Over the past year, the NFT craze has reached spectacular heights. And 2022 will undoubtedly continue to be the year of the famous Non-Fungible Tokens that are causing panic among young investors and geeks by combining cryptocurrencies and blockchain. A madness favored by the growing interest in the world of art, sports and the media. But beyond the millionaire sales for these digital works of art, there are also crypto scams, with the aim of financially taking advantage of this new technology.
In theory, blockchain technology was supposed to make it easier for digital artists to sell tokens, offering buyers a permanent record of ownership linked to the work. But no matter which way you look at it, the NFT ecosystem right now is in chaos.
A disaster. To illustrate what we are talking about, just look at the latest movements of OpenSea, the most popular market for NFT. Last week, it suddenly capped the number of times users could generate NFTs for free on its platform because more than 80% of those created with the tool “were plagiarized works, fake collections and spam”.
However, we’ve recently seen misuse of this feature increase exponentially.
Over 80% of the items created with this tool were plagiarized works, fake collections, and spam.— OpenSea (@opensea) January 27, 2022
NFT scams are big business. They include everything from impersonating an artist and making fake offers on OpenSea to typos and insider trading. Even OpenSea product manager Nate Chastain was found guilty of trading NFT using inside information. The scams of phishing they are also growing and prominent digital artists have sounded the alarm about how easy it is to execute fakes.
downplaying the importance. The same organization that marked that 80%, however, revoked the limitation a few days ago after protests from NFT project developers. In a recent article in The Guardian, which delves into precisely those platform struggles against fraud and theft, OpenSea tried to downplay the seriousness of the problem, stating that it takes action against 3,500 NFT collections every week (that’s barely the 0.175% of its 2 million products). Thus, when almost all the NFT collections created for free on the platform are spam or stolen jobs, one wonders if OpenSea is now stuck in a quagmire.
fraud alert. For artists on DeviantArt, which hosts more than 500 million pieces of digital art, the problem has become so serious that the platform implemented a fraud alert system that scans the Ethereum blockchain for NFT copies of works. of art. The platform has already issued 80,000 alerts since August, doubling by the end of the year and increasing by 300% in early 2022.
Nobody is saved. OpenSea’s competitor LooksRare is plagued with another serious problem: wash trading, an illegal type of market manipulation that inflates the volume and value of trade when buying and selling an asset for oneself or among an organized group.
Scams and hacks. The foam of enthusiasm combined with the weak infrastructure of the market (most projects are run from Discord, a chat platform for video games) has also led to a spectacular number of scams and hacks targeting investors. NFTs are used to raise money for dodgy projects that end in dismal failures or a sudden “rug pull” where anonymous founders take everyone’s money.
The Evolved Apes NFT project raised millions to help develop a fighting game and break even. The developer, “Evil Ape”, disappeared with 2.5 million euros. The creators of Big Daddy Ape Club stole 1.2 million in tokens on Solana. Blockverse, an unofficial Minecraft NFT project, sold 10,000 NFTs shortly before its creators disappeared with over a million euros.
Only a few will make gold. These are not isolated incidents. There’s the case of Vignesh Sundaresan, a collector known as “MetaKovan” who bought the 60 million Beeple NFT that started one of the first hype cycles around digital assets. We tell it in Magnet. MetaKovan was actually an investor in Metapurse, a Singapore-based firm that earlier this year listed its mission as “democratizing access to and ownership of works of art.”
Metapurse purchased 20 Beeple NFTs, four virtual museums, a soundtrack, and consolidated it all into an “NFT bundle” offering fractional ownership through 10 million B20 tokens. It turns out that Beeple is a trading partner of MetaKovan and owns 2% of all B20 tokens, while MetaKovan owns another 59%. Something doesn’t smell quite right. For profit, yes. And more so when 10% of merchants account for almost 90% of all transactions.
Feet on the ground. But the domain is expanding at a breakneck pace. Bloomberg estimated a few weeks ago that the market will have a value of more than 40,000 million euros in 2022. And the main problem is not the size of the theft or fraud, although these are worrying, because for now they do not represent a risk for no one outside of the crypto community.
However, what is worrying and could lead to the development of systemic problems is that no scandal, hack, theft or scam is big enough to temper the insistence that NFTs represent the future of digital assets and their ownership. In any case, they are being used to propose categories of objects, goods and services that are increasingly nebulous, abstract and difficult to manage.
Image: Pixabay
