multifactor authentication.

Given the openness of the communities, users should also
research the platforms they visit. Members have flocked to
messaging servers such as Discord to share the latest news and to
keep their communities up to date on their respective projects.
Lastly, users should only buy, sell or trade from trusted sources,
and be skeptical of any promises that sound too good to be
true.

In sum .

NFTs have the potential to be great investments, but due to the
increase in illegal activity surrounding them, it is likely that
regulations and legal oversight will be coming soon. Until then,
extreme caution is advised.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.