<p>Fungibility refers to interchangeability.&nbsp; Fiat money and most cryptocurrency are designed to be fungible.&nbsp; One dollar bill has exactly the same value as another, so they’re completely interchangeable.&nbsp; The same is true of Bitcoin, Ether, etc.</p><p>Non-fungible tokens (NFTs) are designed to be unique.&nbsp; This enables them to be used to denote ownership.&nbsp; If ownership of a particular NFT maps to ownership of an asset, that ownership can be tracked and traded on the blockchain.</p><p>This use of NFTs is behind the Beeple art auction making headlines recently.&nbsp; On March 11 2021, a piece of digital art by Beeple <a href="https://www.christies.com/features/Monumental-collage-by-Beeple-is-first-purely-digital-artwork-NFT-to-come-to-auction-11510-7.aspx">was auctioned off by Christie’s</a> for $69,346,250, making Beeple the third-richest living artist.</p><p></p><h2>NFTs and Blockchain Security</h2><p>With near-constant news regarding hacks of cryptocurrency exchanges and DeFi, storing ownership of high-value assets like Beeple’s art on the blockchain may seem risky.&nbsp; However, NFTs do not rely on smart contracts or require cryptocurrency exchanges to transfer them.&nbsp; There are a few blockchain security threats that can have an impact on the security of an NFT though:</p><p></p><h3>The Importance of Private Key Security</h3><p>From an ownership perspective, an NFT is like any other cryptocurrency token.&nbsp; Ownership is recorded on the blockchain and secured in a digital wallet.</p><p><strong>For high-value assets like Beeple’s art, this makes strong private key security essential</strong>.&nbsp; If an attacker can gain access to the owner’s private key, they can perform a transaction that transfers the asset from the owner’s account to another on the blockchain.</p><p>With blockchain’s immutability, such a transaction would be irreversible.&nbsp; Additionally, with digital art like Beeple’s copies of the art are freely available online.&nbsp; The NFT denotes ownership of the piece, meaning that a malicious transfer could cause loss of ownership forever.</p><p></p><h3>51% Attacks and Ownership on the Blockchain</h3><p>The transfer of the Beeple NFT to the new owner’s account is recorded on the blockchain.&nbsp; Blockchain immutability should protect this transaction and the buyer’s ownership of the digital asset.</p><p>Blockchain immutability has been broken on numerous occasions.&nbsp; 51% attacks are common on smaller blockchains, enabling the ledger to be rewritten and reorganized into a new version of the blockchain created by the attacker.&nbsp; Such an attack could cause the transaction transferring the Beeple NFT to be removed from the digital ledger, “revoking” its ownership.</p><p>However, a 51% attack can only accomplish this temporarily.&nbsp; <strong>As long as Beeple’s private key (which is used to sign the transaction), remains secure, the attacker cannot forge a transaction that transfers ownership of the piece to anyone else.</strong></p><p>And, even with a blockchain reorganization forced by an attacker, the original transaction will still be valid and included in a block eventually.&nbsp; An attacker may be able to delay the transfer ownership of the piece, but it cannot be stolen via a 51% attack.</p><p></p><h2>Securing Art Ownership on the Blockchain</h2><p>Ownership of digital art has always been complex because the art is stored in image files that can be easily copied.&nbsp; The emergence of blockchain and NFTs has changed this.&nbsp; The auction of Beeple’s NFT art is a historic moment, demonstrating that ability of blockchain technology to secure ownership of extremely high-value assets.</p><p>If you’re in the business of selling or auctioning high-value NFTs, you&#8217;ll require a third party security audit. Contact Halborn today at <a target="_blank" href="mailto:halborn@protonmail.com" rel="noreferrer noopener">halborn@protonmail.com</a> to see how we can help.</p>

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Fungibility refers to interchangeability.&nbsp; Fiat money and most cryptocurrency are designed to be fungible.&nbsp; One dollar bill has exactly the same value as another, so they’re completely interchangeable.&nbsp; The same is true of Bitcoin, Ether, etc. Non-fungible tokens (NFTs) are designed to be unique.&nbsp; This enables them to be used to denote ownership.&nbsp; If ownership

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