Sales of NFTs, or non-fungible tokens, have skyrocketed to around $25 billion in 2021, leaving many perplexed as to why so much money is being spent on items that don’t physically exist. that anyone can view online for free.
NFTs are cryptographic assets that record ownership of a digital file such as an image, video, or text. Anyone can create, or “mint”, an NFT, and ownership of the token generally does not confer ownership of the underlying object.
Cases of fraud, counterfeiting and “wash trading” have become commonplace.
US company Cent made one of the first known million dollar NFT sales by selling the former Twitter CEO’s tweet as an NFT https://www.reuters.com/business/media-telecom /twitter-boss-jack-dorseys-first-tweet-sold-29-million-year-nft-2021-03-22 last March. But since February 6, it stopped allowing buying and selling, its CEO and co-founder Cameron Hejazi told Reuters.
“There’s a whole range of activity going on that shouldn’t be happening – legally,” Mr Hejazi said.
Hejazi highlighted three main issues: people selling unauthorized copies of other NFTs, people making NFTs from content that doesn’t belong to them, and people selling bundles of NFTs that look like titles. .
He said these issues were “endemic”, with users “hitting and hitting and hitting counterfeit digital assets”.
“It kept happening. We were banning offending accounts, but it was like we were playing a game of cat and mouse… Every time we banned one, another popped up, or three more popped up .”
“MONEY THAT HUNTS MONEY”
These issues are likely to be further highlighted when the big brands join the streets in what is known as the “metaverse”, or Web3. Coca-Cola and luxury brand Gucci are among the companies that have sold NFTs, while YouTube has said it will explore the functionality of NFTs.
While Cent, with 150,000 users and revenues “in the millions”, is a relatively small NFT platform, Hejazi said the problem of fake and illegal content exists across the industry.
“I think this is a fundamental Web3 problem,” he said.
The largest NFT marketplace, OpenSea, valued at $13.3 billion after its latest round, said last month that more than 80% of NFTs offered for free sale on its platform were “plagiarized works, from fake collections and spam”.
OpenSea tried to limit the number of NFTs a user could mint for free, but later reversed that decision following backlash from users, the company said in a Twitter thread, adding that it was “working on a number of solutions” to deter “bad actors” while supporting creators.
OpenSea did not immediately respond to a Reuters request for comment.
For many NFT enthusiasts, the decentralized nature of blockchain technology is attractive, as it allows users to create and trade digital assets without a central authority controlling the activity.
But Mr Hejazi said his company was keen to protect content creators and could introduce centralized controls in the short term to reopen the market, before exploring decentralized solutions.
It was after Dorsey sold NFT that Cent began to get a sense of what was going on in the NFT markets.
“We realized that a lot of this is just money chasing money.”