Non-Fungible Token Fraud: Studying security issues and improvements for NFTmarketplaces using hashing techniques

Abstract

In recent years, interest in Non Fungible Tokens (NFTs) has soared and the NFT market has experienced significant growth. Built upon blockchain technology, the tokens represent a unique offering, a rarity, due to its attributes of immutability, trust, transparency, auditability and anonymity. These unique tokens are highly appealing and sought after by investors and traders, since ownership rights, provenance and authenticity are publicly available. As a result, NFTs can be applied in a wide range of contexts and sectors. One such sector is in the digital art market, where sales of NFTs skyrocketed during 2021, thereby generating a multibillion dollar ecosystem. However, due to the fast-changing evolution of NFTs, the increase in demand for the tokens, high returns and lack of regulation, fraud has become commonplace and many security issues have arisen in the ecosystem. In this paper, we explore some of these security issues. Furthermore, by investigating Interplanetary File System (IPFS) and hashing techniques, namely cryptographic and perceptual image hashing, in more detail, proof of concept (PoC) models were built to aid in the identification and combat of NFT fraud.