Bhat, though, is just one among the many artists around the world whose work is being copied and sold as fake NFTs. Chelsea art gallery owner Todd Kramer, for instance, took to Twitter on New Year’s eve to reveal that 615 ETH (about $2.3 million at that time) worth of NFTs were stolen by scammers and listed on OpenSea.
While Kramer was criticised for not storing his digital work–mostly jpegs of Bored Apes and Mutant Apes–in an offline wallet, he was fortunate that OpenSea froze trading of the stolen NFTs on its platform.
Many artists, however, are not as lucky as Kramer and end up losing a lot of money and sleep. According to Toshendra Sharma, chief executive of NFTically–a company that helps others build their NFT marketplaces by providing a software-as-a-service (SAAS)–even though the digital signature of an NFT cannot be tweaked, the underlying media file can be copied, tweaked, and minted as a new NFT on a different platform.
This scamming trend is driven by the hype around the metaverse and NFTs which has companies rushing to launch new platforms but not putting adequate safeguards in place unlike what is done in the physical world of art.
Swaroop Biswas, an independent artist, explained that putting a physical piece of art on an auction rank requires steps to be taken for its validation. Insurance companies dealing with art, on their part, are quite scientific when it comes to validation. “For instance, Axa, which specializes in art, has about six steps of authentication – chemical, sound, fabric, carbon dating, 3-4 layers of X-rays, and even MRIs,” Swaroop said.
X-Rays and MRIs help figure out if there was a painting that existed below the one that can be seen on the canvas from above. “Van Gogh, for instance, is one who used to do this a lot,” Biswas pointed out.
Pedro Herrera, senior blockchain analyst of blockchain research platform DappRadar, pointed out that Renaissance era painter and architect Raphael was notorious for regularly copying artwork produced by his students, adding that the frauds in the NFT space are not too different. “Such acts of artists and individuals with larger followings overshadowing those with little exposure have remained constant across traditional and digital art worlds,” he said.
In comparison to an art gallery, NFT platforms allow virtually anyone to ‘mint’ an NFT for as low as ₹2,000-6,000, according to Biswas. This implies that anyone can potentially create anything that they wish to. “There is no way to know if there is any kind of authenticity, even though you can trace the source of artwork online,” Biswas noted.
To encourage more artists to mint NFTs, OpenSea has a tool called Lazy Minting, which doesn’t require them to pay a gas fee–a one-time fee charged for creating NFT on a blockchain. However, more than 80% of NFTs created with the tool were found by OpenSea to be plagiarized or fake. The gas fee of minting an NFT on most platforms range from $2 to $32.
According to Huzefa Motiwala, director, systems engineering, India and SAARC, at security firm Palo Alto Networks, while the global NFT market clocked $4 billion in 2021, over 90,000 NFTs were found to be fake. Motiwala said it is ironic that while by nature NFTs are supposed to be deregulated trust transactions “that deregulated trust framework on which a piece of artwork, original or digital, is based on to establish authenticity is a big issue.”
To highlight fake NFT listings, a collection of artists has created a Twitter account called NFTTheft, which recently said artists are seeing hundreds or thousands of art work being stolen and listed.
The lack of entry barriers or checks and balances is already hurting the industry. According to Huzefa Motiwala, director, systems engineering, India and SAARC, at security firm Palo Alto Networks, while the global NFT market clocked $4 billion in 2021, over 90,000 NFTs were found to be fake.
On January 5, artist Aja Trier took to Twitter to point out that her artworks had been ripped off and listed on OpenSea 86,000 times without her knowledge. While Tirer did prevail on OpenSea to take down the fake NFTs, she realised that she had to put in multiple requests which took weeks. In fact, many artists have complained that marketplaces take too long to even comply with their requests.
Motiwala believes it is ironic that while by nature NFTs are supposed to be deregulated trust transactions “that deregulated trust framework on which a piece of artwork, original or digital, is based on to establish authenticity is a big issue.”
On its part, NFTically said it is working on a tool to scan NFTs for authenticity before they are minted. Sharma said the company is putting the scanner on its website as an application layer. He added, though, that any “tech-savvy person can still directly go to the blockchain and mint the NFT”.
Fake NFTs aside, another concern is that traders are inflating prices of NFTs by selling them to themselves. According to a report by blockchain tracking firm Chainalysis from earlier this month, 110 traders made $8.9 million by doing just this. The report also underlined the growing use of NFTs for money laundering. Since crypto transactions are identified only by the wallets attached to them, it is very easy for a buyer to split their crypto assets across multiple wallets, and make it seem like different people are buying an NFT.
NFTs are part of the overall metaverse concept. Motiwala warned that identity theft is going to be a major concern in the metaverse. “The fundamental issue is that the metaverse by nature is unregulated, so security concerns will only heighten,” he said, adding that lawmakers and industry should work closely to have some sort of zero trust framework for these virtual spaces. N.S. Nappinai, a Supreme Court advocate and founder of cyber safety organization Cyber Saathi, stressed that it’s important to understand the “purpose of the technology” and what it’s meant to achieve when formulating laws for emerging technologies, like AI and the metaverse.
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