How to Protect Your NFT Drop? From Discord Hacking to Smart Contract

We all know what NFT means, but do you know that they aren’t as secure as most people think. The NFT market is rapidly growing, reaching new heights every day if not a minute, with art, music, sport and other enthusiasts entering the domain with new ideas. Even though NFTs work with the blockchain ledger, this ecosystem is still fresh, and there are many threats that can ruin your experience with the market.

Only within the start of the new 2022 year did the global NFT sales reach over the $4 billion mark. Alongside the growth of this ecosystem, it also increases the number of scamming in space. For instance, Google searches for “NFT scam” remained high for a few weeks now. While some people, token holders and marketplace owners, are far more tech-savvy, others don’t know how to protect their tokens and what they should consider in this challenging market.

We curated this guide to help you learn more about NFT’s security, how it works, what can happen with your tokens without proper protection, as well as showing the exact steps you need to consider to make sure your NFT won’t be hacked. Let’s get started!

How Safe Are NFTs?

NFTs are secure but it’s not a secret that threats are always looking for new ways to steal something physical or digital. Even though the NFT market is still in its development stage, the immense popularity, bunch of money tokens can cost, and rapid growth has opened a unique revenue stream for hackers. This is because tokens are not something forward-looking; they are already in-game and in motion.

This March, there were threats of several Nifty Gateway NFT accounts. They transfer already purchased NFTs from users’ accounts and buy new tokens to transfer with their own cards. Even though the money of these users has been returned, the platform wasn’t able to return the NFTs lost because hackers have already sold them to other holders of NFTs on a different platform. This is because the Nifty Gateway contains private keys of tokens, and they are not subjected to be recovered after being transferred. 

Additionally, crypto scam through email is also a popular way for hackers. Users of Coinbase admit that they get a high volume email scam that is sent to compromise the data of users’ accounts. Hackers force users to open the (credential-stealing) attachment as well as show the login and password to verify their account. In case of the successful procession, hackers compromise their Coinbase login credentials and ultimately get access to the account. However, the multi-factor authentication provided by Coinbase can save the situation. 

The same as with Coinbase can happen to users who have an account on various NFT platforms. Hackers send emails to steal users’ data from the account and/or implant malware. For instance, the most popular attack for NFT is remote access trojans. This method allows attackers to get complete remote control over the user’s machine. This also allows them to steal other data and keystrokes alongside many other opportunities. 

How Does Blockchain Security Work?

Blockchain technology has opened up a new way to the world of cybersecurity, working through a decentralized system of data protection. The goal was to keep the sensitive data of people and organizations protected against malicious attacks by hackers or various third parties. Blockchain security opportunities can be achieved through decentralized technology, security blocks, private and public blockchain, as well as smart contracts. Let’s take a look at how it works:

Decentralized Technology

A blockchain network allows users to keep their sensitive information in a decentralized system which is later used for more potent data encryption. This decentralized system works by ensuring that one doesn’t have control over another identity or information. Therefore, hackers would find it too hard to attack one’s sensitive data to succeed; they will require to attack more than 51% of the system concurrently. 

Security Blocks

The blockchain keeps all data in particular blocks throughout the network. Therefore, one block holds a cryptographic translation when every transaction happens and a timestamp. This in-duplicity allows users to stay confirmed in case their identities have been compromised.

Smart Contracts

More known in the NFT sphere, smart contracts are self-executing and do not involve human or machine assistance. This technology has increased confidence among businesses because information can’t be transparent. While smart contracts are used for NFTs and cryptocurrencies, there are many other spheres where smart contracts can be used to manage identities.

Private And Public Blockchains

When talking about private blockchain databases, companies are able to easily connect with each other without using third parties. However, in a public blockchain, information placed on the network is available for any interested party that either wants to use it or just takes a look. Regardless of private or public blockchains, data is protected from any alteration since they are transparent and safe. 

How to Safely Store NFT?

Software Wallets

Software wallets represent probably the most popular choice for investors and token holders to store their NFTs. However, they have only moderate security, which is quite typical for digital wallets. They are usually powered by encryption, a password, as well as a 12-24 word seed phrase to protect tokens. 

The biggest issue that comes with software wallets is that they allow access only through a browser or cloud service. Compared to other options, software wallets have probably the lowest security level. Even with this information, you can store NFTs in them but preferably for a short period of time.

InterPlanetary File System

An InterPlanetary File System (shortly IPFS) ensures security by storing your NFT assets off-chain. This has been shown to reduce the risk of hacks and cyber attacks. In addition to storing NFTs off-chain, IPFS also uses content identifiers (CIDs). This represents a piece of data that is connected to your token. This technology adds another layer of protection since easily accessible URLs will not be used to get the NFTs. 

Today, IPFS can be called one of the most secure options for storing NFTs because the CID data hashes will be stored only on your computer. And when the data is required from the IPFS, the nodes are looking for the same data hash within the NFT and the local data store. Even though it is one of the most secure methods, it still can be hacked.

Cold Storage Hardware Wallet

Well-known worldwide for its high level of security, this might be the best option for storing NFTs today. This is because the data is stored offline. What is more, all of your information is password-protected, which aids another layer of security. 

These wallets also come with many different features that provide better functionality to users. One of the most beloved features among users is the chance to restore the device’s information in case it has been lost or stolen. You can also use a cold storage wallet as a hot wallet via the device’s mobile connectivity. Therefore, it makes it easier for you to manage the data and make transactions having the same high-security level.

Legal Risks Attributable to NFTs

It is vital to verify that the seller actually is the owner of the NFT before purchasing. This is because there have already been precedents where the seller copies the art or sells photos of NFTs. As a result, you will likely get only the legal rights to just use these tokens instead of getting the intellectual property rights. 

It is worth noting that although NFTs aren’t regulated by the government right now if they represent the attributes of regulated investments, owners may be regulated by both national and international obligations. This is why the token holder might be required to prove that the asset is non-fungible. Otherwise, these tokens may be considered tokens or cryptocurrency and, thereby, might be applied under financial regulations.

NFT Marketplace Security

NFT security is not always guaranteed with marketplaces. Since all NFT marketplaces are based on blockchain technology, people think that they have to be decentralized. However, there is a great controversy around OpenSea, which is one of the largest and most popular NFT marketplaces today. Last year the tokens that cost $2.2 million were stolen from this marketplace. 

OpenSea, in response to the attack, has frozen all these items and stopped the complete trading. This behavior became a precedent for users to question the decentralization of the marketplace and many customers suggest that this contradicted the entire crypto philosophy.

Another issue related to some NFT marketplace centralized nature, which means that the transactions happening are recorded in an off-chain database regulated by the NFT marketplace. For instance, Nifty is a good example of this case. As a rule, the centralized marketplace always stores the private keys of tokens right on their own platforms. Therefore, hackers are able to steal all these digital assets very quickly. Check how to create your own NFT marketplace here.

Smart Contract Vulnerabilities

There is a high level of smart contract NFT security risks in today’s market because the rights of ownership are not always clearly written, and the seller can, as a result, lose the asset. When NFT projects do not follow the proper smart contract security guidelines and/or fail to pass regular audits, attackers will have a great opportunity to exploit even minor vulnerabilities to steal user tokens. The attacks happening on smart contracts have significantly increased during the last few months. This is mainly because unprepared and poor-quality projects try to enter the market as soon as possible.

One of the key issues related to stolen NFT is the exploitation of smart contracts that have already been reentrancy attacked. This hacker’s method strives to influence the fallback function of the Ethereum contracts. Therefore, they execute transactions that can’t be performed by other functions.

Discord hacking for NFT

Discord helps services to work properly. This app allows users to set up chat rooms named as a server, and users can enter them only via invite links. Each server can then be broken down into “channels” that represent small spaces for open discussions on several topics. In addition, channels are available in text and voice forms, improving and simplifying the usage. 

If you want to use Discord for the NFT, the first thing to do is to ensure that you are the owner of the Discord server. Even if you weren’t the one who crafted the server, you need to ask the creator to give the ownership to you. This will help you to take proper action if something goes wrong. Next, you should consider people who will have access, and you should trust them the most. They will be the moderators, and they should cover all the time zones. 

Discord accounts also have a high chance of being attacked. The most popular way for hackers is using the bot’s token that provides access to the account’s login data. In a few years, hackers have also learned how to overcome two-factor authentication and steal from discord accounts. 

Even though the two-factor authentication is considered to provide a high-security level and is used by Google, hackers can still attack your Discord accounts in the following ways:

• The target of the hacker is usually a crew member who strives to learn one’s means to the server and the place the focused member is.
• The hackers impersonate the key member, motivating Discord to ban them.
• Once the ban is achieved, the hacker then reaches the banned crew member, impersonating MOD.
• The hackers then ask this member to show their innocence.
• The final step is asking about showing their examine aspect, allowing the hackers to get all the data the scammers want and take complete control over the goal’s account.

Since you now know the main ways hackers can attack your Discord account, let’s learn what can show that these are hackers and how to protect your account from hackers. Keep in mind the following things:

• Do not trust the DMs from Discord containing links;
• Discord never asks users to connect their wallet anywhere;
• Do not say anyone on Discord your seed phrase;
• Never share a team viewer or screen.

In case you are worried about security and notice something abnormal – it is best to connect with the Discord support chat to get the answer.

6 Tips on How to Protect Your NFT

Never Tell Anyone Your Seed Phrase

It is best to think of your seed phrase as your card CVV code. Even if the hacker does not contain enough information, this phrase will become the key to accessing all tokens that are stored in your digital wallet. We highly recommend you protect it like you would with a physical wallet with a bunch of money. As long as you keep your seed phrase safe and remember it, you will always be able to access all tokens associated with that wallet and phrase. Therefore, regardless of who has asked you – the answer is no.

Use All Available Security Measures

One of the best and practice-proven ways to make sure your NFTs won’t be hacked or at least reduce the risk of threats is not to avoid security measures. Moreover, we advise you to use all available security measures you can. 

Do Not Talk to Strangers and turn OFF your DMs

Hassle-free and straightforward way. Avoid any conversation with strangers, whether it will be on email Discord or anyone else over direct messages. For instance, Discord and Twitter allow users to first talk to strangers publicly and get acquainted before having a private conversation. To boost your data protection, we recommend you turn OFF your Discord direct messages. 

Never Share Your Screen 

Screen sharing is a pretty standard way for hackers to steal your tokens. Even though people are now sharing screens with everyone, whether it is for work or private conversation, when talking about NFT, it may put you at risk of losing your assets. This is because hackers can easily manipulate you to share your secret recovery phrase that can compromise your wallet or just use it to steal assets.

Keep Your Wallet on a System You Don’t Use For Other Purpose

Cybersecurity is essential to guarantee the safety of your tokens. Experienced users do not download wallets on their phones as we all tend to browse and click too many links using mobile devices. Another great way to secure your tokens is to store the wallet on a system you don’t use for links, messages or for browsing other websites.

Always Double Check Email Links and OpenSea Offers

Even though various marketplaces like OpenSea usually send different email notifications when you receive an offer or purchase something. Scammers like to impersonate these emails by representing the marketplace itself and may ask you to open links or perform something that will compromise the security of the assets. So it is best to double-check the email, and in case you notice something strange, to first get to the marketplace support team.

How Can Interexy Help?

Interexy has in-depth experience in blockchain and NFt industries with an in-house team of high-skilled experts. While we are a mobile and web app development company, we also provide various services to token holders, like smart contract audits and more. With over 30 projects in the NFT space, we use only the latest technologies and mathematical approaches to check how your system works to make sure everything is secure and stable. Whether you need NFT development services, smart contra audit or your unique custom solution, our team is always ready for any challenges and ideas!

Bottom Line

NFT is obviously a trend. The rapid growth of its popularity also increases the risk of being stolen and hacked by attackers. The new tech solutions also allow hackers to overcome those protection measures that have always been safe and reliable. This is why we curated this guide to help you make sure your NFTs are safe by showing how threats may happen and how you can protect your wallet and sensitive data. Book a call to check your NFT security, drop NFT collection or develop a custom solution!

FAQs

Where to store NFTs?

NFTs can be stored in various places, but the most secure way is a cold storage hardware wallet which ensures the highest security level.

How to avoid NFT scams?

You should create a complex password, choose secure places to store NFTs, choose trusted marketplaces, turn OFF your DM in Discord, never tell anyone your seed phrase and watch for common threats that happen to NFTs.

How to protect NFT?

To protect NFT, you need to always stay informed about scams that usually happen and avoid using untrusted services to either store data and tokens or believe every message that comes to your email or Discord accounts.