Despite the increasing appetite for non-fungible tokens (NFTs), new research found that nearly 45% of the entire NFT transaction volume recorded on the Ethereum blockchain is wash trading, a type of scam traders use to manipulate the market in their favor.
The study was conducted by data analyst Hildobby using different filters designed to uncover odd behaviors associated with trading NFTs in various marketplaces, including Ethereum, OpenSea, LooksRare, and X2Y2.
People Manipulating the Ethereum Network
According to the research, more than $30 billion of the entire NFTs traded on Ethereum in 2022 are wash trades, making up 45% mentioned earlier.
The researcher Hildobby noted that nearly half of the “amazing trading volume” in the protocol are just people exploiting the system illegally.
“When we apply all these filters, the results are eye-opening. On Ethereum, wash trades are only 1.5% of all trades, but…….Over $30B of NFT trading volume – almost 45% of the total – is from wash trading,” the research reads.
Generally, wash trades accounted for more than 80% of NFT trading volume recorded in 2022, significantly increasing from the 10% it recorded in previous years, particularly in 2018.
Highly Dependent on Wash Trades
While the wash trade surged in 2022, some popular NFT marketplaces like OpenSea, CryptoPunk, and Foundation had less exposure to the scam.
According to the research, wash trades are an insignificant contributor to the transaction volumes recorded on the platforms. In OpenSea, only 2.4% of volume and under 1% of trades were identified as scams.
In contrast, NFT trading platforms like LooksRare & X2Y2 highly depend on wash trades for their volumes.
The research found that these two platforms are the leading carriers of fake transaction volumes, as malicious actors often use the marketplaces to achieve their dubious aims.
“These two platforms are wash trade central – with 98% and 87% of their respective volumes driven by the activity,” the report reads.
Although LooksRare & X2Y2 are famous for wash trades, only a significant minority of their respective trading volumes are recognized as washed trades at 25% and 22%, respectively.
Other NFT marketplaces, such as Element and Sudoswap, have portions of their trading volume, and trades conducted on the platforms are wash trades.
More than 66% of volume and 18.5% of trades on Element are fake, while 11% of volume and 14.5% of total transactions on Sudoswap are washes.
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