Non-Fungible Tokens
The NFT Market’s Darkest Secret—Fraud and Price Manipulation
How the ultra-stealthy practice of wash trading affects NFTs
Blockchains and NFT marketplaces need to do a better job at stopping the often stealthy and unethical practice of wash trading.
In 2021, wash traders in the NFT industry made a whopping $8.9 million profit on the Ethereum blockchain using the tactic.
What is Wash Trading?
Wash trading is when a trader sells a digital asset to themselves, giving the impression of a real transaction, in order to inflate the asset’s price.
This fraudulent trading strategy gets carried out when the same individual—the NFT holder—owns two digital wallets.
One wallet acts as the seller and the other serves as the buyer. After the crypto transaction get confirmed on the blockchain, the NFT transfers to the buying wallet. A wallet still owned — secretly — by the seller.
NFT traders who are looking to get rich or make a profit may use this tactic to manipulate the value of the digital asset. Artificially driving up the price in a short span of time.
