Keep Your Eyes Open When Buying NFTs: Cyber ​​attack and counterfeit NFTs & Co: These are the risks when buying an NFT | newsletter

• NFTs are trending around the world
• Blockchain technology is not immune to hacking
• Fake NFTs in circulation

NFT’s business is booming. While non-fungible tokens were still an exception two years ago, providers of digital certificates of authenticity are now starting to look like mushrooms. Big companies like Disney, Adidas & Co. have also jumped on the bandwagon and launched their own NFT collections – with great success.

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Digital collectibles are no longer needed only as unusual virtual art objects, and many investors hope to create a profitable business by trading in non-fungible tokens. No wonder, after all, there are now many digital goods being sold at record prices. For example, the first source code for the Internet, which was changed in 2021 for several million dollars.

NFT Trading Risks

However, there are also some risks involved in NFT trading that those interested should be aware of. Because, as is often the case when a new noise appears, the scammers are not far off. After all, there is a lot of money at stake in the NFT market. But the risk of hack attacks should not be underestimated either.

Hacker attacks are possible

NFTs are based on blockchain technology. The purchase and sale of digital items is processed using smart contracts. However, these encryption techniques are not immune to cyber attacks, and hackers have frequently stolen millions of dollars from attacks on crypto companies. For example, in August 2021, when Poly Network fell victim to cybercriminals, $600 million in cryptocurrency was stolen. The reason was the insufficient security of smart contracts, and vulnerabilities in the system could be exploited here, Geekflare wrote. Therefore, investors who want to become active in the NFT market should be aware that there is no 100% protection against hacker attacks.

NFT prices are volatile

Another source of risk with NFT lies in the pricing of digital goods. There is no industry standard for pricing non-fungible tokens, there are various factors that contribute to whether people are willing to pay more or less for an NFT. It can play the role of the artist who created the NFT, how unique and creative the collectible is or how rare the irreplaceable token is. There can be huge price fluctuations, and there can be big changes even in a very short time. So it is very difficult to determine the value of the NFT.

Unfortunately, some providers also take advantage of this phenomenon in so-called wash trading. The provider uses several accounts with which he frequently buys and sells his own digital goods in order to artificially inflate the price of the NFT. This is possible because the platforms that enable NFT trading often do not impose high requirements on user registration.

Stealing NFTs and Fake NFTs

In addition, investors should be aware that there are always cases of fraud using fake NFTs on crypto platforms. Since anyone who knows how to do this can generate a non-fungible token, the authenticity of the NFT is not independently verified by anyone. There are cases where unauthorized copies of NFTs are made and sold in turn. Retailers often create NFTs from content they don’t even own. So the artists get stolen and the designs they create become huge profits on the NFT platforms.

So if you want a non-replaceable token, you can’t avoid the exhaustive search. Trader history should be carefully examined. If the deal sounds too good to be true, it probably is.

finanzen.net editorial office

Image sources: archy13 / Shutterstock.com, Sergei Elagin / Shutterstock.com

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