The NFT space consists of several wash traders and related activities, but these are not making money, according to Chainanalysis. NFTs are a hot commodity in the crypto world and have taken markets by storm. Because of NFTs, many people and institutions are investing in crypto. Per the information in a Chainanalysis NFT Market Report, about $44.2 billion in NFT was channeled through Ethereum and smart contracts.
This is an impressive figure but not without problems. There are several scams and fraudulent schemes on a daily basis in the NFT arena. Recently, major marketplace OpenSea shared that its free tool for minting has been misused and prone to further misuses. OpenSea also said that 80% of the non-fungible tokens created with their tool were fake or plagiarized. Not just that, in a recent Chainanalysis blogpost, it was revealed that the vulnerable NFT market is experiencing a lot of money laundering activity.
Wash trading refers to the practice in which a seller buys and sells. This paints a misleading picture of the value and the liquidity of the asset being traded. This is no surprise that wash trading is a big concern for the NFT sector. Even the LooksRare NFT platform is experiencing a lot of wash trading. New solutions are being developed and deployed to detect and deter such activity, according to Chainanalysis. The company has created a tool that is capable of detecting people who fund their crypto wallets with proceeds from misleading trade transactions.
Although wash trading is risky and causes losses for many people, this activity is here to stay. It is easy to do with an ETH wallet. It has become essential for NFT platforms to enforce programs to ensure that users are safe from such fraud.
