In the last year, non-fungible tokens, or NFTs, have swelled into a multi-billion dollar crypto industry. Even during the crypto downturn, popular collections continue to sell for eye-watering figures. At the time of writing, the floor price for an item in the Bored Ape Yacht Club is $450,000, according to DappRadar.

The intrinsic value of NFTs comes down to their utility. Once an image or any other file type is minted as an NFT (created on the blockchain), an indelible digital record is created that serves as proof of authenticity and ownership, making the NFT indisputably the only one of its kind. NFTs can be used for just about anything, including art, exclusive clubs, gaming, and interactive experiences. 

However, as tends to happen when large sums of money are involved, the NFT market has become a fertile breeding ground for swindlers and counterfeiters. Indeed, there has already been an explosion in the prevalence of artwork being copied and sold without the original creator’s consent, undermining trust in the new digital format. In January, the world’s largest NFT marketplace, OpenSea, admitted that more than 80% of the NFTs created on its platform are fraudulent.

The “Creatorship” Problem In NFTs

Countless artists have seen their creations minted as NFTs and sold by unrelated third parties who reap all the profits, while the artists themselves get nothing. In fact, the problem has become so pervasive that major NFT marketplaces such as Cent have had to shut down their operations temporarily to address the issue.

This phenomenon has fostered an air of distrust in the community and eroded the potential incomes of genuine artists. This has led both buyers and artists to call for better accountability and more robust mechanisms to prevent this kind of fraud.

Until now, there have been no effective means to prevent someone from minting NFTs created from assets the minters don’t own. If someone can download an image of another person’s artwork, they can easily create NFTs out of it. Indeed, the original artist can too, but there’s been no established way to separate the authentic NFTs from the fraudulent ones. All that we can prove is that they are both the original themselves, which isn’t beneficial for combating this kind of fraud.

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Fortunately, thanks to a new minting process that’s being developed and implemented on the latest blockchains, that’s all about to change.

It’s Time to Fight Back

What is needed here is a robust solution allowing for safe storage, authentication, and verification of NFTs. The answer is Trusted Execution Environments, or TEEs. TEEs allow NFT minters to execute code in a secure environment that cannot be tampered with, as computation within the TEE can’t actually be accessed by any other program, even the actual operating system.

This solution means that all code being executed is genuine, serving as proof that no third party was involved in the minting. This means that NFT creators who have minted within a TEE can provide absolute confirmation that they are the original owner, as they will be the only one with the appropriate keys. 

The keys, metadata, and NFT itself can all be stored together in a secure fashion, either on IPFS cloud storage or even offline in cold storage, and it would be impossible for anyone to reproduce the work with the same credentials. Any duplicates lacking this “seal of authenticity” should be regarded as fraudulent, and exchanges could even be built to only accept NFTs that have been verified. 

This is why, moving forward, minting in a TEE environment is going to be essential in order for enterprises to begin utilizing NFTs at scale. It puts power back into the hands of creators, and makes for an overall more trustworthy NFT market. Already, some blockchains, like The Casper Network, have begun to implement such solutions, but it is likely only the beginning.

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Building A Better Market

This development alleviates the single-most pressing concern surrounding NFTs, paving the way for the digital format to make new inroads into broader markets. 

The TEE solution finally provides an avenue for content creators to take true ownership of their work and safeguards them against the rampant issues of unauthorized minting and forgery. NFTs can now finally act as reliable vehicles for trading art in a way that is beneficial to artists, transparent for buyers, and obstructive for fraudsters.

What’s more, this system will also allow for blockchains to offer verified minting as a service. Artists who want to mint collections that they can prove creatorship of can turn to networks that support TEEs, allowing them to mint anything they desire with an irrefutable seal of authenticity. While fraud in the NFT market won’t subside overnight, implementing a TEE-like system provides peace of mind to creators who want to enter the sector but remain wary of the challenges that come with fraud.

About the author:

Ralf Kubli is Board Member at Casper Association and an experienced executive with a strong background in blockchain, cryptocurrencies, and decentralized technology. Ralf’s career spans roles in M&A, sales, and executive management positions in large corporations and technology startups. He discovered Blockchain through a Fintech investment in 2015. Since then, Ralf cannot unsee the transformative potential of this technology and has been involved in the blockchain space as an investor, advisor, and board member. 

Ralf holds an MBA from Cornell and an M.A. in History from the University of Zurich.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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