NFTs are booming. The problem: Their popularity also attracts more and more fraudsters. For example, crypto crime reached a new all-time high last year. The “Crypto Crime Report” by Chainalysis from February 2022 shows this very clearly: In 2021, about 14 billion US dollars were sent to illegal addresses, in 2020 it was still under eight billion. Cybercriminals captured almost twice as much as before, their illegal transactions increased by about 80 percent. The NFT market is also affected, as Chainalysis shows in its latest report. In addition to a turnover of 44 billion US dollars in Ethereum smart contracts, there was also criminal activity here. Especially money laundering and wash trading were popular with the fraudsters, as were asset counterfeits. It is, therefore, necessary for buyers and marketplaces to check whether and which NFT is a really good investment – and whether there is not a scam.
NFTs with excellent future prospects
NFT application possibilities are almost unlimited. There are experts who predict that in ten years all purchases will include NFTs. Others are sure that invoices will also be NFT-based in the future. But there are also those who believe that NFTs are a pure gimmick or too “extravagant” to be really accepted on a broad basis. Since large companies such as Meta, Twitter, and Reddit (where people can buy upvotes via upvote.shop), but also companies such as Mastercard as a renowned payment service provider and partner of bitsCrunch, closely monitor industry trends and further expand their commitment, the boom will probably continue. For example, Mastercard is now also participating in the Metaverse and wants to make NFTs accessible to a broad audience. Every user is given the opportunity to buy NFTs or cryptocurrencies via credit card quickly and easily. This means that in the future there will no longer be a need for a “digital wallet” to process the transactions. It can therefore be assumed that the boom will not only continue but even consolidate Especially with NFT ticketing, NFT games, NFT art, NFT streaming, the scaling of blockchains
and websites or even in the financial sector, there will probably be a lot of movement in the future.
The same goes for elite NFTs. These appeal to a very exclusive clientele and are extremely expensive. The prices here are often several million euros. Protecting consumers: Solutions for better NFT security
Due to the great potential and increasing popularity of NFTs, it is necessary that buyers and users feel safe in the blockchain world and that their transactions and digital assets are protected. To achieve this, the potential for fraud must be effectively contained: reliable protection services and protection options are needed that make the NFT ecosystem more reliable. With regulation so far lagging far behind what innovative techniques and artificial intelligence can do, the industry itself is called upon to act. A modern market needs, for example, modern data-supported analysis models in view of the acute and future challenges.
With regard to crime, the biggest challenge in the NFT sector currently comes from wash trades and money laundering. Wash trading is an illegal method in which a higher market value is represented than it actually exists. An investor buys and sells an NFT several times to his own wallet and finances these transactions himself. This leads to inflated, unfair prices – and thus ultimately harms the honest end buyer. Money laundering is also a problem, especially in the NFT art market. Through subjective pricing, simple resale, and also crypto world pseudonymity, criminals have a lot of leeways to circumvent laws.
So how can buyers be protected – or protect themselves?
Not only legislators and the judiciary are in demand here, but also the NFT marketplaces should act – and they do. For example, the NFT marketplace “Rarible” uses Scour, an AI-based solution from bitsCrunch that detects wash trading and illegal and improper practices on blockchain networks. “Polygon” and “One/Off” rely on analytical dashboards. These enable effective management of NFT collections. Wallet owners also have the opportunity to track their activities, such as sales across multiple marketplaces on all blockchains. With each NFT tracked, they are thus able to better understand their collections and evaluate the net value of their collectibles.
But not only marketplaces now have valuable, useful tools at hand. NFT enthusiasts and collectors should also give more thought to the price and legitimacy of their assets. After all, 20 percent of NFTs are affected by uncontrolled trade, for about 15 percent excessive prices are called – not to mention counterfeits. With Crunch DaVinci, there is now a system for detecting digital counterfeits. With the help of the system, copycats can be found and identified and the investor receives a warning message. Using Liquify, a (fair) market value of NFT assets can be accurately determined using artificial intelligence (AI), metadata, and sales history. As a result, B2B customers, i.e. marketplaces, DAOs and blockchain operators, as well as end users, now have efficient tools in their hands that protect their digital assets and make the blockchain world more secure.