Explosive Increase in Fake NFT Transactions on the Ethereum Blockchain Raises Concerns in the Cryptocurrency Community
Date: 2023-09-25 Author: Dima Zakharov Categories: BLOCKCHAIN
The surge in fake NFT trades on Ethereum to 50% raises concerns in the cryptocurrency world
In the world of cryptocurrencies, non-fungible tokens (NFTs) have long been synonymous with the digital revolution and opportunities for earning for many. However, recent events on the Ethereum blockchain raise serious questions about the fairness and authenticity of this trade. Over the past day, an impressive increase in fake NFT trades on this platform reached 30%, totaling $4.7 million. This is a staggering figure, considering it constitutes half of all NFT trades executed on this platform in a single day.
Wash Trading: How Does It Work?
The primary question that arises is how "wash trading" achieves such remarkable results. This fraudulent practice creates an illusion of high user activity. By conducting fictitious trades between wallets of the same individual or related parties, it creates the appearance of real trading, while assets and money do not change ownership. Such practices are actively used on cryptocurrency exchanges and trading platforms, as well as by NFT issuers to generate artificial hype around their assets.
NFT Market Specifics: Why Is "Wash Trading" Effective?
It's important to note that this strategy proves to be particularly effective and attractive to fraudsters in the NFT market. For many cryptocurrencies, the use of "wash trading" doesn't yield benefits, especially on decentralized platforms where arbitrage and direct transactions prevail. However, with NFTs, the situation is different. According to DeFiLlama data, on the Blur platform specializing in NFTs, over the past week, more than 40% of all trades turned out to be "wash trades." This is an indicator of a serious problem that needs to be addressed.
Speculation and Manipulation: How to Combat Them?
According to data from the Dragonfly cryptocurrency fund, since July of this year, the share of "wash trades" on the Blur platform accounted for 20% of the total trading volume, reaching an impressive $220 million. This platform incentivized users to increase their trading volumes by promising free tokens as rewards. This scheme attracted many who hoped for easy earnings.
Overall, the explosive increase in fake NFT trades on Ethereum raises serious concerns in the cryptocurrency community. It raises important questions about the need to combat fraud and manipulation in this market. Regulators and market participants must collaborate to develop measures to improve the fairness and authenticity of NFT trades to maintain trust in this innovative cryptocurrency sphere.
