On Tuesday, Bloomberg was first to report on a technical loophole that cost traders of non-fungible tokens (NFTs) on Opensea – the wildly popular digital asset trading website – hundreds of thousands of dollars in losses.
What happened is that traders of high priced NFTs – think CryptoPunks, Bored Ape Yacht Club, World of Women – moved some of their pricey NFTs over to Opensea to secure premium prices. The thinking being that Opensea is the biggest NFT marketplace so it should command the highest prices. However, when the original owners moved the NFTs to the Opensea wallet, many of them left the old listings open on their other wallets where the NFT was still at a much lower price.
Sneaky shoppers who knew those old, discounted priced listings were still active and linked to the NFT – made the purchase on the bargain basement page – snagging the asset right out from under the owner who failed to close the older listing. The unscrupulous buyers then quickly flipped the newly acquired NFT at the much higher, current market price – leaving the original owner in a fog, empty-handed with a loss in the thousands or even tens of thousands of dollars.
“It’s a bit like being on eBay (NASDAQ:EBAY) and listing something for sale,” said Tom Robinson, chief scientist and founder of Elliptic, an NFT data tracking firm.
“If you want to increase the price of this, you wouldn’t create a new listing and leave the old one going. You’d replace that listing. The problem here is that people aren’t canceling the original listing.” However, there are high gas fees associated with taking down a listing – the same way there are high fees when you initially set up an NFT listing. For many sellers, they never think that the listing is still active and actionable. So if they happen to be moving the asset back-and-forth among multiple wallets, that’s where the bug kicks in and seems to have occurred here, according to Elliptic.
The story went on to note that a spokesperson for the Opesea platform told Bloomberg the issue arises because “OpenSea cannot cancel listings on behalf of users. Instead, users must cancel their own listings.” If they don’t, that’s when trouble happens.
The old admonition goes “buyer beware,” but clearly in this instance perhaps it’s more appropriate to say “sellers be smarter.”
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