There are several NFT scams we have seen in the past few months, that created fear in the NFT marketplace. On July 13, it was observed that the main marketplace of Ethscription had been hacked, resulting in an undisclosed amount of losses. The exact value of the loss is currently unclear.
According to the creator, Ethscriptions, a protocol that allows people to create and share digital objects on Ethereum, has suffered a major setback. The main marketplace for Ethscriptions was hacked, resulting in the theft of a significant number of Ethscriptions listed on Ethscriptions.com. Approximately 123 individual addresses lost a total of about 202 Ethscriptions in the exploit. The exact value of the loss is unclear, but according to the NFT marketplace OpeanSea, some Ethscriptions have been sold for as much as 5 Ethereum (approximately $9,600) in the past month.
Tom Lehman, the co-founder and former CEO of Genius.com who launched Ethscriptions, stated that the protocol itself and other applications using it have not been affected. However, he expressed his disappointment over the theft, particularly highlighting the loss of Ethscription #56, which was considered rare and valuable. Lehman had intended for the marketplace to serve as an example for other marketplaces building support for Ethscriptions, but the hack has hindered that goal.
Lehman took responsibility for the failure and attributed the exploit to a smart contract that he and co-founder Michael Hirsch had created. A code snippet allowed individuals to withdraw Ethscriptions they didn’t own from the marketplace. He acknowledged the challenge of balancing cost savings with strategic contract usage in marketplaces.
Lehman plans to relaunch the Ethscriptions.com marketplace once necessary changes are made to the protocol. He has been in contact with the affected users and commended them as the earliest adopters of the Ethscriptions protocol.
Ethscriptions differ from traditional NFTs in that they are stored in transaction-level data rather than being tokens issued on Ethereum through smart contracts. According to a Dune Analytics dashboard, around 474,000 Ethscriptions have been created so far.
The emergence of the Ethscriptions protocol followed the rise in popularity of Ordinals, which are used for creating NFT-like assets on Bitcoin, leading to experimentation with Bitcoin’s blockchain. As of now, Ethscriptions.com carries a warning about the issue with the marketplace contract, advising users to withdraw their Ethscriptions and avoid creating new listings.
In July, several fraud incidents occurred, including a multichain scam and the theft of millions of digital assets by two Canadian teenagers. Multichain, a cross-chain router protocol, experienced a breach resulting in a loss of over $100 million. The attacker exploited token bridges to withdraw funds. Multichain acknowledged the incident on Twitter and advised users to stop using their services. The company is currently investigating but is uncertain about the details.
After the fraud, Multichain ceased operations due to a lack of funds. Chainalysis raised suspicions of insider involvement in the withdrawals. The incident highlights the risks in the DeFi space and the need for improved security measures. The marketplace needs to conduct thorough security checkups to prevent security breaches that result in the loss of digital assets and individuals’ hard-earned money.