54.5K NFT contracts have privilege functions after CoinEdition

• The BlockSec and NFTGo 2022 report revealed that 54.5,000 NFT contracts allow privilege functions.
• 61.8% of NFT projects are over-centralised and 50% are capitalized by one user.
• Wash trade transaction volume reached 9.8 million ETH or $15.2 billion.

BlockSec and NFTGo have published their 2022 NFT Security Report, which revealed the prominent security risks of the NFT ecosystem.

The report focuses on off-chain NFT security risks that determine the security of digital assets stored outside the blockchain, as well as on-chain NFT security risks, meaning the risks driven by smart contracts and transactions that occur on the blockchain.

Moreover, the report presents a systematic study of all 25,900,000 NFT transactions that have taken place on the blockchain network from July 2015 to August 2022, including 119,900 NFT contracts and 83,100,000 issued NFT tokens.

The report suggests 5 major observations. First, 16.1,000 out of 84,8,000 (19%) NFT projects have NFT assets that are unavailable. This means that digital asset tokens worth about 330.2K Ether ($515 million) are at risk of becoming worthless and causing huge financial losses to their owners.

Another 55.4% of open source NFT contracts show problems with re-entry and incorrect access control. In addition, 54.5,000 NFT contracts have privilege features that allow privileged users to operate other users’ assets without permission.

Third, BlockSec detected 1960 sleepmint transactions involving 75 NFT contracts. A sleepmint contract is when an attacker creates an NFT for a high-profile person without their permission, using privileged functions, and then transfers the token to the attacker’s account and lists it on the market.

BlockSec also found that nearly 61.8% of NFT projects are under holder pooling risk, which occurs when a few users known as “the big whales”, own the maximum tokens in an NFT project. This abnormal market behavior in the chain disrupts the liquidity of the market and its robustness via ownership concentrations. Currently, 50% of the tokens in the projects are owned by one user.

Finally, the report concluded that 43.0% of the total trading volume on OpenSea, LooksRare and X2Y2, which reaches 9.8 million ETH or $15.2 billion, are wash transactions. Wash trading is a market manipulation tactic where a user buys and sells the same NFT collections without incurring market risk or changing the trader’s market position.

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