Forex in this article
• NFTs are popular worldwide
• Blockchain technology is not immune to hacking
• Fake NFTs in circulation
The NFT business is booming. While the non-fungible tokens were still an exception two years ago, digital certificate of authenticity providers are now popping up like mushrooms. Big companies like Disney, adidas & Co. have also jumped on the bandwagon and launched their own NFT collections – with great success.
The digital collectibles are no longer only in demand as unusual virtual art objects, many investors hope to make a lucrative business trading non-fungible tokens. No wonder, after all, there are now numerous digital goods that have been sold at record prices. For example, the first source code for the Internet, which changed hands in 2021 for several million dollars.
Risks of NFT trading
However, there are also some risks associated with NFT trading that interested parties should be aware of. Because, as is so often the case when new hype appears, the fraudsters are not far away. After all, there is a lot of money at stake in the NFT market. But the danger of hack attacks should not be underestimated either.
Possible hacker attacks
NFTs are based on blockchain technology. The purchase and sale of digital objects is processed using smart contracts. However, these crypto technologies are not immune to cyber attacks, and hackers repeatedly stole millions of dollars from attacks on crypto companies. For example, in August 2021, when Poly Network fell victim to cybercriminals, $600 million in cryptocurrencies were stolen. The reason was the insufficient security of Smart Contracts, weaknesses in the system could be exploited here, as Geekflare writes. So investors who want to be active in the NFT market should be aware that there is not 100 percent protection against hacker attacks.
NFT prices volatile
Another source of risk with NFTs lies in the pricing of the 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 a role which artist created the NFT, how unique and creative the collectible is, or how rare the non-fungible token is. There can be big fluctuations in prices, and there can be big changes even in a very short time. It is therefore very difficult to determine the value of an NFT.
Unfortunately, some providers also take advantage of this phenomenon in so-called laundry trade. A provider uses multiple accounts with which he repeatedly buys and sells his own digital goods to artificially drive up the NFT price. This is possible because platforms that enable NFT trading often do not have high requirements for user registration.
Counterfeit NFTs and NFT Theft
In addition, investors should be aware that there are always cases of fraud with fake NFTs on crypto platforms. Because anyone who knows how to do it can create 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 in turn sold. Retailers often make NFTs from content they don’t even own. So artists get robbed and the designs they come up with make big bucks on NFT platforms.
So if you want to acquire a non-fungible token, you can hardly avoid thorough research. The dealer’s history should be checked carefully. If a deal seems too good to be true, it probably is.
Image Credits: archy13 / Shutterstock.com, Sergei Elagin / Shutterstock.com