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2021 has been a commendable year for NFTs, experiencing a more than 250-fold increase in its year-on-year sales.
NFTs first came in around 2014, but the hype around the non-fungible digital assets was created only recently as mainstream companies, investors, and influencers delve into the space.
While the demand for NFTs is still high, security threats follow a similar trend. Therefore, it is necessary to consider a few measures to make your NFT trading, collecting, or investment journey free from security overhauls.
This blog will talk about five essential things to be considered before purchasing NFTs, but before that, let’s discuss NFTs and their security issues.
What are NFTs?
Non-fungible tokens are unique cryptographic assets based on the blockchain network. These are signatures or certificates for digital collectible artworks like paintings, music, graphics, games, and many more.
Similar to an IPR(Intellectual property right) giving authenticity to your work, NFTs give ownership to your digital work. Basically, it is a tokenization technique to sell digital art.
What does NFTs security signify?
The buzz around NFTs has not been long drawn; still, it has attracted a considerable market, making it mammoth in value and size. This is probably why NFTs are an indispensable destination for cybercriminals.
- Phishing techniques to steal private keys and seed phrases for NFT wallet access
- NFT rug pulls
- Falsely claiming to be well-known platforms, exchanges, or wallets in order to access users’ virtual assets and compromise NFT security by stealing the private information necessary for it.
- Purchasing fake NFT tokens
Since anyone can tokenize other people’s content, the global blockchain community has to consider the issue of “Are NFTs safe” on a frequent basis.
Moreover, one way to secure your NFT project is an NFT security audit that verifies the smart contract powering your NFT and proves its authenticity.
Moving ahead, let’s discuss five things to consider before purchasing NFTs to prevent NFT vulnerabilities.
Things to Consider Before Purchasing NFTs
If the FOMO is hitting you, and you are planning to buy NFTs for your digital collection, investment option, or as a trading option. Then it would be best if you considered the following pointers to make your NFT journey secure.
Note: Before buying an NFT, you need to set up a secure crypto wallet like metamask in order to store your digital assets.
Look for a credible marketplace.
NFT marketplace is a blockchain platform that makes it simple to store, mint, and trade NFTs. Prerequisites of using an NFT marketplace include a crypto wallet, cryptocurrencies supported by the platform in use, and a user account.
A well-known and trusted marketplace can help build trust in the NFTs listed on that platform. Marketplaces like Binance, coinbase, Opensea, etc., already have access to many trusted users, increasing their credibility. Hence, before interacting with the platform, it is essential to do your own research and interact with the platforms having a solid reputation.
- Development Team
The long-term feasibility of the project may be determined by taking into account factors like the projects they have worked on in the past, how successful each of those projects was, and their experience in the NFT sector.
Moreover, if the development team still plays a role after listing the NFT on the marketplace, it gives reassurance that they are actively involved in executing their vision.
Also, check for an NFT smart contract audit. An audited NFT smart contract has an additional security stamp and verification, adding credibility to the project.
- Network liquidity
The network liquidity depends on three major factors, including the size of the network, no. of transactions, and the liquidity inherent to that network. It plays a significant role in determining the price stability of NFTs.
The NFT rarity ranking quantifies the scarcity of a collection, and long-term ROI is higher for rare NFT collections.
Following are the likely percentages of distribution:
Super Rare – Extremely rare NFTs are frequently the most valuable. Their dispersion is, therefore, less than 3%.
Rare incidents- may be more common than 5 percent of the time. For rare objects, a reasonable estimate is 5–10%.
Ordinary – Common NFTs. As a result, their dispersion is greater than 85%. 88 to 94 percent of the distribution is most likely.
It is imperative to understand what an NFT serves, and the project’s worth determines the utility of an NFT.
The practical use of NFTs in both the physical and/or digital worlds is what gives them their usefulness. An asset class is required to convert the value of assets from the real world to the digital world as the two worlds become more intertwined.
NFTs are not only unique, but they also have a wide range of applications. For instance, they can mimic characters or objects in video games and be depleted as construction resources or worn out as apparel for characters.
A digital asset has no use case and low demand if it lacks utility. An NFT with significant utility provides immediate value that could increase over time based on the level of adoption of the underlying project.
Is NFT worth buying?
Many crypto-enthusiasts feel the NFT craze is just an attraction bubble, which will soon burst out. Volatility comes adjacent to the crypto space, and similar is the case with NFT.
While, with the bleeding crypto market, NFTs have also slowed down, it does not mean the technology itself is of no use.
Every investment option has its own pros and cons. Take the stock market, for instance. Only a handful of shareholders could earn a fortune, but at the backend, it supports businesses with access to funds.
Similarly, supporting artists, gaining access to highly sought-after virtual or real-world goods and experiences, and enjoying the gratification of purchasing into a culturally appealing universe are all strong reasons to invest in NFTs.
When their use cases first emerged, the demand for NFTs skyrocketed. It can stand in for anything, including land, sculptures, music, games, and real estate!
NFTs are certain to draw the attention of malevolent users and hackers, given the abundance of these use cases. It only makes sense to protect your tokens by having them audited by an NFT smart contract audit company. This acts as a security shield removing vulnerabilities and also supporting its authenticity