The NFT market that sold the first tweet is closed due to fakes and wash trading

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The platform that sold an NFT of Jack Dorsey’s first tweet for $2.9 million (approximately Rs. 22 crore) has halted transactions because people were selling content tokens that didn’t belong to them, its founder said, calling this a “fundamental problem” in the fast-growing digital asset market. Sales of NFTs, or non-fungible tokens, soared to around $25 billion (approximately Rs. 1,89,000 crore) in 2021, leaving many puzzled as to why so much money is spent on items that do not physically exist. and that anyone can watch online for free.

NFT are crypto 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 confer 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 sold out 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, legally,” Hejazi said.

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 would ban offending accounts, but it was like we were playing a game of whack-a-mole… Every time we banned one, another one would come up, or three more would come up.”

“MONEY CHASING MONEY”

Such issues may take on greater prominence as major brands join the race toward so-called “metaverse“, or Web3. Coca-Cola and luxury brand Gucci are among the companies that have sold NFTs, while Youtube said it will explore the features of NFT.

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 market, Open seavalued at $13.3 billion (approximately Rs. 1,00,600 crore) 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.

OpenSea did not immediately respond to a request for comment from Reuters.

For many NFT enthusiasts, the decentralized nature of block chain The 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 could 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.”
© Thomson Reuters 2021


Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain at Orbitalthe Gadgets 360 podcast. Orbital is available at Apple Podcasts, Google Podcasts, Spotify, amazon music and wherever you get your podcasts.

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