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Published June 28, 2024

Best Practices for Managing an NFT Portfolio

The Importance of Crypto OpSec — Crypto Safety Measures to Secure Your Digital Assets

With the rising popularity of NFTs, it has become a prerequisite to make sure your digital assets are safe. Proper NFT portfolio management involves implementing strong Operational Security (OpSec) crypto practices to ensure the safety and longevity of your investments. In this blog post, we will go over critical safety practices when managing an NFT portfolio, emphasizing the considerable role that crypto OpSec plays.

Hardware Wallets

A hardware wallet is crucial for cryptocurrency security as it provides an isolated environment for key storage and transaction signing, thereby significantly mitigating the risks associated with malware, phishing attacks, and other forms of cyber threats. Examples of hardware wallets are Ledgerand Trezor. They offer an adequate level of security for most users, nearly all tokens available in the market and are compatible with NFTs. A hardware wallet allows you to store your NFTs in secure cold storage, reducing the chances of unauthorized access. Provisions are usually made for backup and recovery in case of loss or damage.

Multisig Wallets

Multisig, short for multi-signature, wallets provide an additional security layer through which more than one private key is needed to authorize a transaction. This feature benefits organizations or groups that maintain a high-value portfolio of NFTs. Safe(previously known as Gnosis Safe) is a protocol that offers secure multisig wallets, enhancing security and manageability for high-value assets. 3DNS will soon launch a multisig feature for onchain domains using Safe, allowing multiple people to co-own a domain in a shared and secure manner—ideal for DAOs and other groups. Multisig wallets increase security through distribution, lowering the risk of a single failure point while ensuring transparency and accountability with every transaction.

With Safe’s multisig feature, 3DNS aims to bring the highest level of security and collaborative management to onchain domains. Safe provides an intuitive interface for managing multisig wallets, supports various digital assets including Ethereum-based tokens and NFTs, and integrates with hundreds of decentralized applications (dApps).

You Should Never Share Your Private Keys

One of the primary crypto OpSec rules is never sharing your private keys. Private keys are cryptographic codes that access your NFTs or other digital possessions. Even if you share with trusted parties, you will expose yourself to theft and asset loss. Keep private keys private, always, and back them up using encrypted storage or hardware wallets. Use passphrase-protected wallets for added security.

To go a step further in ensuring your security, observe the best practices when attempting to secure your seed phrase. Engraving your seed phrase into 3 to 4 different metal plates and storing them in 3 to 4 separate geographic locations will ensure that in any event, be it natural calamities or robbery, you can still recover your assets. A less secure method is to keep the seed phrase on a single metal plate, stored in a safe location. But the least secure method—the one you should stay away from—is storing your seed phrase in digital formats, such as notes on your phone, because of the high chances of hacking and theft of the device. Security should always be given top priority by keeping your crypto assets safe through physical offline solutions.

Regularly Update Your Security

The crypto world is ever-evolving, bringing new threats regularly. Keep your security measures updated to tackle potential risks. Ensure your software wallets, hardware wallet firmware, and other security tools are current. Stay informed about security trends and potential NFT vulnerabilities.

Other vulnerabilities to be aware of include:

  • Address Poisoning Address poisoning involves sending tiny transactions from an address which looks like yours to try to fool people into accidentally making payments to the wrong address. To prevent this, confirm address details at every step when sending any assets and use a wallet that gives you the possibility to verify what kind of address is in front of your eyes.

  • Phishing Phishing attacks involve malicious emails, messages, or sites aimed at deceiving the user and making him disclose a private key to steal money from his address. Check the source before clicking on any links or submitting sensitive data. Bookmark official websites an.

  • Malware Malware on a personal computer or the device used for an online wallet installation can still leak all passwords, private keys, and other confidential information of cryptocurrency owners to criminals. Own security by updating software regularly and don’t click on suspicious downloads or links.

  • Fake Websites These sites pretend to be real ones and use your information. They will often have slightly different URLs than the legit sites. Carefully check the URL and try to always use bookmarks for sites you visit frequently. Add security extensions that alert against phishing sites.

  • Social engineering Social engineering schemes exploit human weakness to coerce individuals into giving them confidential data. Using these scams, the scammer impersonates either support staff or a familiar face. Be cautious about any unasked-for solicitation of information or access. Finally, use the same checkpoints to verify their identities before revealing any information.

  • SIM swapping Sim Swapping is when threat actors steal your phone number by tricking your mobile provider to port the same number to another sim. This lets them bypass SMS-based Two Factor Authentication. For additional security measures, use new SIM cards for online accounts and neither supply your mobile number nor residence address when you open bank accounts.

  • Keyloggers Keyloggers record every key pressed on your keyboard, effectively grabbing passwords or private keys. Only on trusted devices and secured networks. Virus scan your devices on a schedule and use a virtual keyboard for personal information.

  • Third-Party Data Breaches Third-Party data breaches reveals your personal information in a third-party service you are using. Do Not Use the Same Password Across Different Platforms To see security options make sure none already been violated with two-factor authentication wherever possible and password updating as necessary.

Diversifying NFT Storage

Diversifying your NFT portfolio across multiple wallets will also spread the associated loss risks. Trade via hot wallets and store in cold wallets. This way, if one of your wallets has been compromised, it won’t risk the whole portfolio of NFTs. Use only those wallets with solid encryption and advanced security features. Diversified storage mitigates threats that may emanate from owning digital assets and helps manage liquidity and accessibility for different portfolio segments.

Backup and Recovery Strategies

An efficient backup and recovery strategy is at the core of how to keep your NFT portfolio safe. Have multiple backups of your private keys and recovery phrases in secure locations. Physical backups, like written copies stored securely, supplement the digital ones stored in encrypted formats. Regularly test your recovery process to ensure that your assets can be accessed. A good recovery plan helps prevent the loss of access to your assets in case of hardware failure or emergencies.

Notable Crypto Hacks and Their Lessons

One of the most notableincidents of wallet draining happened to Kevin Rose, the founder of Moonbirds, who experienced a significant hack that led to the loss of NFTs worth over $1 million. In January 2023, Rose became a victim of a phishing attack. The attacker tricked him into signing a malicious signature, which granted access to his digital assets. As a result, Rose’s wallet was drained of valuable NFTs, including pieces from high-profile collections like Art Blocks and Chromie Squiggles. This unfortunate event might have been avoided with the use of a hardware wallet, keeping valuable NFTs in a separate, less active wallet, and using a browser extension that translates smart contract code into understandable actions before signing anything.

Bill Lou, the CEO of Nest Wallet, fell victim to a sophisticated phishing scam, losing $125,000. The attack began with a phishing email that lured him to a fraudulent website promoting an LFG token airdrop. Trusting the site, Lou followed the provided instructions and used his MetaMask wallet to sign a transaction, which allowed the attacker to drain his wallet of 52 stETH (staked Ethereum). This unfortunate event underscores the importance of verifying website authenticity, steering clear of dubious links, and employing security measures like two-factor authentication (2FA) and hardware wallets. Furthermore, using a dedicated device or account for substantial transactions can provide an extra layer of protection.

Conclusion

Secure management of an NFT portfolio relies on strong crypto OpSec. Improve the security of your digital assets with hardware wallets and multisig wallets, keeping your private keys secure, updating your security measures, diversifying storage, and staying vigilant.