Fraud in the metaverse: what is it and what are the risks?
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What is the metaverse?
The metaverse, also nicknamed web3 or web 3.0, is a term that encompasses the many different ways in which we could communicate socially in the “cyber world.”

From VR headsets to avatars to wearable NFTs, the metaverse development company sees the combination of new technologies like blockchain, virtual reality, and augmented reality brought together in a new environment that is more interactive than the traditional 2D web to which we have traditionally been exposed to.

For some people, the idea is that all of this takes place on a fully decentralized version of the internet where the platforms and applications are developed and owned by the users or gamers themselves.

But when Facebook announced its name change to Meta, skepticism about the new concept began to rise, with senior figures in technology and finance voicing their views on social media, often commenting on the proprietary aspect of web 3.0.

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How do NFTs fit into the metaverse?
If you’re not an avid fan of the cryptocurrency world, it’s fair to say that all the new words can be pretty overwhelming, and non-fungible tokens (NFTs) are definitely something people haven’t bought into yet…

However, with predictions ranging as high as $10–20 million worth of NFTs being sold on the blockchain every week, as well as mainstream news coverage, it’s a phenomenon that’s becoming increasingly difficult to ignore. .

In short, NFTs are a new asset that is tokenized on a certain blockchain (the digital ledger that powers cryptocurrencies) to create a form of digital property that can be bought, sold, and traded on special marketplaces like OpenSea.

How are NFTs used in the metaverse?
The individual code associated with the NFT can be traced back to its owner through the blockchain on which it was built. The token itself can be used in a variety of ways across massive sectors.

*Some use cases include:

  • digital art

  • licenses

  • Ticketing

  • fashion

  • experiences

  • supply chains

  • ID

  • real estate

  • games

The idea is that, within these virtual worlds, users can acquire NFTs to use and exchange them on different platforms.

The interoperability level allows users to craft and create virtual, “meta” versions of themselves across a number of games and platforms.

In 2021, the NFT market passed the $40 billion value point, according to blockchain analytics firm Chainalysis.

What is fraud in the metaverse?
Although the metaverse development solutions is an entirely new concept, cryptocurrency and blockchain have been around long enough that we are aware of many of the issues surrounding it.

The metaverse may have plans to expand beyond the blockchain, but at the center seems to be this technology that fraudsters have unfortunately found incredibly useful to use for money laundering, identity theft and scams.

Due to the lack of KYC verification measures on certain platforms, combined with minimal regulatory measures, fraudsters can try new methods and, to some extent, enjoy risk-free attempts to defraud both companies and users.

What tools can stop fraud in the metaverse?
It’s not going to be easy, it never is. Preventing online fraud is an ongoing battle, and fraudsters no doubt see platforms as full of new opportunities to expose their weaknesses, try new methods, and ultimately defraud companies and individuals.

There are certain things that platforms can do before launch to secure defenses and block fraudsters before they have a chance to test the new frontier. Here are some of them.

minimize cores
Fraudsters don’t improvise their scams; they are calculating criminals who analyze industries by trying out methods with different companies to see what might work and often even sharing information with others.

Information often gets trapped in hubs and for risk and fraud managers this is a nightmare because they need a complete view of business information to be able to spot connections between risky customers.

Lack of communication and transparency between teams can lead to large knowledge gaps that can impact revenue, security, and effective decision-making.

We recommend not only trying different types of solutions that can help create a complete 360-degree view of the business, but also making use of machine learning, which can support data organization and automate easier decisions.

Machine learning combined with a sandbox environment can allow companies to investigate historical data and suggest new rules before applying them.

To ensure complete protection, a transaction must be transparent and allow full access to your risk team or the company they outsource their anti-fraud efforts to.

Having templates and rule sets for each stage of a user’s journey (account opening, login, transactions, etc.) with an easy-to-use graphical user interface can greatly reduce the risk of information loss.

Multi-tiered defenses
Machine learning is just one aspect of a sophisticated stack of risk management products that will help metaversal platforms protect their business and their users.

On top of this there must be other solutions that complement the machine learning algorithm. Often, providers will give an overall risk score that can be used to automatically accept or reject someone who joins, logs in, or makes a transaction.

For some platforms, blackbox AI will be the route of choice, as it handles most decisions without any human intervention. However, for early stage releases, the whitebox AI may be more useful in minimizing the rate of customer insults.

This is because the machine learning whitebox provides full transparency as to why a decision or score has been reached, and therefore the humans reading the results can choose the parts of the analysis that are most relevant to the situation. in question.

Browser and device fingerprints
In short, being able to identify someone’s device settings can help detect emulators, virtual machines, and bots.

Unseen devices should be another indicator of potential risk, although it’s worth noting that certain metaverses will be available on multiple devices, which again can cause a high rate of client insults if relied on alone.