Game (NOT) Over with Digital Investing 

3 Ways to Protect Your NFT

Keeping up with technological advances can be a full-time job in itself. It seems that every day there is a new app, cryptocurrency, or a gadget coming to market. Just looking at the way we store our data and documents has significantly changed from using floppy disks to now storing information on the cloud. Similar to “the cloud”, investing has become more digital with cryptocurrency. This newer form of investing is especially exciting if you were an early adopter. An even newer way to digitally invest is with a non-fungible token or NFT. 

The definition of an NFT according to Merriam Webster dictionary “is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership (as of a specific digital asset and specific rights relating to it).” You can think of an NFT as similar to a casino chip. The chip you use represents a specific amount of money and different chips can have varying amounts they are worth. However, the biggest difference is that no two NFTs are alike. Each NFT is digitally different from the next to protect the privacy and security of the NFT. In this way, they are more similar to snowflakes or fingerprints.   

Digital Artwork – Taking it beyond “The Cloud”

Another example is a collectible item such as collectible art or a rare baseball card.  These items are only as valuable as how atypical they are. When I was younger, I collected record albums and I specifically remember having WHAM!’s “Make It Big” album and Michael Jackson’s “Bad” album. There were millions of these records sold which made them all the same value. However, what if I had met one of these artists and they personally signed my album and dated it. This would have significantly increased their financial value and made these specific albums unique. Fast forward to 2022, and some artists are selling their art digitally through NFTs.

One of the most expensive NFT artworks sold so far was Mike Winkelmann’s piece called “The First 5000 Days.  This is a collage of 5,000 individual pieces of artwork over a 13-year time frame.  This was sold by Christie’s for $69,346,250 on March 11, 2021. This is by far the most distinguished NFT that has sold thus far. NFTs are being sold as digital art, pieces of property, and even protection of property. Even companies such as Nike are using NFTs. Nike wanted to ensure that their shoes were not counterfeit in the metaverse, so they purchased a company that makes NFTs and sneakers for the metaverse. The world of NFTs and the metaverse is quickly growing. There is even a possibility that NFTs might be used for electronic documents such as wills or estate planning in the future. There is no limit to what an NFT can represent. 

Where is an NFT stored?

An NFT is normally stored on the blockchain to ensure its authenticity and to make certain that it is not interchanged with another asset. The NFTs “on-chain” are completely written on the blockchain along with their smart contracts and metadata. The blockchain is like a digital wallet. This is important since each NFT is different. 

Is there a password for NFTs to keep them safe?

NFTs do not have a password in the traditional sense of creating abc123! for your password (please don’t use that one!).  The password is called “seed phrase”. A seed phrase is typically 12, 18, or 24 random words long to be able to recover the NFT from a digital wallet.  An example of a seed phrase would look similar to “flower run judge water rose ocean triple liquid tape weight shake every ”. There is no logical sense to this phrase and should be kept secure at all times.  However, what is the best way to keep your NFT secure?  

Here is the First of 3 ways to keep your NFT safe and secure

1. Who do you REALLY trust with your seed phrase?

Your seed phrase is the key to Pandora’s Box, so it is imperative that you keep it safe. How can you keep this random set of words safe from hackers? Some people keep this phrase safe in an old-school safety deposit box. It is thought to be more secure to have sections of this phrase kept at multiple locations. For example, have your cousin Joe keep the first four words in a secure place. Then have your brother John keep the next four words in his safe and you keep the last four words in your super, secret hiding spot. However, who will be the one person besides you that knows how to put this puzzle of seed phrases together? Your lawyer can assist you. What happens in the unexpected event of you not being able to communicate with your brother and cousin? Your lawyer can communicate with them and ensure that your account is kept safe or managed as you wish.  

In part two of this article, we will finish explaining other ways you can keep your NFTs safe.