As NFTs have shot to prominence and become a major part of the blockchain ecosystem, they’ve brought with them a new set of challenges, from plagiarism to outright theft. NFT marketplace OpenSea is making changes to combat these challenges or some of them at least, but its latest policy updates are nowhere near enough.
OpenSea has been rocked by several instances of NFT theft and complaints about how it has handled these cases. As it recently revealed, this has forced it to review its policies to better protect its users while still adhering to regulations in the United States.
2/ Our policy is designed to keep our community safe, but we know in some cases its side effects have damaged your trust in our platform. We’ve failed to proactively and transparently communicate the rationale behind our approach.
— OpenSea (@opensea) August 10, 2022
Currently, OpenSea has some measures in place to curb the sale of stolen NFTs. If an NFT is reported as stolen, its sale is barred (well, not always, but more on that later). This, it says, is because it’s “against US law to knowingly allow the sale and transfer of stolen items. We do not want to incentivize theft by allowing our platform to be used to help sell stolen items.”
This system is not without its faults. In some cases, unknowingly, users who purchased a stolen item have ended up being punished. As a result, it has changed its policy, incorporating feedback from its users.
The first thing it has changed is the use of police reports. Previously, these reports were only required in instances where the disputes were escalated. Now, they’ll be used to confirm all theft reports.
“For all reports going forward, if we don’t receive a police report within 7 days, we’ll re-enable buying & selling for the reported item. This change will help prevent false reports,” OpenSea revealed.
This change isn’t without its challenges. The first will be reporting NFT theft cases in some parts of the world. While the police may be receptive to claims of NFTs being stolen in the U.S. and some other developed countries, it will be much more difficult for NFT owners from parts of the world where these digital collectibles aren’t as popular.
The second change is geared towards making it easier for users whose NFTs were reported stolen to relist them and sell them once they recover them.
OpenSea still not doing enough
The changes are a move in the right direction, but they aren’t nearly enough.
OpenSea is the biggest NFT marketplace in the world, boasting over a million active users this year. In January, it raised $300 million in a funding round that brought its total funding to $400 million and its total valuation to $13.3 billion.
As its profile and user base have shot up, so have complaints. Its stolen items policy, which it has now changed, has been the subject of several of these complaints. Two weeks ago, one user sued the platform for handling stolen items. He claimed that users have their NFTs frozen over dubious and even false reports of theft.
Filed a lawsuit against @opensea today based on their ‘broken’ stolen NFT policy.
I believe this template could be the impetus which forces a long overdue change to the system. 🧑🏻⚖️📝🌊@punk9059 @NFTinitcom @CapetainTrippy @iamDCinvestor @0xZubic @SpeculatorArt pic.twitter.com/Mda6VL3nIT
— Jesse Halfon (@jesseshalfon) August 4, 2022
But this is just the tip of the iceberg.
OpenSea has had its system exploited several times in the recent past, with the attackers buying NFTs at a fraction of their cost. In one instance, the owner of a Bored Ape Yacht Club set its price at $1.1 million but was later notified that it had been bought for $300,000. A scammer had reportedly exploited a flaw in OpenSea’s system to devalue the ‘ape.’
OpenSea would later contact the owner and offer him $30,000 in compensation for the mishap, but he would have to sign a non-disclosure agreement. He turned the offer down, however.
This case wasn’t unique, and according to some reports, OpenSea paid over $6 million in compensation to users whose NFTs were exploited and bought at a fraction of their price. Scammers took advantage of a loophole that allowed them to purchase an NFT at the price it was first listed.
OpenSea has also been a victim of its rapid growth (although it recently announced layoffs). As users surged, its team could not scale fast enough to attend to them, leading to many customer complaints taking days, and some even weeks, to be handled.
Carrie Presley, who worked for a few months at the startup, told the New York Times, “It would be difficult for any company to pivot and accommodate that kind of increase so quickly. It was very chaotic.”
And then there’s the plagiarism of art owned by artists who are not compensated. Aja Trier, a Texas artist whose work has been used on NFTs without his consent believes that OpenSea has “bastardized the concept of what NFTs were supposed to be. It dilutes the market for my work.”
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.