Tokenproof, a startup working to secure Non-Fungible Tokens against theft and scams, said last Tuesday that it has raised $5 million in seed funding led by PennyJar Capital to make Web3 safer for NFT owners so they can realize their value without fear.
The team at Tokenproof is led by Fonz, who is described as a “serial entrepreneur”.
Non-Fungible Tokens are a type of crypto asset on blockchains that represent the ownership of a particular digital or physical asset. These digital items can be anything from artwork, music, files or other virtual assets such as gaming items.
Some of the world’s most coveted artwork NFTs have reached enormous value, such as Beeple’s Everydays: the First 5’000 Days, which sold at auction for USD $69 million in 2021.
NFT Market Value
According to a report from blockchain analytics company Chainalysis, the NFT market ballooned to USD $41 billion in value in 2021, dwarfing the USD $100 million in digital collectible sales in 2020.
Although the market has cooled in 2022, with sales falling 25% between Q1 and Q2, it has still attracted plenty of brand attention to NFTs seeking to use them in their marketing campaigns.
Risks When Using NFTs
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 retain real-world value – although not all NFTs sell or trade for millions of course.
“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.”Alfonso Olvera, Founder and CEO of Tokenproof
Olvera also mentioned that “Eliminating the unnecessary risk of connecting or carrying a digital wallet is crucial for mainstream use of NFTs.” and is determined to solve current issues, keeping NFT investors safe from scammers.
Big Scams Including Stolen BAYC
A recent report from blockchain security company Elliptic said thieves stole more than USD $100 million worth of NFTs during the first half of 2022. Security compromises via social media surged during that period and thefts averaged more than USD $300,000 per scam.
Actor Seth Green recently became the victim of a prominent theft when his Bored Ape Yacht Club #8398 NFT was stolen in a phishing-related incident in June. He termed the theft a “kidnapping” and the ape was returned by the scammer after he paid a ransom.
Green had intended to use the image of the NFT in an upcoming television show called “White Horse Tavern.” The “kidnapping” meant that Green had to delay work on the television show until he could recover the NFT and regain rights to the image as it was the main character in the series.
Although most NFT holders do not have this much collateral riding on their NFTs, it is worth noting that their holdings are valuable and would never want them to be stolen. As a result, this can be seen by brands as a blocker to adoption and Tokenproof believes that its technology will provide a necessary security barrier to help prevent the masses from becoming victims of scams.
How It Works
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, retailer experiences and events in the real world or online – at no point do they expose their wallet for verification.
As a result, there is no chance that a scammer can get access to their wallet and steal their NFTs or other cryptocurrency tokens from them.
Tokenproof’s identity verification mechanism holds the actual NFT in cold storage, beyond the reach of scammers. Through an app it allows its users to prove they own the NFT, and therefore unlock the myriad associated benefits.
The company’s seed round has attracted some notable investors in the crypto space – Corazon Capital, 6th Man Ventures, Canonical Crypto, and several angels including billionaire Mark Cuban, co-founder of The Sandbox Sebastien Borget, Keith Grossman and Patricio Worthalter.
The funding follows the company’s success at both physical and virtual events and will fuel the expansion of additional use cases for NFT verification, including online services, and retail experiences.
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: Chain Debrief