People Start To Sell Their Own NFTs To Artificially Inflate Its Value

A new report from the Decentralized Economic Chamber of Commerce has found that large numbers of people are buying NFTs from themselves to artificially inflate market prices. The use of bots and other third party services to purchase key items is a clear sign that the NFT market is not as healthy or decentralized as it claims. In fact, the findings suggest that only 0.05% of total transactions between players on CryptoKitties were completed by actual humans with unique tokens. That means that the rest came from automated accounts which buy repeatedly until they front-run an item’s price.

This is further proof that the NFT market is not healthy or decentralized

The report found that more than 99% of CryptoKitty transactions had been made by automated accounts, which use bots to buy up items repeatedly until they are no longer available or too expensive for real players to compete with. It adds weight to the claim that most of the activity on blockchain games is speculative and driven by investors rather than users enjoying themselves playing a game. This is likely because buying an NFT token is often seen as an investment in the future sale price of items within their games; it’s less about actually engaging with an ecosystem and more about earning returns based on money spent.

It’s time we end this charade and stop pretending like game items have a real-world value

This is a warning to investors buying into the NFT market. It suggests that tokens might not hold their price, and it is time we put an end to this charade of digital items being worth anything more than the cost required to obtain them.

The report also found of the top 100 most valuable NFTs created by users of dApps on Ethereum. 98% of these were built by amateurs.

“You want to know how things get out of hand fast? Have a bunch of devs who don’t understand games and business model design and economics and promotions and operations and PR all try to channel their inner Willy Wonka at once,” wrote the top moderator, who goes by Kartez on Reddit, in a statement . “And then we wonder why liquidity is low!”

CryptoKitties , which launched as one of Ethereum’s first dApps in 2017, was one of the first games to use non-fungible tokens that are unique, owned by individual users, and securely stored in their wallets.

But while CryptoKitties has sold more than $25 million worth of virtual cats since it launched, the game is not known for its high adoption rates among players or strong liquidity .

The report also found of the top 100 most valuable NFTs created by users of dApps on Ethereum. 98% of these were built by amateurs. 

A report  also showed back in December 2018, how people were creating accounts on CryptoKitties and finding ways to sell their own cats for much higher prices than they bought them – simply by keeping the price high enough so nobody would buy low and outsell them. Many of these individuals had created hundreds of accounts each in order to do this, driving up the cost of buying rare kitties considerably. The situation was quickly resolved when CryptoKitties took action against these bot accounts.

But it seems the same issue is popping up again, this time to do with Cryptopunks – digital collectibles that are similarly limited in number but are cheaper to buy into. Hackernoon reports that ‘Cryptopunks are being sold by their owners for prices many times higher than they were initially purchased’. One example Hackernoon highlights is one of a user with 241 Cryptopunk who has been selling them off at very high prices and using bots to outbid incoming customers. As of today, the bid price on his account is $3,591 working out at around $14 per Punk.

Another way people have been gaming these markets is through spoofing – creating fake bids so as to push up the final price of the Punk. Hackernoon reports that they’ve seen bids of more than $1,000 on some accounts, ten times the price of the Cryptopunk they are selling. 

There’s an ongoing discussion thread about this on Reddit with many speculating as to what CryptoKitties is going to do now they know people are gaming their markets. One user said ‘there has to be a better way to detect bots’ while another pointed out that spoofing seems almost impossible for CryptoKitty to deal with without also stopping legitimate bidders who are just bidding higher than usual.  

“I don’t think it can be stopped short of manually vetting every transaction which will not scale unless you have hundreds of employees doing nothing else but catching spoofers. The point is to set prices so people don’t buy more than they can afford.”