NFT: OpenSea worth 12 billion, counterfeiting out of control

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The NFT buying and selling platform OpenSea announces one $ 300 million collectionwhich brings its total valuation to approx $ 13.3 billion, or about $ 12 billion.

At the same time, the dissatisfaction is very real with many artists who are harmed by forgery of their works, used without their consent to create NFTs, especially on OpenSea.

Before describing these points below, let us take the opportunity to return to the concept of NFT, which is still very vague to many people.

But by the way, what is an NFT?

NFTs (“non-fungible tokens”, which can be translated to “non-fungable tokens” in French) are, to put it simply, digital certificates associated with arbitrary objects, such as a jpeg image, a video file.

Without going into too much technical detail, these certificates indicate an owner and cannot be duplicated. In other words, even if a digital work associated with an NFT can be registered with a simple right-click, the certificate is unique. Behind the scenes, this has been made possible by the use of the famous blockchain technology (most of the time, the blockchain of the Ethereum cryptocurrency) and the system of smart contracts.

Much like a notary’s deed when selling a house, the blockchain is intended to be tamper-proof (the deed cannot be fraudulently altered or copied), is publicly available (we can therefore know which account has bought / sold an NFT, even if this does not imply knowing the identity of the person or entity holding the account).

NFT’s interest is therefore to recreate a rarity that had disappeared with the advent of digital, to create unique works in the same way as a painted picture or collection card. NFTs can be bought and sold when their value changes, just like in the physical art market.
They can also incorporate different clauses: for example, a percentage assigned to the original creator at each resale.

The applications can be particularly broad, but very concisely we can therefore see NFTs as a system of ownership certificates that could not be photocopied or tampered with.

Reality is obviously more complex than these few lines of explanation, and we have deliberately simplified things. But this vision should allow you to understand the main issues for the rest of the article.

Headline and above image: The Bored Apes Yacht Club, a series of NFTs sold individually on the OpenSea platform. Like any NFT, a simple screen image can duplicate the image, but not the associated NFT.

What effect?

NFTs have seen a meteoric rise in recent months. If their principle can have very different applications (skins in a video game, virtual plots of land in a virtual reality world, etc.), in practice it is the virtual art market that is exploding and has experienced a strong media visibility. . The sale of multi-million dollar NFTs has helped the movement, which is getting the appearance of a speculative bubble.
At this stage, the NFT market as a whole is estimated at approx $ 41 billion in 2021. A colossal number considering that “classical” art is about 50 billion, as Le Monde reminds us.

At the same time, artists see it as a new outlet for their works.

This technology is a strong trend notwithstanding many reviews : for example, the ecological impact related to the use of blockchain, or the fact that if blockchain manages the traceability of ownership of NFT, it does not ensure that the creator of NFT had the necessary rights in the image.
The non-centralized side of NFTs also has its limitations: if a third party gets caught in your NFTs after a scam or phishing, blockchain lists them as the legitimate owner.
NFTs can also facilitate the artificial inflating of the value of a work (a person can, by using multiple cryptocurrency wallets, repurchase an NFT repeatedly and at rising prices to make interest before reselling the NFT to a third party), or even money laundering. Note, however, that these reproaches also exist within traditional art: they are simply technically simplified here.

In a context that therefore combines criticism and enthusiasm, rejection and massive investment, some buy / sell platforms have a valuation that skyrockets. Which brings us to OpenSea.

OpenSea raises $ 300 million

The OpenSea platform announces one new collection : $ 300 million, bringing the group’s financial value to $ 13.3 billion, or about $ 12 billion.

OpenSea explains that this sum will be invested along four axes:

  • “accelerate product development”, especially thanks to the recruitment of Shiva Rajaraman, who will become Vice-President Product. He was part of the Meta group (formerly Facebook), also went to Youtube, Spotify, WeWork.
    At the same time, OpenSea intends to facilitate access for new people to the universe of NFTs by simplifying the associated workflows. The group also discusses support from several blockchains, assistance in discovering / managing / promoting NFTs, presentation and analysis tools.
  • “significantly improve customer support and customer safety”: This concerns in particular the stability and security aspects of the site. OpenSea says it has a team of 60 people for customer support and security, a number that is expected to double by the end of 2022.
    These improvements will be crucial in resolving counterfeiting issues, which we will discuss in the next section, but also cases of phishing / fraud with the intent to steal NFTs.
  • “investing in the NFT and web3 community”: For example, a scholarship program specifically designed for developers and creatives is being set up.
  • “enlarge the OpenSea team”: the volume of transactions at OpenSea has been multiplied by 600 by 2021, promotes the platform, and therefore it is necessary to recruit accordingly.

Counterfeiting: a nuisance for artists

If OpenSea is talking about expanding its support and security team, it’s not for nothing: commonly known, the platform handles certain problems relatively poorly, such as counterfeiting.

An NFT is admittedly a deed, but does not make it possible to ensure that the original owner actually had the right to use the associated digital work.
To return to the comparison with trading cards, a painting or a house, we find ourselves in the situation of people seeking to sell fake cards, a copy of a painting or even houses that they do not own.

The problem here is exacerbated by technology: some narratives mass mail artists’ works (concept art, fan art) in an automated wayothers modify existing works slightly before posting.
We have even discovered cases of this type: for example, an account that broadcast hundreds of concept art by digital artists, without bothering to invent it (presence of brand logos like The Witcher, SEGA, very different, which clearly shows that they were different artists). We reported the problem to OpenSea, which removed the works from its website.
Another situation that raises questions: some accounts post pictures of celebrities en masse, a priori without having obtained the rights, and by simply applying predefined filters.
Given the amount of NFT in question, in both cases it is most likely bots.

The NFTs of a suspicious OpenSea account.

The problem with counterfeiting is that the community of artists DeviantArt offers its users an automatic detection system that alerts them if an NFT appears to be taking over one of their works, which then allows them to contact the platforms to assert their rights.

But this approach has limitations: some artists point out on social networks that they face an avalanche of NFTs using their creations, suddenly imposing on them a daily job of sending messages to OpenSea support:

Fight against counterfeiting: inadequate solutions

Faced with this nuisance, the Twitter account NFT thefts specializes in collecting cases of plagiarism, fraud and other NFT-related issues. It also offers some leads to injured artists. This Twitter feed centered on OpenSea will also be useful.

The proposed solutions aim first and foremost to act as efficiently as possible, without having to seek the official help, by referring directly to the form and by proposing model messages to send all the necessary information the first time.
We may also notice initiatives like SnifflesNFT that propose to automate the detection of counterfeits, like DeviantArt, but go ahead by also automating the sending of withdrawal requests. Currently free in beta, it will eventually switch to a paid model.
Finally, there are (for example here) guidelines for filing a DMCA (U.S. Copyright Law) complaint with Google, which hosts the OpenSea images. Please note that in the case of a DMCA, certain information may be transferred to the person who submitted the forgery.

Also note, as this article on Cryptoast points out, that these tracks do not solve everything: the very principle of blockchain means that an NFT cannot be completely deleted, which prevents the classic measure used in case of forgery. The author, Benjamin Allouch, former lawyer, comes to ask himself: “Should we then consider that compensation to the unsurprised author is enough? Only the future will (eventually) tell us that ”.
The first lawsuits will no doubt shed light on this point.

Meanwhile, it is a fact that the artists most exposed to counterfeiting are struggling to control the constant flow of new NFTs using their works without permission.

OpenSea will have to evolve

It is therefore becoming urgent for OpenSea to really act on the topic, for example by detecting bots more efficiently, via DeviantArt-like detection, or even by asking for more elements when making NFTs.

We could compare OpenSea’s situation with the situation for Youtube a few years ago, where accounts uploaded songs and movies en masse without the consent of the rights holders to get views and thus remuneration.
If the situation continues or worsens, one can imagine resounding legal action. The structure that manages Picasso’s works has also launched lawsuits against NFTs of animated Picasso paintings. Others will follow.

Whatever opinion one may have about NFTs, whether one perceives them as an El Dorado or an ethically questionable concept, this sector is currently booming. It remains to be seen whether this is a temporary bubble or an approach that will last over time, which can only be done by very clearly improving the recurring problems.

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