Imperfect Crimes — The Manipulations of NFTs and How to Stop Them
While criminal enterprises may seem extensive and expensive on the silver screen, real-life crimes are more efficient and secretive. Individuals looking to make a quick profit find increasingly innovative ways to exploit modern technology and the law to find ways to misuse them both.
Take, for example, the world of cryptocurrency and NFTs that has sprung up in recent years. Providing a dynamic, ever-evolving community for the creation, sale, and purchase of digital assets (including NFTs), blockchain technology has opened up a new frontier for digital trading, the likes of which the world has never seen before.
However, with each new technological innovation comes a group of people who aim to exploit it in one way or another for their own selfish gains. The use of bots and several other techniques have threatened the security of NFTs in digital markets over the past few months, making it very clear that NFT manipulations are possible to those looking for a quick profit. However, it is equally possible to secure them against such manipulations.
Read on to learn how NFTs are being manipulated today and what you can do to safeguard your collection against it!
Manipulating NFTs: What Can Fraudsters Do?
It is a relatively straightforward method of NFT market manipulation, involving the repeated sale and transfer of the asset between multiple wallets with the intent of generating false demand for it, thereby inflating its value.
The Bored Apes Yacht Club (BAYC) collection is an excellent example of this, in which tokens #BAYC50 and #BAYC7392 were traded between the same buyer and seller multiple times, increasing their respective prices to inflate the value of the asset.
Top Selling Creator Pattern:
The Top Selling Creator Pattern is another method fraudsters use to generate false demand for an NFT. A creator sells an NFT to a buyer, who then returns it to the seller for free. This allows the seller to sell the asset to another party at a higher inflated price. The inflation, in this case, is the result of a higher sales volume, given that the NFT in question only sold once.
Layer 2 add-ons:
In addition to creating false demand and NFTs price manipulation, adding Layer 2 add-ons could compromise their security. It is an innovative way of bypassing standard security protocols across platforms. While the original platforms remain secure and adhere to specific security standards, Layer-2 add-ons are not as safe and carry the added risk of compromising the entire blockchain as a result!
NFTs can also be used for manipulating money in the real world through the age-old practice of money laundering. Using NFTs, one can purchase digital currencies with cash. It is especially true for NFTs in the art space, where variations in pricing could make them highly susceptible to these kinds of practices! Blockchain platforms’ added security and rapid adoption rates among modern investors make it a perfect operating ground for money laundering.
Additionally, NFTs are manipulated by falsifying their buy and sell orders using bots. When bots place such orders at scale, with their actual completion subject to the manipulator’s requirements, assigning a real price to an NFT and gauging its original value effectively can be challenging. NFTs present a unique challenge in this regard, as their price is generally based on what a buyer is willing to pay for their ownership. It can make estimating the value of an NFT a challenge in the event of even one vulnerable collector who falls prey to manipulations through NFT bidding bots or other techniques.
One of the most critical applications of NFT bots is financial spoofing. By placing large-scale buy and sell orders that are not likely to be completed in the long term, NFT bots can create an impression of high demand. It may push many users to fall prey to, drastically increasing its original value and generating a tidy profit for the original manipulator! When combined with the Tornado Effect, in which an NFT is bounced between multiple wallets, likely owned by the same entity, these manipulations can be hard for the average collector to work around, making the buying and selling of NFTs seem like a risky venture.
What Can You Do To Identify Potential Manipulations of NFTs?
There are several steps you, as a collector, can take to identify any potential NFT manipulations. One is to check the Smart Contract of an NFT on a platform like OpenSea to verify its legitimacy and transaction history. It is easy considering the decentralized, public nature of blockchains.
The creators behind the NFT and its utility can often help determine its price and value to a collector. NFTs that are part of decentralized platforms and limited collections are often more valuable than others. This primary research can often help a collector avoid NFT scams or NFT manipulations using bots when scouring the digital markets for their next asset.
While such steps can protect any collector to a certain extent, they alone are not enough to protect against the use of increasingly innovative scams and manipulative techniques in digital markets. In addition to other approaches, you need a compelling set of tools to perform these checks independently. It is an absolute need for any collector who has limited time and resources to devote towards determining the legitimacy of their NFTs.
For instance, the UnleashNFT platform from bitsCrunch offers a suite of solutions. The tools can precisely perform functions such as:
- Verify the authenticity of trades using Scour
- Fair price estimations using Liquify
- Identify and spoof various NFT arts using Crunch DaVinci, and
It can allow you to make an informed decision about your NFT purchases and enjoy your collection in peace!
The digital world may be a scary place, but it is a world of opportunities for you to explore with the right digital companions by your side!
bitsCrunch is the Guardian of the NFT ecosystem. It offers buyers and sellers potential tools like Scour, Crunch DaVinci, and Liquify, to identify digital wash trading, asset forgery, the true value of assets, and respectively. Yes, bitsCrunch’s securing services can be integrated in any of the NFT marketplaces with a sense of protecting the authenticity and provenance of the artists and the NFT assets. Also, bitsCrunch keeps you posted on all the latest NFT trends and updates on Unleash NFTs — Launching Soon.
Are you interested in knowing more about the tools or NFT market cap? Get in touch right away.
- NFT Information Center (Unleash NFTs), A real-time NFT analytics dashboard and portfolio tracker.
- AI-Enhanced Safety Feature (SCOUR), An AI agent that acts as a watchdog to flag spoofing transactions that manipulates both volume and price of the assets in the NFT ecosystem.
- Fair Price value estimation for an Asset(Liquify), A fair value estimation & analytics for Digital Assets (NFTs) using AI to empower the community to embrace and value their assets in real-time.
- Digital Asset Forgery Detection System (Crunch Davinci), An AI model that flags forgeries, copycats and bootleg digital art contents thereby protecting the artists and their creations.