February 15, 2022
Nearly $30 billion was spent on NFTs last year, according to analytics firm Chainalysis, and one of the companies that’s benefitted from the boom is OpenSea. The firm has a $13 billion valuation thanks to its well-timed entry into the hot new sector, becoming one of the biggest NFT marketplaces in the world. With success has come headaches, as scam artists began to target NFTs and the people who buy and sell them. Now the four-year-old New York firm and other marketplaces are struggling to find a balance between boomtown and lockdown.
As with cryptocurrencies, NFTs (non-fungible tokens) exist via transactions recorded on blockchain — a decentralized, largely unregulated world that primarily exists beyond the purview of government control or banking rules. Yet those same trailblazers drawn to NFTs are becoming quite conventional when things go wrong, looking to OpenSea “to enforce rules and compensate people who are ripped off — exactly the kind of role that centralized institutions have traditionally played,” reports The Wall Street Journal.
Some of OpenSea’s trouble “stems from the tension between NFTs’ decentralized nature and OpenSea’s attempt to create a central market,” WSJ writes, noting that “In practice, it is possible for anyone to make an NFT of any image or video, even if he or she doesn’t own the copyright for the image.
OpenSea, and many NFT buyers and sellers, consider such an NFT stolen, or counterfeit, since the creator of the digital item doesn’t own the underlying art. But government policies haven’t caught up to this technology, so it isn’t entirely clear what legal consequences there might be for someone who creates an NFT of someone else’s art.”
OpenSea is the market-facing name used by owner/operator Ozone Networks, which is “backed by high-profile venture-capital firms including Andreessen Horowitz and Founders Fund,” which has “vacillated over how to run its platform since its popularity exploded last year,” WSJ reports, explaining that in its earliest day, the platform “relied on an approval process to combat abuse. But it rolled back those requirements last March, just days after an NFT of an image by an artist called Beeple sold for $69 million via Christie’s, accelerating a surge in trading.”
Because it allows people to create an unlimited number of NFTs through their accounts (taking 2.5 percent of each sale) unauthorized work has proliferated, resulting in unauthorized sales.
In December, Wix subsidiary DeviantArt “found about 25,000 digital images that had been turned into NFTs and sold without the permission of the original artists, many of them on OpenSea,” a three-fold increase from the prior month, says WSJ, noting “thousands of images a day have been turned into NFTs by people who don’t have permission from the creators of the images, so many that DeviantArt suspects they are being created by bots.”
Cent, the platform best-known for helping Jack Dorsey get $2.9 million at auction for an NFT of his first tweet, on February 6 temporarily halted “most transactions to address ‘rampant’ sales of fake and plagiarized tokens,” Engadget wrote last week, quoting a Reuters interview in which Cent co-founder and CEO Cameron Hejazi discussed NFT crime across the Internet and said trying to shut them down was like playing whack-a-mole: “Every time we would ban one, another one would come up, or three more would come up.”
NFT Art Is Transforming the Market and Setting New Records (Video), The Wall Street Journal, 2/11/22