How to Protect Your NFTs

Last month, a Twitter influencer trashed a $129k CryptoPunk NFT. Here are some best practices for protecting your NFTs from losses to technical mishaps with your crypto.

“This is really so wrong of me. But I did it myself, and it’s no one’s fault but mine. Both beauty and the curse of incubation,” chirp Crypto Investor Brandon Riley, “Stay safe out there, everyone, and please be extra careful than I have been. Thank you so many for the kind words. 🙏🏼”

NFT Collector CryptoPunk Loses $129K

Riley reported on March 24 that he had “accidentally burned” a non-fungible token, CryptoPunk #685. The health, fitness and finance influencer was trying to get a CryptoPunk NFT wrap.

Bypass extends the functionality of the NFT smart contract so that it can be listed for trading on the Ethereum NFT markets. This includes popular NFT exchanges such as OpenSea and Rarible.

But the NFT collector made a tragic mistake, entering an incorrect address while following the instructions to encapsulate his NFT for the first time. As a result, he sent his NFT irretrievably to nowhere, destroying a third of his net worth investing in cryptocurrency:

“I was so fixated on following the instructions exactly, that I slipped up, destroying a third of my net worth in a single transaction.”

Riley wrote:

For those wondering how this happened…

While trying to create a proxy wallet, something went wrong.

Following the instructions on the site, Step 1. You access the nodes on Etherscan.

Step 2. I entered my wallet address and tried to get my agent’s wallet address.

Step 3 reads: “Skip to step 2 if address is not 0x00…0000”

I figured that meant that since the address was exactly that, it had to be correct and I could move on to the next step. I thought that was the proxy address I was supposed to use.

I followed Step 4 for “Write Contract” and “Register Agent” and then Step 5 for Copying the Agent Address…

I should have known something was wrong and realized that was a mistake, but I didn’t. It wasn’t until she went punk-twisted that cosmic gas even gave her away.”

Unfortunately, Riley went out on a limb on his own with a $129,000 haul and did what the developers call a “lone wolf.” He implemented his own NFT encapsulation code without having done so before and without any advice or review from anyone else in the NFT community before heading into the doomed process.

How do you view yourself out there in DeFi?

If it was an enterprise central application that Riley was dealing with, he could have emailed customer support. For an account with $129,000 in assets on its platform, the company is sure to fix the issue and take ownership back to the user.

But in such a scenario, with such central oversight from the companies, was the NFT worth that much in the first place? it’s improbably.

However, the total market cap of Ethereum exceeds $200 billion in this frosty market. During bull markets, it has a higher market value. On November 21, 2021, Ethereum is worth nearly $600 billion. So why is it valuable despite these risks?

Investors are willing to take the risks of these trade-offs for the freedom from centralized control that DeFi offers. With assets denominated in fiat currencies, investors could wake up tomorrow to find that the value of their holdings has diminished. But with DeFi, investors can rest assured that their assets are being valued by the market.

However, for this trade-off, there are higher due diligence requirements from Ethereum investors. The NFT collector who lost $129,000 should have been more careful when trying new technology on the P2P platform.

Before trying something new with a valuable digital asset, try wrapping another NFT worth a nickel first. Maybe try wrapping several penny NFTs to find these problems and troubleshoot them on the cheap.

This is expandable for any beginner’s foray into cryptocurrency.

Everyone doing something new for the first time is a newbie at it, whether it’s a total newbie creating their first Coinbase account or a division of Binance launching a new product.