In late December 2021, Todd Kramer lost $2.2 million worth of Bored Ape Yacht Club and other NFTs to a phishing scam. This illustrates the risks and perils investors get associated with and exposed to when buying non-fungible tokens. While reports of hacking are not new on the internet, it should be noted that in the crypto world if a user’s asset is stolen, transactions can hardly be reversed.
There are numerous NFT marketplaces like OpenSea but they don’t keep custody of tokens for the users. A token buyer is responsible for the storage of his or her own NTFs. They have to take full control of their digital asset. Hackers are able to get into digital wallets by the phishing link they send to the victim.
With the popularity of NFTs increasing day by day, hacking incidents highlight that blockchain networks or digital wallets are not 100% safe and secure. Chainalysis in a recent report highlighted an increase in criminal crypto transactions in 2021. This was way higher than the 2020s $7.8 billion. The crypto market, which is said to be worth trillions, is a huge money mine for hackers.
In centralized marketplaces, strong security measures are not enough. It is not adequate. Users become vulnerable either because they have a weak password or lack a two-factor authentication. In cyberspace, they can also easily fall target to identity fraud.
Experts have also stated incidences of users falling vulnerable when the crypto exchange sends out a high volume of emails. Actually, the emails are not from the exchange but from the hacker, made to look like it’s from the crypto exchange. In such cases, the user ends up revealing their account details and specifics and the cryptocurrency/NFT wallet gets hacked.