The expected “merger” of the Ethereum blockchain this week could increase the risk of fraud and fraud in the market for non-fungible tokens such as the Bored Ape Yacht Club as analysts warn that the original and new issuance of tokens known as NFTs could confuse buyers.
The $200 billion Ethereum network accounted for 70% of NFT trading activity in August, making it the world’s leading blockchain network for such markets operated by companies like OpenSea.
However, integrating Ethereum into the PoS network of Proof of Work (PoW) will create duplicates of NFTs from the original network, something that unscrupulous people can benefit from, Andy Lian, author of the new book “NFT: From Zero to Hero,” said fork in an interview.
Scams are already rife in the NFT industry, which lacks regulatory oversight or protection, and any additional confusion could generate more. Lien said that some exchanges or markets may pause transactions to address any complications or confusion that may arise.
“This is going to become a huge problem for unwary investors,” he said.
The current Ethereum PoW network includes crypto-mining companies that use energy-consuming computer farms to solve cryptographic equations that validate transactions on the blockchain, which are rewarded with Ether.
The shift to PoS — where users validate transactions through “stacked” ether — is expected to speed up and reduce power usage on the network, which could appease some critics who say the blockchain industry is contributing to global warming.
However, Ethereum miners are not happy as they see a business model evaporate leaving them with redundant and expensive computer farms that cannot be reused. Hence, some have undertaken to split the network and create a synchronous network PoW Ethereum network.
“[Miners] They are all trying to come up with their own ecosystem,” Lian said, “Everyone is trying to take over [slice of the] pancake because of this new consensus mechanism.”
This is where the potential NFT confusion comes in. All existing NFTs on the Ethereum blockchain will be replicated in the new PoS system, but in the case of a PoW fork, the original NFTs will continue to exist on that network as well.
And this is not just an assumption, the exchanges have had to explain to users what their policy is regarding duplicates.
OpenSea’s flagship NFT marketplace, which has generated nearly four times the sales volume in the last 30 days of its history Closest competitor, Magic EdenAnd the announce It was “only NFTs are supported on the developed Ethereum PoS chain.”
Yuga Labs, creators of the leading NFT group Bored Ape Yacht Club, He said Their licenses only apply to the point-of-sale versions of their tokens.
The competing marketplace, Rarible, has taken a different approach, say It recognizes the authenticity of any copies of NFTs created at the same wallet address when they were held on Ethereum.
Rarible pointed to another potential issue, saying that the total number of NFT collectibles could increase, potentially reducing the value of the collections.
Alex Salnikov, Chief Strategy Officer at Rarible and co-founder of Email to fork. “Especially for less experienced NFT collectors.”
This scenario is not without precedent in the NFT market. One of the most popular NFT suites, CryptoPunks, is actually a re-release of the original – now known as V1 CryptoPunks – to fix a bug in its programming.
The replacement V2s were dropped for all original holders and the V1s were left to be forgotten.
However, as V2 CryptoPunks grew into one of the largest NFT collections, a significant market for V1 versions grew among collectors who were looking to own a piece of NFT history.
The creators of CryptoPunks, Larva Labs, tried to crush this secondary market using legal means, but in the end the V1 community won out and both versions can now be traded freely.
Ultimately, Lien believes, the market will follow the PoS network as it is recognized as the “official version” of Ethereum.
“which of these [chain] It will gain more momentum and with the most liquidity it will eventually be the thing that everyone will recognize,” Lian said.
The good news for green NFT investors is that PoS is estimated to be 99.95% more energy efficient than PoW, according to the Ethereum Foundation.
“This could cause a new environmentally conscious user base to adopt the technology which in turn will help increase the mass adoption of NFT and Web3 technology,” said Rarible’s Salnikov.
“Increased activity on Ethereum may also lead to new innovative use cases for NFT technology and drive the development of new tools designed for the growing Web3 innovative economy,” he added.
The merger could help boost the price of Ether as the network introduces new mechanisms that will burn or remove 1,600 Ether every day, And it is expected To have a deflationary effect on the price of the token.
This could be good news for buyers whose Ether-denominated NFT has depreciated against the US dollar since it peaked in November.
But Lien said he was skeptical that the merger would turn the current bear market for NFT.
“I think that’s very security thinking.”