The platform that sold an NFT of Jack Dorsey’s first tweet for $2.9 million stopped most transactions because people were selling content tokens they didn’t own, its founder said, calling it a “fundamental problem.” in fast-growing digital assets. market.
Sales of NFTs, or non-fungible tokens, skyrocketed to around $25 billion in 2021, leaving many puzzled as to why so much money is being spent on items that don’t physically exist and are free to view online by anyone.
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 does not typically grant ownership of the underlying item.
Reports of scams, fakes, and “wash trades” have become common. US-based Cent executed one of the first known $1 million NFT sales when he sold the former Twitter CEO’s tweet as NFT last March. But as of February 6, it stopped allowing buying and selling, CEO and co-founder Cameron Hejazi told Reuters.
“There’s a spectrum of activity that’s going on that basically shouldn’t be going on, like legally,” Hejazi said. While the Cent marketplace “beta.cent.co” has stopped selling NFTs, the specific part for selling tweet NFTs, which is called “Valuables,” is still active.
Hejazi highlighted three main problems: people selling unauthorized copies of other NFTs, people making NFTs from content they don’t own, and people selling bundles of NFTs that resemble a security.
He said these issues were “rampant”, with users “minting and minting and minting counterfeit digital assets”.
“It kept happening. We banned the offending accounts, but it was like we were playing the mole… Every time we banned one, another one appeared, or three more appeared.”
“Money chasing money”
Such issues may take on greater prominence as major brands join the race toward so-called “metaverse”, or Web3. Coca-Cola (KO.N) and luxury brand Gucci are among the companies that have sold NFTs, while YouTube said it will explore NFT features.
While Cent, with 150,000 users and revenue “in the millions,” is a relatively small NFT platform, Hejazi said the problem of fake and illegal content exists throughout the industry. “I think this is a pretty fundamental problem with Web3,” he said.
The largest NFT marketplace OpenSea, valued at $13.3 billion after its latest venture funding round, said last month that more than 80% of the NFTs minted for free on its platform were “plagiarized works, fake collections and spam”.
OpenSea attempted to limit the number of NFTs a user could mint for free, but later reversed this 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 the creators.
“It is against our policy to sell NFTs using plagiarized content,” an OpenSea spokesperson said. “We work around the clock to ship products, add features, and refine our processes to meet the moment.”
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 Hejazi said his company was interested in protecting content creators and that he might introduce centralized controls as a short-term measure to reopen the market, before exploring decentralized solutions.
It was after the Dorsey NFT sale that Cent started to get a sense of what was going on in the NFT markets. “We realized that a lot of it is just money chasing money.”