By Elizabeth Howcroft

LONDON (Reuters – A platform that sold Jack Dorsey’s initial tweet NFT for $2.9million has halted all transactions. People were selling tokens that didn’t belong to them. This was a fundamental issue in the rapidly growing digital asset market.

The sales of non-fungible tokens (NFTs) grew to $25 billion by 2021. This left many wondering why so much was being spent on things that don’t exist physically and can be viewed online free.

The ownership of digital files such as images, videos or texts is recorded by NFTs. Anybody can make, or “mint”, a NFT. However, ownership of the token doesn’t usually grant ownership over the item.

There are many reports of frauds, counterfeits, or “wash trading”.

The U.S.-based Cent executed one of the first known million-dollar NFT sales when it sold the former Twitter (NYSE:) CEO’s tweet as an NFT https://www.reuters.com/business/media-telecom/twitter-boss-jack-dorseys-first-tweet-sold-29-million-an-nft-2021-03-22 last March. However, it no longer allows buying or selling as per Cameron Hejazi, the CEO and cofounder of Cent.

Hejazi stated that there is a wide range of activities that are occurring that should not be, like legally.

Hejazi identified three major problems. Hejazi mentioned people who sell unauthorised copies to other NFTs and make NFTs from content that does not belong. Hejazi also highlighted people selling NFTs that resemble security products.

These issues are “rampant”, with people “minting, minting, and minting fake digital assets”.

It kept going. It was almost like we were playing a game with whack-amole. Every ban would result in another ban, and so on.

“MONEY CHASING MOONEY”

These problems could become more apparent as big brands rush to the “metaverse”, also known as Web3. Coca-Cola (NYSE 🙂 and Gucci, a luxury brand are two of the companies that have sold NFTs. YouTube has also stated it is exploring NFT features.

Cent is an NFT platform with just 150,000 users, and revenue in the millions. However, Hejazi stated that fake content and illegal content are a problem throughout the sector.

He stated, “I believe this is a very fundamental problem with Web3.”

OpenSea is the largest NFT marketplace and has a valuation of $13.3 billion. Its latest venture financing round saw it valued at $13.3 million. OpenSea said that more than 80% were fake collections, plagiarized works, spam, or duplicates of NFTs.

OpenSea attempted to limit the amount of NFTs that a user can mint free of charge, but it reversed its decision after a backlash by users. The company stated in a thread on Twitter that they were “working through several solutions” to discourage “bad actors” and support creators.

OpenSea has not yet responded to a Reuters inquiry for comment.

NFT enthusiasts find it appealing that blockchain technology allows for users to make and trade digital assets with no central control.

Hejazi stated that his company is keen to protect content creators and might introduce centralised controls in the short-term to help reopen the market. Then, he may explore decentralised options.

Cent was able to see the NFT market in detail after the Dorsey NFT auction.

We realized that most of this is money-chasing money.