In 2021, there’s no doubt that non-fungible token (NFT) collectibles have been extremely popular and NFTs have made billions in sales during the last year. For instance, in the last month Opensea saw $3.44 billion in NFT sales, Axie Infinity saw $838 million, and the pixelated NFTs Cryptopunks saw $653 million in sales. However, there are plenty of NFT skeptics who wonder why JPEGs are selling for millions in ether, and some have suspected auctions and sales could be bolstered by shill bidding or rigging.
While NFT Market Values Swell, Skeptics Wonder Why JPEGs Sell for Millions
You’ve probably seen all the NFTs in the news as rock JPEGs and pixelated images have been selling for more than most medium-sized homes. Non-fungible token (NFT) assets have made billions of dollars during the last 12 months and believers don’t expect the trend to end. For example, Autoglyph #463 sold for 460 ether or $1.582 million on August 31, and the Art Blocks NFT Fidenza #6 sold for 460 ether or $1.582 million. Cryptopunks are selling for millions, Bored Ape Yacht Club (BAYC) NFTs sell for hundreds of thousands, and the trend continues throughout a myriad of projects.
Of course, many crypto enthusiasts are skeptical of NFTs and the millions of dollars these picture files are selling for. For instance, the software engineer Jameson Lopp showed his distaste for NFTs this week and said he believes the high prices won’t last. “Much like ICOs and overhyped sh**coins,” Lopp stressed on Twitter, “I expect that 90%+ of NFTs will be unable to retain their current level of value. You’re not too late to lose a ton of money.”
However, Ethereum proponents and supporters of other blockchains that issue NFTs believe that bitcoin maximalists have it all wrong. One person emphasized this week:
I love Bitcoin maxis saying NFTs are a scam to steal your BTC considering they spent years arguing against the notion BTC was a scam to steal your fiat lmfaooooo.
Shill Bidding Plagues Internet Auction Markets
But how do we know that the non-fungible token (NFT) markets are not being manipulated? There are plenty of skeptics who have talked about how NFT markets could be manipulated by things like shill bidding. Some NFTs have sold for millions but what if some of them were made to look as though they are very valuable by leveraging a shill to manipulate the bids. Essentially a shill is a plant or stooge (typically a friend or accomplice) that has a close relationship with the collectible’s owner. Shills, however, are not known to be associated with the project and act as if they are organic bidders.
A shill could easily make it look like a specific NFT was more valuable than it really is in order to dupe a real buyer. All one needs to do is craft an NFT and have a friend purchase the NFT for the said price and meanwhile, the shill pays the owner back with the funds under the table. No one can guarantee this is not happening in the NFT auction space as shill bidding is prominent in the collectible, fine art, and general auction scene. Internet auctions are even worse, as Kenneth Walton’s book “Fake: Forgery, Lies, & Ebay” describes how Walton and his friends were prosecuted for Ebay shill bidding practices.
The problem still exists today as the retro video game collectible industry is up in arms over a shill bidding controversy. On August 23, accusations about fraud and deception in the retro video game market were sparked by a video by Karl Jobst. Allegedly the retro video game market is plagued by shills and allegations have been cast at Heritage Auctions and Wata Games. Both firms deny the allegations made by Karl Jobst, but the video and manipulation conversation concerning the retro video game industry has gone viral.
In the NFT world, buyers are hidden behind alpha-numeric addresses and users can’t tell if shill bidding is happening unless the system is checking for such transgressions. The fact is that the sales NFTs are seeing could be manipulated to a degree and it could happen to any non-fungible token (NFT) collectible project if unethical practices are leveraged in order to up confidence in NFT values.
What do you think about the possibility that the NFT market could be bolstered by unethical shill bidding? Let us know what you think about this subject in the comments section below.