Now we have a sense of how severe the wash trading has become since LooksRare launched on January 10.
NFT analytics firm CryptoSlam reported today that it has identified more than $8.3 billion worth of wash trading from LooksRare, making up the vast majority of trading volume on the marketplace to date.
Most of the wash trading comes from royalty-free collections, which means that sellers don’t have to pay the creators a secondary sale fee. Larva Labs’ Meebits has seen the most wash trading at $4.4 billion, with Terraforms at $2.9 billion, Loot at $705 million, and CryptoPhunks (a CryptoPunks derivative project) at $251 million, plus $62 million from other projects.
According to public blockchain data collected by Dune Analytics, LooksRare has amassed more than $9.5 billion in total Ethereum trading volume since its launch.
Treasury Department study assesses that, depending on the nature and characteristics of NFTs and related platforms, the Financial Action Task Force (FATF) may consider these platforms as virtual asset service providers (VASPs) and may be subject to affiliation It is regulated by the Financial Crimes Enforcement Agency (FinCEN) of the Treasury Department.
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To make the transaction, a digital wallet is also required, though not just any wallet. Not all wallets can support NFTs, so ensure you find one that does. Once set up, it needs to be filled with cryptocurrency.
At that point, any NFT that you have the money for can be bought using the wallet. The sale will then be permanently logged on the blockchain and the NFT will appear in your wallet once the sale is verified.
Investing In The NFT Industry
If you don’t want to get involved directly with NFT trading, but wish to invest in the industry, then trading NFT marketplace tokens or cryptocurrencies is the way to go. As a marketplace grows, the value of the tokens used to make transactions rises.
8b ethereum nft wash tradingview
Meanwhile, the marketplace’s previous Polygon record was set in December with $76 million, as NFT trading on the scaling solution has steadily increased in recent months.
On the Ethereum front, OpenSea had its best single day in months yesterday, January 31, with $233 million worth of NFT trading. It’s one of four single days above the $200 million mark for Ethereum trading in January for the marketplace.
OpenSea initiallyappeared to be on trackfor an even more sizable finish. However, the Dune Analytics dashboard created by Richard Chen, general partner at venture fund 1confirmation, was double-counting transactions sent by newer aggregators likeGenieand Gem.
In fact, LooksRareretweeted a threadfrom an investor that called such tactics “genius.” LooksRare did not respond toDecrypt’s earlier requests for comment.
CryptoSlam—which recentlyraised $9 million from Mark Cubanand others—removed wash trading datafrom its total sales metrics last week, and has implemented a tracker for each NFT collection that shows the total amount of wash trading to date. Today, the companyshared an extensive postabout why it made the moves and how it has approached the situation.
Randy Wasinger, CryptoSlam’s founder and CEO, toldDecryptvia email that the firm currently uses both automatic and manual methods to detect wash trading in a multi-step process.
So as our industry considers how to monetize digital art, we should also consider how to make sure that these systems are safe, secure, and have anti-money laundering (AML) mechanisms built-in.
In this article, we look at two forms of illicit activity we’ve observed with NFTs:
- Wash trading to artificially increase the value of NFTs
- Money laundering through the purchase of NFTs
Let’s dive in.
Some NFT sellers are making a killing with wash trading
Wash trading, meaning executing a transaction in which the seller is on both sides of the trade in order to paint a misleading picture of an asset’s value and liquidity, is another area of concern for NFTs. Wash trading has historically been a concern withcryptocurrency exchangesattempting to make their trading volumes appear greater than they are.
The “most prolifiic NFT wash trader” that the study identified made 830 trades between their accounts but profited only $8,383.
Because smart NFT traders who wanted to hide their activity would likely use different Ethereum wallets for each transaction, the Chainalysis findings are likely only a small fraction of how many NFTs are wash traded, said Kimberly Grauer, director of research at Chainalysis.
“What this data set looks at is, of the individuals who were selling NFTs at scale, how many of them are actually just funding their own wallets?” she said.
“We built a very, very, very conservative estimate of what might be NFT-related wash trading,” she added.
Jarod Koopman, the director of cybercrime investigations for the Internal Revenue Service, which has increasingly cracked down on fraud cases involving cryptocurrency, said while the U.S.
As some of you might remember, it was originally designed to be a currency that could be used to buy actual things! And although it fails to meet all the criteria that would make it a currency, it does have one thing in common with it: its price is underpinned by sheer faith. The difference being that with fiat currencies, that faith is effectively placed in the governments of the nation states who issue them, whereas for bitcoin, the faith is placed in . . . the hope that other people will keep having the faith. But even if it weren’t, the number multiplying the “price” is just wrong too:although 18.6m bitcoins have indeed been mined, far fewer can actually be said to be “in circulation” in any meaningful way.
For a start, it is estimated that about 20 per cent of bitcoins have been lost in various ways, never to be recovered.
But it has so far not profited from wash trades, which have to cost gas fees for such on-chain wash trades.
Profitability of wash traders according to Chainalysis
According to the analysis data, the agency confirmed that 262 address users are habitual NFT wash traders, of which 152 did not make a profit, while the other 110 made a profit of nearly $8.9 million through wash trading.
“NFT wash trading exists in an ambiguous legal area.” Chainalysis noted that while wash trading is prohibited in traditional securities and futures markets, wash trading involving NFTs has not yet been the subject of enforcement actions.
The quarter saw a substantial increase, surpassing the $1 million worth of cryptocurrencies, which grew again in the fourth quarter, peaking at nearly $1.4 million.”
The analyst firm pointed out that in the third and fourth quarters of 2021, the vast majority of illicit crypto assets involving NFTs came from scam-related addresses that purchased NFTs in cryptocurrencies, in addition to a large amount of stolen funds being stolen. Sent to the NFT marketplace, where several different types of cybercriminal addresses interact with the NFT marketplace, including malware operators, scammers, and Chatex, a cryptocurrency trader sanctioned by the U.S.
In such cases, an individual would be spending way too much money for something that was deemed worthless before the wash trading.
Unfortunately, at this time, the only solution for people to avoid becoming victims of wash trading is through authentication of the transactions registered on the blockchain. This is a long process that most people will definitely not do, as the majority do not have the bandwidth or experience to take those extra steps.
However, we are seeing projects that aim to aggregate and organize data in a much more seamless fashion, which will hopefully filter out all the malicious activities.
Ludo is a metasearch engine and data aggregator that aims to solve this problem through data aggregation and validation. This way, people are much more protected from malicious activities like wash trading.
The report found the seller sold and bought the same NFT from a marketplace with different addresses, and also that the original seller sent currency to a buyer just before the NFT was purchased from the marketplace. This particular seller, however, has so far failed to profit from wash trading due to money spent on gas fees during the transactions.
Chainalysis identified 262 users who have sold an NFT to a self-financed address more than 25 times – a level it believed reflected users who are “habitual wash traders”. Of those, 110 made a profit.
The overall net profit – sales of NFTs less gas fees – made by those users on Ethereum or Wrapped Ethereum in 2021 was $US8.9 million.