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NFT Cyber Warnings

04.13.21

What exactly are NFTs? According to CNBC, “NFTs, or non fungible tokens, are unique digital assets, including jpegs and video clips, that are represented by code recorded on the blockchain, a decentralized digital ledger that documents transactions.

NFT Cyber Warnings



April 13, 2021


What exactly are NFTs? According to

CNBC, “NFTs, or non-fungible tokens, are unique digital assets, including jpegs and video clips, that are represented by code recorded on the blockchain, a decentralized digital ledger that documents transactions. Each NFT can be bought and sold, just like a physical asset, but the blockchain allows for ownership and validity to be tracked.” All of this can be very confusing. Can you actually own NFTs?


 

Do you truly own an NFT?

According to CNBC, Mike Winkelmann (Also known as the artist Beeple) states that “I think that people don’t understand that when you buy, you have the token [or NFT]. You can display the token and show you own the token, but you don’t own the copyright” to the art that is represented by the token…” He continues on to say that “if you buy a [physical] painting, you just bought the painting,” Moreover “You did not buy the copyright to that picture. And so, it’s very similar with these tokens.” Think of this as owning a photo and just that. The NFT, whatever that may be, is not yours to own the copyright or make copyright decisions on. 

 

According to many sources, such as the Verge, many investors actually believe that NFTs will be like collecting fine art. “NFTs have made the news in recent months because of the high dollar price tags being purchased for something that has no tangible value. One shocking example of this is the JPEG that sold for 69 million US dollars.” The file made by Mike Winkelman (Also known as Beeple) sold a JPG file titled Everydays- The First 5000 Days. According to the New York Times, this JPG is a collage of every image that the artist has posted online since 2007. The New York Times states that “Rebecca Riegelhaupt, a Christie’s spokeswoman, said 33 active bidders had contested the work, adding that the result was the third-highest auction price achieved for a living artist, after Jeff Koons and David Hockney.” Beeple joins the ranks of the highest-paid auction artist.


 

Are NFTs just a flash in the pan?

The New York Times also states that “Christie’s record-breaking auction was held at a moment when the mainstream art world has become transfixed by the fast-moving, speculative market for NFTs, which have recently achieved exceptional prices on specialist websites like Open Sea, Nifty Gateway, Super Rare and Makers Place.

 

The New York Times continues to state that “Although their popularity has increased in recent months, NFTs are nothing new. In 2017, when the value of cryptocurrencies like Bitcoin and Ethereum first began to climb, there was a speculative craze for Dapper Labs’ CryptoKitties, blockchain-certified images of cats, the rarest of which sold for more than $100,000.” Some may think that selling images of cats on the internet is nonsense. But with high dollar price tags of cat photos fetching upwards of $100,000, this is no investment practice to ignore. 

 

Could NFTs be an investment bubble waiting to pop?

 With such a rise in recent months in NFT popularity, could this be an investment bubble waiting to pop? According to the New York Times, “The price of cryptocurrencies collapsed in 2018, and with it the nascent market for NFTs.” There is some cause to be concerned with investing in NFTs. After all, this is an investment, and risk is always guaranteed. 

 

However, The New York Times states that “In the art world, where the market for NFTs is more established, the current top-sellers are “CryptoPunks,” a cohort of 10,000 individual algorithm-created characters, 9,000 of which were given away in 2017 for trading and collecting on a dedicated Ether platform. Early the next year, the most sought-after “punks” were selling for about $13,500.” The New York Times interviewed the co-founder and states that “John Watkinson, the co-founder of CryptoPunks, said in an interview that he first noticed a resurgence of online interest last spring, during the early days of worldwide coronavirus lockdowns. “There was a showing-off factor,” Watkinson said. “Flashing what you have to other people in a virtual way was the only way to do it.” The interest in NFTs has continued to rise since last spring only further reiterating what John Watkinson, co-founder of CryptoPunks, saw. 

 

Are you excited and thinking about investing in NFTs? Here are some Cybersecurity Warnings you should know before investing.

With large companies such as Tesla, CryptoPunks, and Christie's Auction backing these investments, how could you lose? Like any investment, there are always risks. One unique risk to NFTs is that they are digital and susceptible to being associated with cybercrime. 

 

According to the online art community, Hypoallergenic, “Michael Miraflor, who tweeted this weekend that his Nifty Gateway account had been compromised and his entire NFT collection cleared out in a matter of minutes. The hacker transferred Miraflor’s NFTs to another account and used his credit card on file to purchase more than $10,000 worth of Nifty’s daily “drop,” which they also transferred; then, they sold the stolen NFTs via the messaging app Discord.” This large investment was stolen out of Miraflor’s account without his or Nifty Gateway’s knowledge.

 

Hypoallergenic states that “Miraflor reported the fraudulent charges to his credit card company and was able to get his money back.” According to Nifty Gateway policy, any purchase made using their credit card is able to be refunded. Many other platforms like Foundation, super rare, and MakersPlace require the use of cryptocurrency according to Hypoallergenic. 

However, the plot of this hack takes a shocking turn.

Hypoallergenic states that “But when he [Michael Miraflor] reached out to Nifty’s support team regarding the stolen NFTs, he was told they could not transfer the digital tokens back to him. Transactions cannot be reversed on the blockchain, and per Nifty’s Terms of Service, Miraflor’s NFTs now legally belong to the users who purchased them fair and square — even if they were bought from a hacker.” Making a large investment is risky enough without the added risk of having it stolen from you. Keeping your devices up-to-date, being cautious of malware, staying on guard from phishing are just a few things you can do to help mitigate your risk of being hacked. However, using vulnerability tools and scanners (like those offered in our user-friendly dashboard) may be one of the most effective ways to prevent and stop a hack.  


Synergy Infosec is here to help answer any questions you may have about being secure. We offer convenient 24/7 consultations to help discuss a strategy of how to protect your assets and data. Whether you are worried about keeping your personal data safe or a $69 million JPG file, Synergy Infosec has got your back.

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