From the Digifinex blog.
- An explosion in the value of the NFT market has seen an accompanying rise in scammers looking to cheat buyers with counterfeit NFTs.
- An NFT’s authenticity and originalitycan be verified with tools like blockchain explorers, digital certificates of authenticity, and reverse image searches.
- Some third-party platforms may offer reassurances with regards to NFT authentication, but it’s always best to do your own research.
Sales of NFTs totalled $24.3 billion over the first nine months of 2022, according to an October 2022 report by Reuters. The amount of money now involved in the NFT market goes some way to showing how popular and important this type of digital asset has become among many crypto users. Indeed, such is the mainstream interest in NFTs that renowned British auction house Christie’s sold an NFT by the artist Beeple for $69 million in March 2021.
For those unfamiliar with the space, an NFT or non-fungible token is a type of cryptographic token on a blockchain that represents a unique asset. These can be entirely digital assets or tokenized versions of real-world assets.
Fungibility describes something that can be replaced by, or interchanged with, an identical item. For instance, if your friend owes you $10 in cash, it doesn’t matter which $10 bill they give you — they’re fungible. The same goes for crypto tokens denoting value. BUSD tokens, for example, are fungible in the same way dollar bills are fungible.
NFTs, however, are not interchangeable as each one has a distinct and unique identifier. This means that NFTs can be used as proof of authenticity and ownership within the digital realm. For example, digital art and collectibles can be sold as NFTs, allowing their creators to monetize their work and buyers to prove ownership over something that could otherwise be digitally duplicated.
But buyers need to be careful because an explosion in the value of the NFT market has seen an accompanying rise in scammers looking to cheat people and cash in on their lack of knowledge or attention to detail. The existence of inauthentic or fake NFTs can fool buyers into spending money on something that’s actually worthless.
This article will explain how fakes can exist in a space where all NFTs are, by definition, unique. We’ll also look at what it means to authenticate an NFT, how this authentication can be done, and how users can best protect themselves.
What Is a Counterfeit NFT and Why Is Authentication Crucial?
You may think that because each NFT has its own identifier, you can buy one safe in the knowledge that it is the only one of its kind. But here’s the problem: authenticity. While all NFTs are indeed unique, there’s nothing to stop a scammer from digitally copying someone else’s work, minting it as an NFT, then selling it with the false claim that it’s an official release.
However, the NFT in question would be a fake. The work has been stolen and minted by a scammer trying to profit from someone else’s creativity while there has been zero approval from the person who created the original. This is why NFT authentication is essential for anyone considering buying NFTs.
What Is NFT Authentication?
NFT authentication is the process by which the validity of an NFT is verified to ensure it is legitimate. The two key factors to bear in mind are authenticity and originality.
The question of authenticity is about ensuring the NFT really did come from the person who is said to have created it, and that ownership can be traced back to its supposed source. The question of originality, meanwhile, is about checking that the work itself is unique, rather than a copy of something else already out there. This can be particularly important, given that a lot of NFTs derive value from their rarity.
How Are NFTs Authenticated?
The person who bought the $69m Beeple NFT from Christie’s would have relied on the auction house to authenticate the work, most likely through direct communication with the artist. In the same way, some NFT marketplaces take it upon themselves to guarantee the authenticity of the work being sold on their platforms. How they do so offers a good idea of how the authentication process can best be approached, and what buyers can do when considering NFT authentication.
The first tool to consider is the blockchain explorer. Each blockchain has its own explorer, which is basically a site where you can inspect transactions, wallet information, and token data. Using this tool and examining the publicly available data can help to validate the ownership and origin of an NFT. In terms of authentication, you could check if the NFT really was minted as part of a specific collection, for instance.
Another tool is the NFT’s digital certificate of authenticity. This holds information about the NFT, such as its token identity, collection serial number, and creator’s digital signature. Do note that not all NFTs have this, but those that do provide vital data that can be checked against information released by the creator.
Both the above-mentioned tools deal with an NFT’s authenticity and origin. In terms of originality and rarity, one approach is to conduct a reverse image search. For example, with Google Images, you can search using an image instead of words. This then returns any matching images, including duplicates, and allows for investigation into details such as date of upload and other key data. The goal here is to confirm that the work you’re looking at hasn’t been copied or duplicated from a pre-existing image or minted NFT.
How Can Users Best Protect Themselves in The World of NFTs?
Always remember that if something looks too good to be true then you should be on high alert as it’s most probably a scam. For instance, if someone is selling a CryptoPunks NFT for 1 ETH but a trusted crypto data site such as CoinMarketCap lists the average price for the collection as over 60 ETH, your alarm bells should start ringing.
Also, before you buy an NFT, be sure to think about if and how it has been authenticated. If it’s been authenticated by a centralized third party, you will need to decide how much you trust that particular platform.
But, where possible, it’s always best to ensure the authenticity and originality of any NFT using tools such as blockchain explorers, digital certificates of authenticity, and reverse image searches. Additionally, be sure to cross-reference all that data with information from the official channels of the NFT’s creator. This is a great way to remove any doubts you may have.
The key is to be mindful that there are fakes out there and to always authenticate an NFT as best you can to ensure your own safety. Never take anything at face value, and always be prepared to do your own research (DYOR). Having the right mindset and awareness means you can engage in NFT trading with much greater confidence and understanding.
This article came directly from the Digifinex blog, found on https://blog.digifinex.com/2022/12/29/nft-authentication-combating-fake-nfts-and-scams/