Expert Guide to NFT Smart Contract Security: A Comprehensive Look at Auditing

In recent years, non-fungible tokens (NFTs) have gained popularity as a means of encoding distinctive digital assets like music, art, and collectibles. However, because to the potential value of these assets and the potentially serious repercussions of theft or fraud, the security of NFTs and the platforms on which they are exchanged is a worry. 

The following are some of the most typical security problems and how to spot them:

Smart contract Vulnerability: NFTs are based on blockchain technology, and the underlying smart contracts may have flaws that might be used by bad parties to their advantage. It’s vital to inspect the code and search for known bugs or security holes in order to find these vulnerabilities.

Phishing Attacks: Phishing is a popular technique used by bad actors to steal NFTs and other digital assets. It’s crucial to be cautious of unexpected emails or messages requesting personal information or account access in order to prevent these attacks. Never enter private information into an online form unless you are very certain that it is secure and always confirms the sender’s legitimacy.

Market manipulation: Unsavory parties with sufficient market sway have the ability to distort the value of NFTs. It’s crucial to pay attention to market patterns and keep an eye out for odd price spikes or abrupt price declines to spot these manipulations.

Unsecured storage: If NFTs are stored on decentralized platforms or in individual wallets, they may be lost or stolen if the storage is not secure. Use a safe wallet and take precautions to protect access to the wallet, such as by utilizing two-factor authentication or a hardware wallet, in order to secure NFTs.

Major NFT Hacks

Binance hack in 2021: In May 2021, Binance, one of the largest cryptocurrency exchanges, reported that it had suffered a security breach that resulted in the theft of over $40 million in cryptocurrency, including NFTs.

Gnosis Safe hack in 2021: In April 2021, a vulnerability in the Gnosis Safe, a popular Ethereum wallet, was exploited by a hacker who stole over $13 million in cryptocurrency, including NFTs.

Basis by Art Station hack in 2021: In February 2021, the Basis by Art Station platform suffered a security breach that resulted in the theft of over $1 million in cryptocurrency, including NFTs.

A major vulnerability in the OpenSea NFT marketplace allowed hackers to buy valuable NFTs from customers in January 2022 for a significant discount. Five attackers used the bug vulnerability to purchase at least 12 NFTs, including those from the Bored Ape Yacht Club, Mutant Ape Yacht Club, and Cool Cats NFTs, according to Elliptic, a blockchain AML analytics business.

Illegal actors have also utilized Larva Labs‘ official server to hijack or pass as other NFT projects’ official servers, including Discord, a well-liked chat platform for NFT communities. In December, a hacker gained access to the Monkey Kingdom Discord server, an NFT collection founded by Hong Kong businessmen, and used a phishing scheme to steal 7,000 Solana, or almost US$1.3 million, from prospective purchasers.

Issues involving copyright infringement are nothing new for the NFT sector. In a recent tweet, OpenSea claimed that spam, bogus collections, and works that were plagiarized made up more than 80% of the things produced using their free minting tool.

Plagiarized work has always been a problem and will continue to be a problem for the NFT business, CryptoSlam’s Calpu told Forkast. Because of this, it’s crucial for purchasers to validate through a variety of channels that they are, in fact, purchasing an NFT from a reputable author, whether that source is the marketplace or a social network confirmation.

Why do hackers choose to attack NFTs?

Due to the great value and distinctiveness of these digital assets as well as the market’s comparatively lax regulation, hackers target NFTs. NFTs may potentially be subject to attacks on some NFT platforms and infrastructure due to inadequate security measures. Hackers may find it simpler to maintain their anonymity due to the challenges associated with tracking NFT transactions on blockchain technology. Due to its high liquidity and ease of trading and conversion into other cryptocurrencies, NFTs are also desirable targets for hackers. Securing digital assets and remaining attentive against potential assaults are crucial for protecting NFTs. This entails carrying out smart contract audits, putting secure storage options in place, and staying current with the most recent security best practices. NFT holders can secure their investments and lower the chance of theft or loss by adopting these precautions.

Top blockchain for NFTs 

The NFT project’s particular demands and criteria will determine which blockchain to use. NFTs’ top blockchain platforms include:

1. Ethereum: ERC-721 and ERC-1155 standards are supported by Ethereum, which has a robust developer community and enables smart contracts.
2. Binance Smart Chain (BSC): Low transaction fees and quick processing times are features of this high-performance blockchain
3. Polygon (formerly Matic Network): This is a Layer 2 scaling solution for Ethereum that provides more affordability and scalability.
4. Flow: a blockchain created exclusively for digital assets and NFTs that allows for quick and inexpensive transactions
5. WAX is a decentralized marketplace allowing virtual assets, including NFTs, to be bought, sold, and traded.

Reasons for a smart contract audit in NFT projects:

Security: Identify and fix vulnerabilities in the self-executing code, improving overall NFT security.

1. Reliability: Ensure the smart contracts supporting high-value transactions function as intended.
2. Compliance: Ensure the NFT project complies with regulatory requirements or industry standards.
3. Reputation: Prevent security breaches and other issues with smart contract technology to preserve the project’s reputation and investor trust.

Summary:

Social engineering and smart contract flaws can be used to steal NFTs. Social engineering techniques can persuade users to transfer NFTs to malicious addresses, while vulnerabilities can permit mounting NFTs without consent.

By conducting routine security audits and suggesting improvements, smart contract auditors can significantly contribute to the protection of NFTs. Users must keep up with the most recent security threats and take preventative measures to secure their NFTs in order to lower the chance of NFT breaches.