NFT Marketplaces: The Crypto Playgrounds of 2021
In the digital world, NFTs have shown to be just as - if not greater value - than physical art we once deemed “priceless”. Digital artists and graphic designers are jumping to supply the demand whilst suffering from a plague of plagiarism within their community, with shameless scavengers testing the boundary between plagiarism and parody.
Beeple (aka Mike Winklemann) last year famously sold a single NFT collage for an incredible $69,346,250 through a first-of-its-kind auction at Christie’s in March 2021. Put into perspective, the same luxury auctioneer house closed a sale for 22 Surrealist lots that same month for over $3M less. The collection included pieces from Man Ray, Max Ernst, Marcel Duchamp and Salvador Dali.
Since then, 19-year-old FEWOCiOUS (aka Victor Langlois) reportedly crashed Christie’s due to the overwhelming amount of traffic from bidders.
NFT art marketplaces themselves are now digital playgrounds for both the serious crypto collectors and the curious, peeking in from the outside. The pioneering mammoth is OpenSea, the world’s first NFT marketplace, primarily using the Ethereum blockchain. It’s now also the largest, sitting on a company value of $13.3 billion thanks to a recent Series C round of funding.
Evolving the NFT Narrative in 2022
The trailblazing trend of procuring NFTs on the blockchain doesn’t stop at just digital art. NFTs are feeding an entire metaverse of possibilities - quite literally.
Fashion brand Official is already rolling out membership NFTs via its own marketplace. Only members will be able to purchase exclusive physical products with the brand’s $OFCL tokens. High Street fashion outlets could easily follow suit with the addition of offering combination NFTs that make physical purchases appear as in-game items on platforms like DMarket and on users’ personal avatars within the Decentraland metaverse.
Restaurant dining might never be the same after Gary Vaynerchuck - the man notorious for disrupting everything that can possibly be disrupted - opens his upcoming restaurant membership NFT in 2023. Although food and drink within Flyfish Club will be paid with traditional USD and not cryptocurrency, the restaurant offered 2 types of life memberships that sold out within hours and began trading for over 50% of their original value in ETH on OpenSea.io.
Just like physical works of art at an auction house, the value of a non-fungible asset truly depends on what someone is willing to pay for it at that moment. As Anatol Antonovici of CoinDesk aptly puts, NFT Marketplaces “are to NFTs what Amazon or eBay are to goods.” Currently, this only applies to select communities of minters and crypto investors. But their rise in popularity is beginning to set the benchmarks for what could be a future venturing beyond the parameters of decentralized e-commerce.
The Vulnerabilities Stifling Progress
NFTs have innovated the way we view ownership. With their integration, any real-world transaction can be converted into smart contracts and bear digital footprints that let us know who owns what. However, introducing this form of technology to the wider public is bound to present its own series of challenges to overcome and questions to answer. Mainly, “is it safe?”
Ransomware is being hidden in plain sight. The US Treasury Department has estimated that Americans have paid $1.6 billion in ransoms since 2011, with ransomware primarily operating in Russia. In November alone, OFAC seized and held $342.5 million worth of NFTs attributed to ransomware payments or sales from the Russian darknet market Hydra.
Larger players with more sway can use their communities to manipulate the market. Lazy Lions was accused of this back in September 2021 when reports exposed admins obsessively asking NFT holders via Discord to delist their assets in order to raise the floor price of the collection above 3 ETH. Wash trading also thrives within NFT Marketplaces as Nonfungible.com analysts indisputably detected.
As RUSI proves, the classic art heist can also happen within NFT Marketplaces. Without the appropriate measures in place, cybercriminals can hack accounts, lay claim to users’ NFTs, sell on the tokens and attempt to launder the proceeds. The security of both Nifty Gateway and OpenSea went under fire in September 2021 when a number of users experienced account hijackings from third party wallets. Accounts were accessed through either stolen passwords and users not having 2FA switched on at the time. Another instance was when Todd Kramer had $2.3 million worth of NFTs stolen by scammers in January 2022.
When it comes to these NFT thefts, code law remains problematic. Once tokens are in someone else’s wallet, even when getting judicial law enforcement involved, there’s no guarantee issues will get resolved. Not exactly the best way to harbour trust within the wider community.
How Ospree Can Help Expedite Trust
Screening the source of funds before accepting large sums of currency has always been common practice for companies who facilitate the sale and purchases of large assets. Taking steps to ensure tokens exchanged on your platform are not linked to a sanctioned wallet or known criminal serves to protect a business from unitingly clearing a path for money laundering or worse. Ospree performs this service for NFT Marketplaces to ensure they are performing basic due diligence in order to avoid falling afoul of regulators.
Compliance policies and tools build trust, and Ospree's solution allows NFT marketplaces to easily identify suspicious activities and block illegal transactions. To learn more about our NFT Marketplace specific products, reach out to our team for a conversation. We are building the tools for tomorrow's regulatory problems, today.