This article discusses how to protect your NFTs from theft and fraud through wallet security and storage solutions, NFT marketplace audit reports, and anti-theft measures.
The first step towards safeguarding your NFTs is by using a secure wallet.
IPFS uses content identifiers (CIDs) that are hashes of data linked to your NFT's content rather than an HTTP link.
Hardware (offline) wallets offer heightened security over software wallets because they store private keys offline on physical devices rather than computers connected to the internet.
Use a strong password (containing words, numbers, and symbols) and change it frequently as an anti-theft measure.
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Measures to Protect Your NFTs in 2022
As blockchain technology advances, so does the world of NFTs (non-fungible tokens). These digital assets are becoming more and more popular, and as a result, they are becoming more and more susceptible to theft and fraud. But digital assets are quite secure at the blockchain level. Thus, it's nearly impossible to lose digital assets due to blockchain-level attacks.
Instead, most NFT losses and theft occur due to asset holders being taken advantage of by scammers or failing to adequately safeguard their possessions. It is critical for NFTs and virtual collectibles enthusiasts and holders to properly guard this fast-growing asset class.
Wallet Security and Storage Solutions
The first step towards safeguarding your NFTs is by using a secure wallet. In addition, it's also important to use a safe storage solution. Do not store your NFTs on a custodial wallet since they can be easily hacked. There are three storage solutions available: software wallets, InterPlanetary File System (IPFS), and hardware wallets, each with varying levels of security.
IPFS encrypts your NFTs on the off-chain, making them more secure. It uses content identifiers (CIDs) that are hashes of data linked to your NFT's content rather than an HTTP link that is susceptible to being altered and hacked. Your computer stores these hashes of data. As a result, the system queries IPFS's nodes for the same hash of data and then verifies the accuracy of the data by rehashing it on your computer. While IPFS provides a more secure storage option for your NFTs, there still lies a possibility of hacks via your devices.
Although software wallets and IPFS are still good and easy to use, hardware wallets are the best option to store your NFTs.
These wallets offer heightened security over software wallets because they keep private keys offline on physical devices rather than computers connected to the internet. Hardware wallets are small physical gadgets that you can use to keep your cryptocurrencies and other digital assets separate from the internet and any potentially hazardous scenarios. They necessitate manual sign-off on every transaction, safeguarding your NFTs from remote theft.
However, they do entail complete control over your security that involves backing up and keeping your seed phrases/private keys in a secure location. In general, even the most basic hardware wallet provides significantly greater security than most centralized wallet services, despite their differences in form and functionality. You must also double-check that your chosen wallet is compatible with the blockchain you are using to store your NFTs and the specific NFT token standards.
NFT Marketplace Audit Reports
NFT marketplaces allow users to maintain control of their assets even while listed on the marketplace, as they are non-custodial platforms. Users must, however, grant permission for their smart contracts to interact with their assets, such as transferring them to the right buyer when they sell them. If these smart contracts have flaws, your NFTs may be exposed.
Therefore, it's critical to ensure the marketplace you're using is highly secure and well-respected. One way to verify this is by reading their public audit reports — which assess whether their smart contracts are free of bugs or security flaws and are safe for the general public to use. Additionally, do your homework before picking a platform, especially if it's new or hasn't been extensively tested by the public.
Even if you do everything possible to secure your NFTs, there is always a chance of theft. Unfortunately, no single magic bullet can protect your assets from harmful actors. That being said, even the most secure wallet can be compromised if you do not take proper precautions.
Here are some tips for keeping your wallet safe:
Use a strong password (containing words, numbers, and symbols) and change it frequently
Install updates promptly when they become available
Never reveal your seed phrase/private keys
Use two-factor authentication on all of your accounts
Install a good antivirus program and keep it up to date
Store your passwords and phrases in hard copy or physical offline devices
Avoid visiting websites that appear to have malicious objectives
You may store long-term digital assets offline entirely
Use a VPN when accessing the internet
Be aware of scam tactics and avoid any offers that seem too good to be true
Only enter your information into trusted websites and pages
How to Avoid NFT Scams
Always double-check: When buying an NFT, sending it, using an NFT marketplace, or performing any other operation that requires you to log into a website or service that can access your NFTs, always double-check that you have the correct URL. For confirmation and bookmarking the link, cross-reference it on their social media accounts.
Unsolicited messages and emails: Your inbox may be vulnerable to spam, fraud, and a variety of other types of crime, especially when there is a database breach. If you get unsolicited messages from anyone on any platform, it's likely a scam. Never reveal your seed phrase/private keys to anyone.
Be cautious of copycats: One of the most prevalent ways for NFT holders to get duped is being scammed by a copycat. When dealing with NFT transfers or trades, only utilize established communication channels, and double-check that the individual you're speaking with is who they claim to be.
Follow the Tips and Take Precautions
NFTs are becoming an increasingly popular investment, and as such, they are becoming more and more vulnerable to theft and fraud. As a result, holders of these assets must take the necessary precautions to protect their investments. These tips can help guarantee that your NFTs are safe from danger.