NFT security startup Tokenproof raises $5 million to stop crypto fraud
Tokenproof, a startup working to secure non-fungible tokens against theft and fraud, said today it raised $5 million in seed funding led by PennyJar Capital to make Web3 safer for NFT holders to realize their value without fear.
Non-fungible tokens are a type of crypto-asset on blockchains that represent the ownership of a particular digital or physical asset. These digital objects can be anything from artwork, music, files or other virtual assets such as game items. Some of the world’s most sought-after artwork NFTs have reached hundreds of millions in value, such as Beeple’s Everydays: the First 5,000 Days, which sold at auction for $69 million in 2021.
In 2021, the NFT market skyrocketed to $41 billion in value, according to a report from blockchain analytics company Chainalysis, dwarfing $100 million in digital collectibles sales in 2020. Although the market has cooled somewhat in 2022, with a 25% decline between first and second quarter this has continued to attract a lot of brand attention to NFTs looking to use them in their marketing.
Using NFTs can come with a number of risks as they come with certain technical hurdles. Using NFTs involves linking a user’s cryptocurrency wallet to buy, sell and trade them, and they retain real value – although not all NFTs sell or trade for millions.
“Eliminating the unnecessary risk of connecting or carrying a digital wallet is critical to mainstream adoption of NFTs,” said Alfonso Olvera, founder and CEO of Tokenproof.
The company’s seed round has attracted some notable investors in the crypto space, including billionaire Mark Cuban, co-founder of the metaverse game The Sandbox Sebastien Borget, Corazon Capital, 6th Man Ventures and Canonical Crypto.
Tokenproof protects NFT holders by generating a one-time verification of a user’s digital wallet by issuing proof of ownership credentials. This allows the user to keep their own wallet disconnected from interactions with third parties. Tokenproof then provides a QR code to authenticate with websites, merchant experiences and events in the real world or online – at no point subjecting your wallet to verification.
As a result, there is no chance that a fraudster can access their wallet and steal NFTs or other cryptocurrency tokens from them.
“We are dedicated to delivering the security and privacy users deserve, while making it seamless for companies to unlock the possibilities of NFTs and connect with people in compelling and creative ways,” Olvera added.
A recent report from blockchain security company Elliptic said that thieves stole over $100 million with NFTs during the first half of 2022. Security compromises via social media increased during that period and thefts averaged over $300,000 per scam.
Actor Seth Green was recently the victim of a high-profile theft when his Bored Apes Yacht Club #8398 NFT was stolen in a phishing-related incident in June. He called the theft a “kidnapping” and the monkey was returned by the scammer after he paid a ransom. The incident was significant because he intended to use the image of the NFT in an upcoming TV show called “White Horse Tavern”, which would use the intellectual property rights of the monkey’s image, which follows the current holder of the NFT.
The “cut” meant that Green had to delay work on the TV show until he could restore NFT and regain the rights to the image as it was the main character of the series.
Although most NFT holders do not have much security on their NFTs, they consider their holdings valuable and do not want them stolen. This could be seen by brands as a block to adoption, as a result, Tokenproof believes their technology will provide a necessary security barrier to prevent people from falling victim to fraud.
“We believe NFTs will transform how brands connect with customers, but only with seamless onboarding and greater security,” said Bryant Barr, co-founder of Penny Jar Capital.
