NFT Marketplace Cent That Sold Jack Dorsey’s First Tweet Shutters Operation Due to Fakes, Wash-Trading

NFT, or non-fungible tokens, sales soared to around $25 billion (roughly Rs. 1,89,000 crore) in 2021.

By Reuters | Updated: 12 February 2022 11:07 IST

Photo Credit: Unsplash/ Pawel Czerwinski

NFTs are crypto assets that record the ownership of a digital file such as an image, video or text

Highlights

NFT marketplace Cent is halting transactions due to plagiarism
Anyone can create, or "mint" an NFT on marketplaces like Cent
NFT scams, counterfeits and "wash trading" have become commonplace

The platform which sold an NFT of Jack Dorsey's first tweet for $2.9 million (roughly Rs. 22 crore) has halted transactions because people were selling tokens of content that did not belong to them, its founder said, calling this a "fundamental problem" in the fast-growing digital assets market. Sales of NFTs, or non-fungible tokens, soared to around $25 billion (roughly Rs. 1,89,000 crore) in 2021, leaving many baffled as to why so much money is being spent on items that do not physically exist and which anyone can view online for free.

NFTs are crypto assets that record the ownership of a digital file such as an image, video or text. Anyone can create, or "mint", an NFT, and ownership of the token does not usually confer ownership of the underlying item.

Reports of scams, counterfeits and "wash trading" have become commonplace.

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The US-based Cent executed one of the first known million-dollar NFT sales when it sold the former Twitter CEO's tweet as an NFT last March. But as of February 6, it has stopped allowing buying and selling, CEO and co-founder Cameron Hejazi told Reuters.

"There's a spectrum of activity that is happening that basically shouldn't be happening - like, legally" Hejazi said.

Hejazi highlighted three main problems: people selling unauthorised copies of other NFTs, people making NFTs of content which does not belong to them, and people selling sets of NFTs which resemble a security.

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He said these issues were "rampant", with users "minting and minting and minting counterfeit digital assets".

"It kept happening. We would ban offending accounts, but it was like we're playing a game of whack-a-mole... Every time we would ban one, another one would come up, or three more would come up."

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Such problems may come into greater focus as major brands join the rush towards the so-called "metaverse", or Web3. Coca-Cola and luxury brand Gucci are among companies to have sold NFTs, while YouTube said it will explore NFT features.

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While Cent, with 150,000 users and revenue "in the millions", is a relatively small NFT platform, Hejazi said the issue of fake and illegal content exists across the industry.

"I think this is a pretty fundamental problem with Web3," he said.

The biggest NFT marketplace, OpenSea, valued at $13.3 billion (roughly Rs. 1,00,600 crore) after its latest round of venture funding, said last month more than 80% of the NFTs minted for free on its platform were "plagiarized works, fake collections and spam."

OpenSea tried limiting the number of NFTs a user could mint for free, but then reversed this decision following a backlash from users, the company said in a Twitter thread, adding that it was "working through a number of solutions" to deter "bad actors" while supporting creators.

OpenSea did not immediately respond to a Reuters' request for comment.

To many NFT-enthusiasts, the decentralised nature of blockchain technology is appealing, allowing users to create and trade digital assets without a central authority controlling the activity.

But Hejazi said his company was keen on protecting content-creators, and may introduce centralised controls as a short-term measure in order to re-open the marketplace, before exploring decentralised solutions.

It was after the Dorsey NFT sale that Cent started to get a sense of what was going on in NFT markets.

Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.

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