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NFTs, the millennial innovation in the crypto ecosystem, found its true utility last year. Several pixelated arts have been sold for millions of dollars. Besides it is also observed that the interest for the term has also witnessed notable attention. Meanwhile, recently Chainalysis, the blockchain analysis firm, observed that the popularity of Non-Fungible Tokens have skyrocketed over the last year. However, the analysis firm also published a report that notes a minimum of $44.2 billion worth of cryptocurrency sent to Ether smart contracts associated with NFT marketplaces and collections last year.
Number of wash trading grows in the NFTs ecosystem
Wash trading are such transactions in which a seller is on both sides of the trade in order to paint a misleading picture of an asset’s value and liquidity. According to some reports we have observed that such kind of trading has become a major concern within the ecosystem.
According to a recent data form LooksRare NFT marketplace, we have found that the platform to be very prone to wash trading. Indeed, such trading types have become very common across NFTs marketplaces.
According to Kim Grauer, head of research at Chainalysis, by using their software we can note when a person buys a token using funds from the same person who sold that very token.
How can users be protected?
Wash trading NFTs have proven to be risky and unprofitable for most. Many experts believe that such activities will become more common as the crypto collectibles ecosystem continues to grow.
According to Alex Salnikov, the co-founder and head of product at NFT marketplace Rarible,in the broader NFT market they have observed that the trends there to be a pattern if users wash trading on platforms that offer incentive rewards for carrying such operations.
LooksRare decided to provide rewards in the form of the platform’s native token. U;timately, the rewards will be added to the amount of wash trading on the marketplace.
Should Non-Fungible Tokens be regulated?
As the ecosystem gets more mainstream, we have observed that measures and discussions around the NFTs and compliance are coming to fruition. According to Joseph Weinberg, co-founder of Shyft Network, major NFT marketplaces like OpenSea that accept funds will inevitably become regulated as VASPs, as these platforms are in the business of matchmaking to counterparties and they accept fees.
