It feels like everyone is talking about NFTs these days. Well, according to a new study from NordVPN, at least half of Americans are. The survey suggests that there’s a growing awareness of NFTs and their potential uses in the US, although many people are still uneasy about security risks. Let’s dig into the survey data.
Before we go further, let’s establish what an NFT actually is. NFT stands for non-fungible token; if something is non-fungible, it’s demonstrably unique and one-of-a-kind. When you exchange money for one of these tokens, you’re buying a specific position on a blockchain (if you think of a blockchain as a big decentralized database, your “token” represents a line in that database).
Pieces of digital media can be linked or associated with specific points on a blockchain. For example, if you take a photo of your cat, you can have that photo “minted” as an NFT, which essentially involves paying a company to link your image to a unique spot on a blockchain.
You can then sell ownership of the cat photo to someone else. The buyer won’t be purchasing your photo, exactly, but rather the unique digital token that represents the blockchain position associated with that photo.
If this all sounds complicated, that’s because it is. And it’s made more so by the enormous amounts of misinformation and hyperbole currently circulating around NFTs and their potential value.
In the last year, NFTs exploded into public discourse, in large part because of the unusually high prices they were selling for. Large parts of the public had already heard of blockchain technology, thanks to the rise of cryptocurrency, so awareness of NFTs spread quickly.
While in theory you might buy a piece of NFT artwork because you like it visually, most people have begun to view these tokens as potential money-makers.
A speculative craze is now in full swing, as people buy NFTs and hope that they appreciate in value. As hype around an NFT grows, so too does the potential to flip it for profit. For many, these digital tokens are indistinguishable from speculative stocks.
The hype around NFTs is very real, as exhibited by the results of our survey. We found that 47% of US respondents had some knowledge or awareness of this technology, and around half of that group had actually bought, sold or invested in NFTs previously.
However, 68% of respondents who were familiar with NFTs also admitted to being concerned about their potential security risks. Here are some of the key threats that worried them:
These are all legitimate concerns; one of the major challenges with decentralized recording systems like blockchains is the lack of recourse for people who are scammed or robbed.
Judging by the results of the NordVPN survey, a large percentage of people who are aware of and even use NFTs are also worried about potential risks. And that’s not a bad thing, either, because those risks are very real.
In February 2022, a major NFT marketplace called OpenSea suffered a breach and lost 254 tokens — worth an estimated $1.7 million. And that’s just the latest in a long series of similar attacks and thefts.
Furthermore, many NFTs are now being sold as part of pump-and-dump schemes. These are scams where an individual or an organization promotes a collection of NFTs, boosting their value with celebrity endorsements and flashy advertising. Once the value spikes, the creators sell off the NFTs they’re holding and make a quick profit.
This sudden divestment depreciates the value of the NFT collection, so anyone who is slow to sell could potentially incur a serious loss.
The fact that a large percentage of respondents had an awareness of the risks is actually encouraging. It’s not surprising, however, as many of those surveyed seemed to have a reasonable understanding of privacy and online security.
Almost half of those who had previously engaged with NFTs said they used private browsers to do so. Others utilized extra security measures like password managers (43%), file encryption software (37%), and VPNs (34%).
Whether you’re buying and selling NFTs or just checking your email, we always recommend implementing some additional cybersecurity measures when you’re online. If you want to boost your overall safety, try these useful tools.