A user of Dune Analytics has counted the number of top-valued NFTs that have been marked stolen or suspicious and thus frozen on OpenSea. The results are shocking.
According to the new dashboard created on Dune Analytics by the user “beetle”, 130 BAYC and 268 MAYC NFTs have been marked as “reported for suspicious activity” on OpenSea. This means that their previous owners contacted the marketplace to report them stolen. This is where the $18.5 million is buried.
153 Azuki NFTs that have been frozen, the 202 stolen CloneX, or the 70 Moonbirds should also be added to the pack. Basically, across all six collections, the current value of the stolen NFTs stands at 24,000 ETH — about $29 million — based on current floor prices. Just a few short weeks ago, their value would have stood in the hundreds of millions. In the new financial reality we are more interested in the mechanisms of the NFT marketplace.
As we know, NFTs can only be transferred or sold if the original owner authorises a transaction. Quite often former owners report their NFTs stolen when they authorised a transaction without realizing it, for example, by clicking on the phishing scam links on Twitter, Discord or in their own inbox. Scams are not unusual in the Web3 world: recently we wrote about the breach of the Yuga Lab’s (BAYC) Discord server when the hacker made off with 200 ETH worth of NFTs.
OpenSea policy clearly states that stolen NFTs can not be traded on its site. But some NFT traders think that OpenSea doesn’t care much about stolen NFTs, so it may be possible to trade frozen NFTs on other marketplaces.
The NFT community has been arguing that OpenSea policy is flawed and too centralised, as they can just freeze what is supposed to be decentralised blockchain assets. And this problem could be applied to all Web3 — lack of decentralisation. The original thought was to use blockchain technology to verify data ownership, however, nowadays NFT owners are experiencing difficulties when trying to sell their NFT bought on OpenSea hexagonal for Twitter.
The popular marketplaces like the above mentioned OpenSea, Rarible, Foundation, etc., mostly run on decentralised public blockchains. The NFTs minted on these platforms are also stored on these networks, offering collectors a sense of decentralization and ownership. But what happens behind the scene is a different story altogether.
NFTs usually represent artwork or music on the blockchain. They usually have large file sizes, making on-chain storage expensive. Thus, even when marketplaces store the actual NFT tokens on-chain, they are compelled to choose off-chain storage for the associated files and documents. So, while the representative asset remains on-chain and is decentralised, the real value remains off-chain and centralised. The offline databases have a single point of failure which makes them easy targets for hackers.
Genuinely decentralised NFT marketplaces could be a permanent solution to the scamming and hacking problem, which consequently will decrease the number of frozen NFTs on marketplaces.