Are NFTs Safe?

June 6, 2024

There’s no denying the allure of NFTs for both creators and collectors alike. They’re a unique way to engage with artists and discover a whole new world where a community is waiting for you. 

But the benefits of NFTs aside, it’s important to look at both sides of the coin. Are NFTs safe? It all depends on the context from which you’re asking.

If you’re wondering whether or not these are a risky investment, there’s no way to know for sure. Here at Pudgy Penguins we do not look at NFTs as investments, and encourage you to do the same.

Now - if you’re worried about the possibility of somebody stealing your NFT, we do have good news. There is more or less nothing to worry about there as long as you put the proper security measures in place. We’ll show you how to enjoy NFTs with peace of mind here in this guide.

Those who are just getting into the fun of NFTs can take the first step here at Pudgy Penguins, where the best NFT projects are just a few clicks away. Join our family today and embrace positivity, creativity, and community with us!

Overview of NFTs

Before we get into NFT safety let’s get the newcomers up to speed on what this exciting digital revolution is all about. What is an NFT, and more importantly, why do people buy NFTs in the first place?

What is an NFT?

An NFT, or non-fungible token, is a digital asset representing ownership or proof of authenticity of a unique item or piece of content using blockchain technology. 

Traditional currency and even cryptocurrencies like Bitcoin or Ethereum are fungible, meaning each unit is the same as every other unit. On the other hand, NFTs are unique - hence the “non-fungible” half of the name. 

NFTs are created and managed on blockchain networks that support smart contracts, like Ethereum. These encode the rules and ownership details of the NFT so the token cannot be duplicated or altered once issued.

Each NFT can represent different underlying assets, such as digital art, music, videos, and more, and cannot be exchanged on a one-to-one basis with another NFT. There are so many different types of NFTs which is part of the fun! 

Benefits of NFTs

Now, what are digital collectibles like NFTs becoming more and more popular for? There are a number of reasons these are here to stay, including:

  • Proof of Ownership: NFTs provide a secure, indisputable record of ownership for digital assets. This means duplication and copyright issues are a problem of the past.
  • Authenticity and Provenance: Each NFT contains a history of ownership and origin, further ensuring the authenticity of the asset it represents. This is particularly important for collectors and creators who value the background and originality of digital pieces.
  • Creative Control and Rights: NFTs offer a platform for artists and creators to maintain control over how their digital work is distributed and monetized. Smart contracts can automate royalties so creators earn a percentage of sales whenever their work is sold to a new owner.

Are NFTs Safe, Though?

There’s clearly a lot to love about NFTs - but the question is, are NFTs safe? This is a loaded question and one we want to take our time to thoughtfully answer so that you are left with full clarity on the safety of NFTs.

First, let’s make one thing perfectly clear - blockchain technology itself is renowned for its high security due to its decentralized and immutable nature. Transactions recorded on the blockchain are extremely difficult to alter, which helps prevent fraud and unauthorized changes.

However, there are a few potential concerns some speculative collectors have referenced in regard to NFTs, including: 

  • Smart Contract Vulnerabilities: If a smart contract associated with an NFT is poorly written or contains bugs, it can be exploited by attackers, potentially leading to loss of NFTs or funds.
  • Phishing Attacks and Scams: As with other digital collectibles, NFT owners can be vulnerable to scams and phishing attacks. Fraudulent schemes designed to trick individuals into giving away their private keys or sending NFTs to scammers are not uncommon.
  • Market Volatility: The value of NFTs can be highly volatile, with prices heavily influenced by market demand, speculation, and the hype surrounding certain collections or artists. This can lead to rapid fluctuations in price, which does not necessarily reflect the underlying value of the digital asset. For this reason, it’s important that you do not look at NFTs through the lens of an investment opportunity. 
  • Liquidity Concerns: Unlike more established assets, some NFTs may suffer from low liquidity, making it difficult to resell them at the desired price or even at all. 
  • Dependence on NFT Marketplaces: The safety and reliability of NFTs are also tied to the platforms where they are bought and sold. Issues like platform security breaches, changes in marketplace policies, or even the shutdown of a platform can impact NFT owners. Fortunately, this can be avoided by sticking with the best NFT marketplaces.

All of that being said, we believe wholeheartedly that NFTs are safe. You just have to take measures to protect yourself and your assets to avoid these risks. We’ll help you do just that below.

Tips on Staying Safe With NFTs

Staying safe with NFTs just requires a bit of due diligence and common sense. We’ll walk you through how to secure NFT safety below!

Securing Your Digital Wallet

A digital wallet is essential for buying, storing, and selling NFTs. Just as you’d do whatever it takes to protect a physical wallet loaded with cash and credit cards, you need to take steps to secure your digital wallet as well.

First and foremost, you should choose a reliable wallet with a strong reputation - you can’t go wrong with MetaMask or even CoinBase. Look for features like two-factor authentication (2FA), biometric data security (fingerprint or facial recognition), and multi-signature options.

The way you actually access your wallet, and thus its contents, is through your private keys. This should go without saying, but make sure nobody ever has access to your private keys or seed phrases. Don’t write them down and leave them on your desk, don’t even put them in your phone. Keep the digital keys to your wallet safeguarded in a physical or digital safe.

Make sure your digital wallet software is up-to-date as well, as developers will regularly release updates to patch vulnerabilities and enhance security features.

If you ever need to transfer an NFT to another wallet, make sure you do so safely and securely - and only after you’ve secured the funds to your asset in the case of a sale. We’ll talk about safe transactions in just a moment, but first, let’s look at some common scams you need to be aware of.

Avoiding Common Scams

We want to be clear in saying that for the most part, the NFT community is made up of ethical, decent people trying to change the world for the better. 

But like any industry, there are always going to be a few people who come into the space with ulterior motives. This is why you need to be able to identify and avoid scams as you interact with others in the NFT world. 

Be wary of emails or messages that ask for your credentials, even if they appear to be coming from a marketplace or wallet you trust. It’s easy to change the sender name on an email address, and this is a common phishing tactic. Always verify the authenticity of any communication and double-check URLs to ensure they are from legitimate sources.

Similarly, you should avoid clicking on unsolicited links, especially those sent over social media platforms. These could lead to fake websites designed to steal your personal information.

Research and Due Diligence

To prevent yourself from purchasing an NFT that doesn’t actually deliver any value, it’s important that you do your research before investing time and resources into a project.

Use blockchain explorers to check the history of the NFT, including previous transactions and ownership. This can help confirm its authenticity and you can see how the price has progressed over time.

It’s also worth assessing the value proposition of an NFT. Is it purely aesthetic, or does it offer some utility or participation in a larger platform, such as a sense of community?

Using Safe NFT Marketplaces and Trusted Platforms

The best way to protect yourself is by using safe, trusted platforms when buying, selling, or even trading NFTs. Platforms like OpenSea, Rarible, and Foundation have built reputations within the NFT community. We personally prefer Magic Eden here at Pudgy Penguin.

Whatever you end up choosing, just be sure it has solid security features in place - including wallet security, transaction encryption, and regular security audits.

On that note, good customer support can be invaluable, especially when issues arise. Check whether the platform offers prompt and helpful customer service.

If you’re not sure where to start, read our guides on how to buy NFT on Opensea or where to sell NFTs. Otherwise, it’s time we wrapped up our guide to NFT safety with a few final thoughts below.

Final Thoughts on How to Secure NFT Safety

So, are NFTs safe? They certainly can be if you use a bit of common sense and take the time to protect your purchases. We hope this resource has cleared up any uncertainty or misconceptions you may have felt regarding the safety of NFTs.

Our blog has additional resources on topics like how much does it cost to create an NFT, how to find upcoming NFT projects, the history of NFTs, the process of minting NFTs, and more.

For peace of mind knowing you’re getting a safe NFT experience, browse our marketplace here at Pudgy Penguins today and consider joining us here in the huddle, where positivity, creativity, and a passion for play come together in vibrant digital art.

We’re the first Web3 brand to take things into the digital realm with our exclusive penguin merch, too! Our penguins toys range from penguin plushies to penguin figurines, penguin collectibles, and more. 

Each is unique and comes with a digital adoption certificate that can be used to access Pudgy World. Here, you’ll be able to unlock special traits for your penguin, play games, engage with other owners, and more.

Whether you're after the latest NFTs or exclusive physical goods, Pudgy Penguins offers a secure gateway to owning a piece of digital artistry. Join our thriving community today and start collecting with confidence!

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