LONDON: The platform which sold an NFT of Jack Dorsey's first tweet for $2.9 million 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 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.
The U.S.-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 Feb. 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.
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."
"MONEY CHASING MONEY"
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.
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 after its latest round of venture funding, said last month more than 80% of the NFTs minted for free on its platform were "plagiarised 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 https://www.reuters.com/technology/what-is-metaverse-2021-10-18 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.
"We realized that a lot of it is just money chasing money."
Reuters
Sat Feb 12 2022
Cameron Hejazi, CEO and co-founder of the NFT marketplace Cent reacts in this handout photo in Chicago, Illinois, U.S., July 2021. - Handout via REUTERS
ANALYSIS - What could happen if Trump rejects the US election results
If Trump seems to be losing, the delay could let him claim fraud and undermine confidence in election officials.
Motorcycling - Marquez wins Australian MotoGP after intense battle with Martin
The 31-year-old, third in the championship standings, has now won the Australian MotoGP four times in the premier class.
Prabowo takes up Indonesian presidency, vows to tackle corruption, other issues
Indonesia's Prabowo Subianto on Sunday took over as president of the world's third-largest democracy, vowing to combat internal issues
Nepal's Sherpas deserve more, says teenager who scaled world's 14 tallest peaks
Sherpas are known for climbing skills that make them the backbone of mountain expeditions.
Inside the underground lab in China tasked with solving a physics mystery
China will soon collect neutrino data, aiming to unravel one of particle physics' biggest mysteries.
Millions in Cuba still without power as major outage persists
Millions of Cubans remain without electricity because of a prolonged outage at the main power plants on the island, Anadolu Agency reported.
Surge in Gaza violence increases famine risk, monitor says
About 1.84 million people across the besieged Palestinian enclave are living through high levels of acute food insecurity.
Israel pounds Beirut and Gaza after rockets hit Israel's north
A drone was launched at Prime Minister Benjamin Netanyahu's holiday home.
Elon Musk promises to award $1 mil each day to a signer of his petition
He awarded a $1 million check to an attendee of his event in Pennsylvania aimed at rallying supporters behind Donald Trump.
Former special forces commander Prabowo to take up Indonesian presidency
Indonesia's Prabowo Subianto will take over as president of the world's third-largest democracy after sweeping the country's election with policies like free meals for school children
Father of Malaysian Islamic banking, Abdul Halim Ismail passes away
His dedication and pioneering spirit played an important role in shaping the journey of Bank Islam as well as leaving a lasting impact on the development of Malaysia's Islamic finance industry.
Zayn Malik postpones US tour dates after One Direction bandmate Liam Payne's death
Payne, 31, died on Wednesday after falling from a third-floor hotel room balcony in Buenos Aires, shocking fans of the boy band.
Why voters in a handful of swing states will decide the US presidential election
The contest will almost certainly be decided by just tens of thousands of voters a tiny fraction of the populace in a handful of states.
INSIGHT - Sudan's war risks 'lost generation' of children
A devastating crisis is unfolding in Sudan, where the most vulnerable members of society children are bearing the brunt of the violence.
Who is Prabowo Subianto, incoming president of Indonesia?
A wealthy ex-general with ties to Indonesia's popular outgoing president and its dictatorial past, looks set to be its next leader.
Trump says he would impose tariffs on China if China went into Taiwan
Republican presidential candidate Donald Trump said he would impose additional tariffs on China if China were to "go into Taiwan,"
Iran's supreme leader says Hamas leader's death will not halt 'Axis of Resistance'
The "Axis of Resistance", built up with years of Iranian support, includes Hamas, the Lebanese Hezbollah group, the Houthi movement in Yemen, and various Shi'ite groups in Iraq and Syria.
Putin says Russia willing to seek compromises between Iran and Israel
Russia is ready to help seek compromises between arch-foes Israel and Iran, President Vladimir Putin said on Friday, saying these would be difficult but possible.
What proposals will Russia push at the BRICS summit?
The proposal is also to establish a BRICS reinsurance company to allow uninterrupted shipment of goods and key commodities between members.
Indonesia's free meals plan in the spotlight as Prabowo readies for office
Prabowo calls the programme one of the main drivers of economic growth, eventually set to add an estimated 2.5 million jobs.