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LONDON, Feb 11 (Reuters) – The platform that sold an NFT of Jack Dorsey’s first tweet for $2.9 million has halted most transactions because people were selling content tokens that didn’t belong to them, a said its founder, calling it a “fundamental problem”. in the fast-growing digital asset market.

Sales of NFTs, or non-fungible tokens, soared to around $25 billion in 2021, leaving many puzzled as to why so much money is being spent on items that don’t physically exist and everyone world can consult online for free.

NFTs are cryptographic assets that record ownership of a digital file such as an image, video, or text. Anyone can create, or “make”, an NFT, and ownership of the token generally does not confer ownership of the underlying item. Read more

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Reports of scams, counterfeits and “wash trading” have become commonplace.

US-based Cent made one of the first known million-dollar NFT sales when it sold the former Twitter CEO’s tweet as an NFT last March. But since Feb. 6, it stopped allowing buying and selling, CEO and co-founder Cameron Hejazi told Reuters.

“There’s an array of activity that’s happening that shouldn’t be happening — like, legally,” Hejazi said.

While the Cent marketplace “beta.cent.co” has suspended NFT sales, the part specifically for selling tweet NFTs, which is called “Valuables”, is still active.

Hejazi highlighted three main issues: people selling unauthorized copies of other NFTs, people creating NFTs with content they don’t own, and people selling sets of NFTs that look like a title.

He said these issues were “endemic”, with users “hitting and hitting and hitting counterfeit digital assets”.

“It kept happening. We were banning offensive accounts, but it was like we were playing a game of moles… Every time we banned one, another popped up, or three more popped up.”

“MONEY CHASES MONEY”

Such issues could become more apparent as major brands join the rush into the so-called “metaverse,” or Web3. Coca-Cola (KO.N) and luxury brand Gucci are among companies to have sold NFTs, while YouTube said it will explore NFT features.

While Cent, with 150,000 users and revenue “in the millions”, is a relatively small NFT platform, Hejazi said the problem of fake and illegal content exists in the industry.

“I think that’s a pretty fundamental problem with Web3,” he said.

The largest NFT marketplace, OpenSea, valued at $13.3 billion after its latest round of venture capital funding, said last month more than 80% of the NFTs minted for free on its platform were “plagiarized works, fake collections and spam”.

OpenSea tried to limit the number of NFTs a user could create for free, but later reversed that decision following a backlash from users, the company said in a Twitter thread, adding that it was “working on a number of solutions” to deter “bad actors”. ” while supporting creators.

“It is against our policy to sell NFTs using plagiarized content,” an OpenSea spokesperson said.

“We are working around the clock to ship products, add features and refine our processes to meet the moment.”

For many NFT enthusiasts, the decentralized nature of blockchain technology is appealing, allowing users to create and trade digital assets without a central authority controlling the activity.

But Hejazi said his company was keen to protect content creators and may introduce centralized controls as a short-term measure to reopen the market, before exploring decentralized solutions.

It was after the sale of Dorsey NFT that Cent began to get an idea of ​​what was going on in the NFT markets.

“We realized that a lot of it was money chasing money.”

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Reporting by Elizabeth Howcroft, editing by Louise Heavens and Andrew Heavens

Our standards: The Thomson Reuters Trust Principles.