NFT Security Audit: The Definitive Step-by-Step Guide

by ImmuneBytes
NFT Security

The abbreviation “NFT floating” has been one of the most trending words on the internet these days. The reason behind this is the high demand for Non-Fungible Tokens in the world nowadays. Quite obviously, we have been seeing some of them being released as music albums and getting sold for millions and billions of dollars! 

So, you are not alone if you see this term flooding the internet these days! 

However, popularity in today’s techno-savvy generation means attracting the attention of hackers and scammers too who are always on the lookout for newer platforms to hack.  This paves the way for NFT security audits

It is no secret that the DeFi space has always been susceptible to a wide range of cyber threats and attacks. With so many vulnerabilities in the smart contract audits today, handling each of these attacks oneself becomes quite a tiresome task. The graph below enlists some of the major DeFi exploitations to date worldwide.

Source: https://www.linkedin.com/pulse/why-should-you-get-your-defi-smart-contracts-audited-preetam-rao/

“Without my knowledge, someone purchased $10K+ worth of today’s drop on @niftygateway using my NFTs,” says Natalia Walsh, marketing freelancer. So, hackers are already showing off their skills to steal NFTs. 

Before knowing more about the NFT smart contract security audit, let us know more about what NFT is.

What are NFTs? 

Before going further into the blog, it would be helpful for you to be fully thorough about what are NFTs first. 

In the realm of blockchain, Non-Fungible Tokens (NFT) or ERC721 are a particularly special kind of cryptographic tokens with a secret key, where each token is distinguishable from the others and can represent any products and assets in digital token form.

Quite overwhelming to understand. Let’s simplify this for you. 

Non-fungible means that any entity is unique and cannot be changed with another object. For instance, a bitcoin can be exchanged for another bitcoin to create the exact same thing.

To guarantee digital ownership, safeguard intellectual property rights, manage digital assets, and generate real-world value, NFT uniqueness can be used. 

Why Do Users Need An NFT Security Audit? 

Even though the blockchain security audit is the need of the hour, people tend to be careless with this process which leads to the loss of their valuable tokens. Failure to meet security requirements may result in a significant financial loss as well as the permanent lockdown of the assets under contract. NFT audits are crucial because these contracts are also legally binding and enforceable.

Hence, there is a strong need for carrying out the NFT contract audit process, and further in the blog, we will provide you with a definitive step-by-step guide on the NFT security process

Different NFT Issues And How Can We Identify Them? 

Whenever we purchase an NFT object, we buy the identifier and not the actual image. The company from which a user obtains an NFT manages the node that is connected to the Interplanetary File System via this special identity.

Therefore, a user will lose access to his NFT object or there is a chance that the value of the purchased NFT may decrease to zero in the event that the company that is minting NFTs experiences a significant hack or decides to withdraw from the market.

Due to the lack of identity verification, so many fake artworks are sold on the NFT market places. If an NFT is stolen, the true creators of the piece must establish their ownership. The absence of contact between markets is one of the factors contributing to the identity verification problem. Marketplaces cannot employ a sizable database in the sector to verify an individual’s identity.

2021 was the year of decentralization. Despite this, a lot of consumers are still seen interacting with NFTs using a variety of centralized systems such as the Nifty Gateway and OpenSea. The private keys are kept on these centralized sites. As a result, any significant assault on the NFT market may prevent users from accessing their NFTs.

The underlying smart contract is the primary source of security issues for NFT. DoS attacks, reentrancy attacks, and front-running are on the list of major hazards associated with a blockchain security audit.

Why Do Hackers Aim For NFTs? 

Malicious actors use NFTs as a convenient method to make users get connected to their wallets. If there will be suspicious transactions in the process, then hackers can easily get access to their funds. During airdrops or similar events where users get NFTs from unverified projects, victims can get malicious NFTs. 

Even in today’s world, people are still oblivious to the security risks that are experienced in the process of dealing with NFTs. One of the examples of such a situation was when the scammers targeted the supporters of CryptoBatz.  

The ability for malicious actors to transform genuine, priceless works of art into NFTs without the authors’ permission is advantageous. Due to the industry’s extreme lack of regulation, bad actors are able to sell these NFTs despite the fact that they are neither morally or legally permitted to do so.

In this situation, carrying out an NFT contract audit can be useful. Don’t you think so? 

NFT Audit: The Process

These are the steps that auditors follow during the NFT security audit

  1. Project familiarization
  2. Freezing the code
  3. Reviewing the code
  4. Automated analysis
  5. Manual/functional analysis
  6. Analyzing the known vulnerabilities
  7. Pen Testing
  8. First Audit Report

Although all of these steps depend upon the proficiency of the auditing team which performs the process, we at ImmuneBytes stick to a fixed methodology of carrying out all these comprehensive steps to ensure a smooth audit process. To get a detailed overview of all of the abovementioned steps, you can directly give us a call at +91 7303699708. We are all ears to your queries and would solve them at the earliest. 

NFT Security Audit As A Means Of Hack Protection

Just like any other virtual assets that you possess, NFTs can also be stolen. A malevolent actor may be able to mint NFTs without the approval of a market because of smart contract flaws. Malicious actors can force users to transfer their NFTs to malicious addresses by using social engineering techniques.

Do you know what are the main elements of an NFT smart audit? These include: 

  • Testing
  • Automated analysis
  • Manual analysis
  • Creating the final audit report with some recommendations

When all these procedures are followed diligently, the NFT security audit becomes a potential weapon against all threats and cyberattacks. 

Want To Know More About Some Of The Recent Examples Of NFT Attacks? 

We, at ImmuneBytes, have a dedicated team of professionals who will cater to all the queries that you have regarding this topic. To give relief to your inquisitive minds, here are some examples of NFT attacks that happened in the world. 

  1. Full send meta card

The hackers hacked the discord server of the project and the users received a scam link. The wallets of a few users were completely robbed. 

  1. Fractal Discord Hack 

Did you know in December 2021, users got scam links through project discord’s channel? It was so sad to see users losing approximately $150K in Solana tokens. A few hours prior to the incident, the project had made public plans to distribute NFTs through airdrop to users. The webhook method was used by hackers to post false messages. The possibility exists that the project did not implement the necessary safeguards to protect the webhook.

  1. LooksRare DDoS Attack

The project, in January 2022, received a denial of service attack just within a few hours after it was launched. Somehow, the site was restored. Even then, a lot of users were facing issues when they tried to connect their wallets.

  1. Lympo Hot Wallet Security Breach

The Sports NFT minting platform Lympo suffered a hot wallet data breach in January 2022, which cost $18.7M. There were 10 separate compromised wallets.

  1. The sevens NFT collection

One user was able to produce 1,000 NFTs by using the smart contract limiter to their advantage. Instead of using the official website, the rogue person was minting NFTs via the smart contract on Etherscan. 

The evil person interacted with the project’s smart contract by creating his own. His smart contract made use of the MEV bribery mechanism to steal entire blocks and guarantee that transactions would be processed with deficient fees. 

Then a malevolent actor began offering some of the newly created NFTs for sale on the OpenSea market.

NFT Contract Audits: Final Takeaways

Due to their simpler design and less complicated ecosystem than the DeFi one, NFT smart contracts may appear to be more secure than smart contracts for fungible tokens. 

The majority of the hacks were caused by errors that users made when attempting to reduce gas costs or looking for ways to obtain NFTs nearly for free. However, if projects had given auditing their smart contracts more attention, these errors might have been prevented. 

Smart contracts were implemented into projects, and their functionality allowed for legitimate exploitations.

Due to its extraordinary ability to assign value to any digital or physical item while recording ownership in the Blockchain, NFTs have exploded in popularity over the past year. NFTs also enable investors to build the future of a tokenized economy by forming exclusive communities around assets. Therefore, it is high time that we think about NFT security. 

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