Assets are now a matter of tokens. Not just any tokens, but Non-fungible tokens that establish the digital identity for the assets, each being one of a kind. i.e. one token differs from the other, holding a special value attribute that makes them non-interchangeable.
NFTs are created on standards different from ERC-20, which is the most basic for creating crypto coins. NFTs let users claim ownership of a digital or non-digital piece of asset tracked through the blockchain network.
NFTs represent the digital rights over,
- Digital arts such as GIFs, Music, Videos, gaming collectibles, etc.
- Real-world properties such as car deeds, concert tickets, etc.
NFTs are minted through smart contracts that possesses the details of the owner to whom the NFT belongs, the transferability of NFTs during trading, etc. The ownership of NFTs is controlled through a unique ID that points to the metadata of the assets.
As NFTs are operated through smart contracts, it provides room for many vulnerabilities. Apart from that, the concept of digital ownership over assets that gained great popularity and a wide market for NFTs also makes them potential targets for hacks.
That makes NFTs vulnerable to a whole lot of security threats which can be classified as follows.
Categorizing The Threats To NFTs
Token sale vulnerabilities: Undeniably, smart contracts are the underlying governing body behind the execution of the token sale. Anywhere there’s a bug in that smart contract, hackers make use of the opportunity to disrupt the process of the token sale.
An example of it is a smart contract bug encountered by the famous project CryptoPunks when the sale was happening. Once all the 10,000 punks with rare traits were sold in the secondary market, a smart contract bug refrained from receiving payments, but then the sale happened.
Smart contract vulnerabilities: Smart contracts does the major part of the work from processing payments to managing the tokens. And so do the vastness of the issue it oughts to deal with. There are various pointers that needs to be checked while coding contracts.
- Timestamp Dependence
- Gas Limit and Loops
- Use of tx.origin
- Byte array
- ERC721 API violation
- Malicious libraries
- Updated Compiler version
- Redundant fallback function
- Unchecked external call
- Implicit visibility level and so on.
Rug pull scams: Rug pull scams are the trend of Web3 hacks. Users” great expectation and enthusiasm for investing in web3 are exploited by many in the form of rug pulls. One such rug pull event was by the project Cool Kittens, which promised the investors of the cat art with utility value.
Once the sales spiked, with each NFT token selling at about $70, the hackers rug pulled investors of $160,000. There are many such innumerable instances of rug pulls since the dawn of the Web3 era.
Private key breach: Private keys that hold access control for user wallets to make payments and store assets, are always at the risk of getting exposed to security breaches. Users are tricked by using traditional phishing links to steal away confidential information and gain control of the coins and tokens held in their wallet.
Marketplace vulnerabilities: Though the marketplace flaw does not correspond to NFT smart contracts, they directly impact NFTS. The loopholes in the NFT marketplace would be used to the buyer’s advantage to make false bids, buy NFTs at the lowest prices, counterfeit NFTs and so on.
How Auditing Helps In Imparting Security To Web3 Protocols And NFT Assets?
Auditing involves the careful inspection of the code that deals with the security of the millions dollar value of NFT tokens. NFT Smart Contract Auditing covers different aspects and levels of doing the test to ensure flaws are spotted and rectified uprightly.
Pointers on what smart contract audits aims to achieve
- Identifying coding errors and preventing them from causing any major losses.
- Optimizing and enhancing the code quality.
- Ensure the safety of private information and protection of NFTs.
- Boost user’s confidence on making investments on NFT project.