Introduction

2019 has been a fascinating year! We have seen some pretty deep upheavals in the non-fungible token ecosystem, the industry has matured considerably, and we can’t wait to see what 2020 has in store!

However, a growing ecosystem inevitably brings with it some fraud attempts, and marginal behavior. In this article, we have chosen to shed light on these behaviors, without pointing out the authors or the projects concerned.

Our goal is above all to alert the public, enhance the critical mind of each, and illustrate how NonFungible.com can bring a little more transparency to these markets.

Wash Trading

How it works

Most data and analytics platforms propose rankings of the top volume-generating projects. To make a place in these rankings, some projects do not hesitate to set up bots which exchange assets all day long to inflate their volume.

Tracking, data and analytical tools such as NonFungible have become, for some projects, a kind of free showcase, offering high visibility to projects generating high volumes. Some smaller projects have understood the importance of these platforms in the ecosystem and have believed that we would not notice these strategies.

Note however that in the case described below, we cannot determine with certainty who of the publisher, the marketplace, a rogue “investor”, or a simple user testing a bot is at the origin of this wash trading.

How to spot them?

We have identified a clear example of wash-trading on an asset, which can be easily identified from NonFungible.com Market history pages

Here, we can see an asset (BC # 700086) being exchanged 6 times in less than 24 hours between the two same addresses (cf. wallet thumbnails).

You will note that:

the price is gradually falling, which guarantees that the transaction takes place and that the wallet opposite has the funds required to buy the asset again despite the gas costs spent on each transfer

transactions are spaced a few hours apart to avoid attracting attention

This strategy is fairly easy to spot to date, because

transactions are generally made between only 2 addresses

the same asset is in circulation

the price changes very little between each transaction

the price is generally high enough to quickly impact the Weekly USD traded volume

Wash trading today: lvl 1

Wash trading tomorrow: lvl 2

Fake pre-sale hype

How it works

A pre-sale is an extremely important moment in the life of a project, this is where the project validates its market fit, market traction, part of its business model, and globally proves to its early investors that they were right to invest!

The problem… is that you can never be sure that all the assets will be sold in the first few hours at the expected price. So to avoid this, some projects decide to buy their own assets.

Absolutely nothing prevents the creators of a project from buying the assets of their own game, but where that poses a problem, is that the success of a pre-sale is also a strong act of communication with the community of NFT stakeholders, which observes a very large quantity of assets sold very quickly, inevitably generating a feeling of FOMO (Fear Of Missing Out).

In a 2019 pre-sale, we have spotted a pre-sale where almost 25% of overall assets were acquired directly by members or employees of the project. 1 of 4 assets have been purchased by its own publishers.

(For those who wonder how we were able to reconcile wallet addresses and the project employees, a security flaw made all the e-mail and wallet addresses of the presale visible for a short period of time. It was enough for us to reconcile the volume purchased by address and the Wallets belonging to mail [email protected])

How to spot it?

Unfortunately this strategy is extremely hard to identify. It is always possible to identify the ETH addresses of the developers by their on-chain activities on the project, but all the early investors, marketing, communication and sales teams are generally anonymous from a wallet address standpoint.

As the ecosystem is still in its infancy, we preferred not to point the finger at the projects concerned and hope that they will tighten their actions, becoming more transparent and honest.

Marketing war

How it works

This strategy has become second nature to the blockchain or NFT ecosystem – growth hacking techniques, player advocacy, or even “two step flow of communication” are not new and are formidably effective. The idea is simple, make your players, investors, readers (your community) spokespeople of your brand through incentive programs and send your hordes of users to spread the word about your project and do your communication work for you.

How to spot it?

The real question is rather: how not to spot it? This practice is extremely visible. To distinguish an effective communication approach and a marketing war, you just need to identify some topics on Twitter or Reddit which evoke the NFT ecosystem, trends, reports, newsletter or more or less exhaustive analyzes,… and pay attention to comments.

You should quickly notice interventions that take the author(s) on, the message always being basically “If you don’t talk about this project, your work is worth nothing!”. Often, you’ll see many users repeat the same statements even when there is little to no volume or on-chain history – these attacks are a clear indication of these growth-hacking techniques.

Medium Bombing

How it works

On Medium, audience is the key. The platform algorithm highlights the most clapped content. The principle of Medium Bombing is therefore very simple: to have a maximum of claps in a minimum of time in order to be featured as “Top Content” of the platform, whatever your real audience.

So, to guarantee the success of articles, the easiest way is to have a pool of a few hundred bots that will like each of your publications.

How to spot it?

At first glance, we just say “Wow! Their articles are hugely successful” but when you take a closer look, you quickly see suspicious things. We have identified a Medium account in the NFT ecosystem which is pretty used to Medium Bombing. The screenshots below are taken from one of these articles.

We see below 11,503 claps for 250 people, an average of 46 claps per person (the maximum being 50) … wow, people are still passionate about this content!

The Medium today’s TOP featured content has very different statistics … 28,417 claps for 5,368 people … in other words, an average of 5 claps per person. Which is the global average on Medium.

Let’s take a closer look at the actors who clapped this suspicious article. Several things catch the eye and seem weird:

All names are in Latin characters without exception (no alpha numeric or special characters that could meet display issues)

No profile photo associated with any of these accounts

“Classic” names and surnames, an army of “John Doe”

Formatting of the perfectly identical name: Capital letter at the beginning of the Name and the First name

No nickname

We can no longer have any doubts when we go to the account of these profiles:

Systematically 2 following (which are always subscribed to the NFT project account)

Very often 2 followers

The account clapped ONLY articles from the suspect NFT account (and generally the “Claps” tab shows us that the one and only activity of this profile is to clap articles published by the account.

Conclusion

We would like to be able to tell you that no one can lie to the numbers… but some people are still trying to and taking advantage of these forged analytics. We do know that growing in such a competitive ecosystem is a complicated exercise, but the values and ethics of the industry are essential to establish healthy markets.

The whole NonFungible.com team takes very seriously to track down and reveal the behaviors and drifts that we will observe in the next stages of the development of the NFT ecosystem.