In the exhilarating world of digital art and collectables, where the boundaries between the physical and virtual blur, the rise of NFTs has captured the imagination of creators, collectors, and investors alike.
NFTs have rewritten the rules of ownership, offering a novel way to buy and sell unique digital assets securely on the blockchain. However, with innovation comes imitation, and the threat of duplicate NFTs has emerged as a pressing concern in this dynamic landscape.
This guide will help you understand how to protect your digital investments and avoid these fake copies.
But here’s the key thing: they can’t be swapped or traded like regular cryptocurrencies. Regular money or cryptocurrencies like Bitcoin can be exchanged for one another. But NFTs are different. They’re like one-of-a-kind collector’s items. You can’t just switch them around.
How Does NFT Work
- NFTs live on something called a blockchain, which is a secure digital record-keeper.
- People make NFTs out of digital things, like art, videos, and even tweets! It’s like turning a digital item into a special digital certificate.
- Think of NFTs as fancy digital collector’s items. Instead of having a real painting to hang on your wall, you get a digital file that’s one-of-a-kind.
- Here’s the cool part – only one person can own an NFT at a time. The blockchain keeps track of who owns it, so it’s secure.
- NFTs can also hold special info, like an artist’s signature, in the digital world. So, it’s not just a digital file; it’s a unique and secure way to say, “I own this!”
What Are NFTs Used For?
Blockchain technology and NFTs offer artists and content creators a new way to earn money. For instance, artists no longer need fancy galleries or auctions to sell their art; they can sell it directly to buyers as NFTs.
This not only gives them more control but also means they get to keep more of the money they make. What’s even cooler is that artists can set up smart contracts to earn a percentage of future sales whenever their art changes hands, which is pretty rare in the art world.
But it’s not just artists benefiting from NFTs. Brands like Charmin and Taco Bell have used NFT art to raise money for charity. In video games, NFTs are used to own special in-game items like unique character outfits or skins.
Even virtual real estate in virtual worlds can be bought and sold using NFTs. Musicians and content creators are using NFTs to sell their music, videos, and even their tweets.
Some people also invest in NFTs, hoping that their value will increase over time, just like investing in stocks or real estate. NFTs have a wide range of uses in the digital world, making them pretty cool and versatile.
The Rise Of Duplicate NFTs
As the world of NFTs continues to gain popularity, it has also become a breeding ground for fraud and scams. Scammers have devised various tactics to exploit unsuspecting buyers, resulting in potential financial losses.
One prevalent scheme in the realm of NFT scams involves the creation of what are known as ‘mimic NFTs’ or fake NFTs. These digital files closely resemble genuine NFTs but hold no real ownership or value.
Deceptively, these mimic NFTs are sold at steep prices, leaving buyers with nothing more than a digital illusion. Scammers also employ misinformation as a weapon. They utilise false details, including fabricated reviews and endorsements from non-existent celebrities, to craft an illusion of value and authenticity around their NFTs.
These smoke-and-mirror tactics can entice buyers into investing substantial sums into what turns out to be a mirage. Another ploy scammers use involves conducting auctions for NFTs without any intention of delivering the purchased items. This leaves buyers frustrated and at a financial loss. To protect themselves from these scams, buyers must be vigilant.
Thoroughly researching the authenticity of the NFT and the credibility of the seller is crucial. It is highly advisable to make NFT purchases exclusively from reputable sellers and established marketplaces. By doing so, buyers can significantly reduce the risk of falling victim to these fraudulent schemes, ensuring their NFT ventures remain secure and enjoyable.
Beeple Impersonation Scam
After the artist Beeple sold a digital artwork for a record-breaking $69 million, scammers created fake accounts on social media platforms, particularly Twitter, to deceive potential buyers. They claimed to be Beeple himself, announcing that they were selling his digital artworks as NFTs.
To make the scam appear more convincing, they used Beeple’s profile picture, artwork samples, and even crafted messages in a manner that mimicked the artist’s style and tone. These scammers then offered these supposed Beeple NFTs for sale, asking buyers to send cryptocurrency payments, usually in popular cryptocurrencies like Ethereum.
Unsuspecting art collectors and investors, eager to capitalise on the popularity of Beeple’s work, fell victim to this ruse and transferred their cryptocurrencies to scammers. In reality, these scammers had no affiliation with Beeple, and the NFTs they were selling were entirely fake. Buyers who sent their funds received nothing in return, and their cryptocurrencies were irreversibly lost.
The Tech Errors Behind Duplicates
Coding Errors In NFTs
When developers create NFTs, they write computer code that defines the rules for those tokens. These rules ensure that each NFT is unique and behaves as intended. However, sometimes mistakes happen, or bugs enter the code.
These bugs can lead to unintended consequences, such as creating duplicate NFTs. A common coding error is accidentally allowing the creation of more tokens than intended. Sometimes, coding errors can mix up who owns which NFT. This can result in multiple people claiming ownership of the same NFT, causing disputes.
Minting is the process of creating NFTs. Coding errors during minting might generate extra NFTs, flooding the market with duplicates. Moreover, errors in the code can lead to issues when transferring NFTs between users, causing duplicates or loss of tokens.
NFTs often contain metadata, which is additional information about the digital item. However, mishandling metadata due to coding errors can have significant implications, particularly in terms of the NFT’s uniqueness and clarity.
Such errors may result in confusion or misrepresentation of the NFT’s attributes, potentially affecting its value and authenticity. Therefore, it is essential to ensure proper metadata handling to maintain the integrity and uniqueness of NFTs in the digital marketplace.
MoonCats Reveal Bug
MoonCats is an NFT collection on the Ethereum blockchain. In 2021, a bug in the MoonCats smart contract allowed a user to reveal and claim a large number of MoonCats for a minimal cost.
The technical bug in the MoonCats smart contract was related to how the system was supposed to reveal and distribute MoonCats over time. In the initial design, MoonCats were meant to be slowly revealed to the public in a way that would make them more valuable as time went on.
However, due to an error in the code, someone discovered that they could ‘reveal’ a large number of MoonCats all at once for a very low cost.
This bug allowed them to essentially create many MoonCats for minimal expense, which significantly disrupted the expected value and rarity of these digital collectables. It was a technical oversight that had real consequences in the NFT community, highlighting the importance of rigorous code testing and security measures in blockchain projects.
Smart Contract Vulnerabilities
NFTs often rely on smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. These contracts manage various functions of NFTs, including ownership, transfers, and interactions.
However, if there are vulnerabilities or weaknesses in the smart contract’s code, it can lead to problems with NFTs. A reentrancy attack in smart contracts allows attackers to repeatedly exploit the contract’s functions, potentially creating duplicate NFTs or stealing them.
Smart contracts need to check inputs to ensure they’re valid and safe carefully. If they don’t, attackers can manipulate the contract to create duplicates or exploit it in other ways.
Gas is like fuel for smart contracts. If a contract runs out of gas during execution, it can leave the process incomplete, potentially causing issues like duplicate NFTs or failed transactions.
Blockchain Network Challenges
Blockchain is the technology that underlies NFTs. It’s like a digital ledger that records all NFT transactions. However, this technology has its own set of challenges that can impact NFTs.
Too many transactions happening at the same time on some blockchain can slow down transactions, including those involving NFTs. This leads to delays in creating or transferring NFTs.
In the blockchain world, gas fees can become very high, making it costly to create or trade NFTs. Some blockchains, like Bitcoin and Ethereum, use a lot of energy. This can raise environmental concerns. It’s akin to a car emitting a lot of pollution while driving. Some NFT creators and buyers worry about the ecological impact of their transactions.
Guarding Your NFT Investments
Verify NFT Sources
Stick to well-known NFT marketplaces like OpenSea, Rarible, or Foundation, as they often have stricter verification processes for creators. Research the creator’s background and online presence. Look for their official website, social media profiles, and other credible sources that confirm their identity.
Reach out to the creator directly through official channels to verify the authenticity of the NFT and their association with it.
Inspect Smart Contracts
Dive into the NFTs smart contract code. Ensure it matches the information provided by the creator and the marketplace. Look for NFT projects that openly share their smart contract code. Transparency is a good sign of a legitimate project. Make sure the NFT contract address matches the official one from a reliable source.
If it doesn’t match, it’s likely a fake. If you’re not tech-savvy, consider seeking help from experts who can assess the smart contract’s integrity. If available, read the project’s whitepaper to understand its goals, technology, and the team behind it.
Check the project’s community involvement. Legitimate NFT projects often have active and engaged communities.
Use NFT Verification Tools
Some platforms like QuickNode offer NFT verification services that can help confirm the authenticity of an NFT and its creator. Use blockchain explorers to track the NFT’s ownership history. Ensure there are no irregularities.
Pastel network is a special blockchain for NFTs. It was made to fix problems like slow transactions and high costs on other blockchains that NFT apps use. They made it so it can work with any other blockchain and apps.
They have something called the Sense Protocol, which helps you see how rare and real an NFT is. This keeps artists and buyers safe from fake NFTs.
Protect Your Private Keys
Store your NFTs in a secure wallet, and never share your private keys or recovery phrases with anyone. Consider using hardware wallets for added security against hacking.
By enabling 2FA, you create an additional layer of security that helps keep your NFT investments safe from unauthorised access. It’s like having a digital guard dog that ensures only you have the key to your NFT kingdom.
With NFTs offering exciting opportunities for collectors and creators, it’s crucial to prioritise NFT authenticity checks and investment protection. By following these practical steps and conducting due diligence, you can navigate the NFT market with confidence, safeguard your investments, and enjoy the world of unique digital assets.