Scams and theft have plagued the NFT industry from day one. To deal with fraud, OpenSea has rolled out a new system for detecting criminal activity. The mechanism first filters out the URLs matching addresses on the blocklist of malicious websites. Then it simulates interactions and transactions with new URLs to pinpoint previously unidentified bad actors. If the system detects a scam attempt, it bans the related account, delists collections, and blocks transfer requests.
OpenSea's new system for dealing with NFT scams – how does it work?
Suspicious activities are flagged and automatically marked as "under review." The algorithm disables any attempt to resell the item in question and sends an e-mail alert to NFT's previous owner to confirm or deny the theft suspicion. If the transaction is confirmed as legitimate, the platform unfreezes resales. The same happens after seven days if there's no response from the previous owner.
OpenSea expects that the new system will diminish the number and the frequency of scams on the platform, even though it won't root out theft in the broader crypto ecosystem. Still, the mechanism is a significant improvement on the previous approach, which basically relied on the action of a user contacting the platform's support team to report fraud. Frequently, it helped to prevent reselling the stolen item on the platform, but in some cases, thieves managed to get away with the goodies.
$13 billion valuation of a simple business model
Despite a 99% transaction volume drop from the May peak, OpenSea continues to be the largest NFT marketplace. According to DappRadar's data, it outperforms the competition by a long shot, with nearly $33 billion in transaction volume compared to the runner-up's $4,2 billion.
The platform has been one of the top winners of the NFT gold rush, with a valuation of $13 billion in a February funding round. It is all the more impressive, considering that OpenSea is a relatively simple marketplace rather than a cutting-edge solution. The platform provides users with an interface to list and bid on tokens without having to interact directly with the blockchain.
OpenSea introduces upgrades in a bid to improve security and polish its reputation
Unfortunately, OpenSea's success has been overshadowed by repeated security breaches. The platform has struggled with numerous fraudulent listings and wallet-draining exploits. Bugs, millions of USD worth of users' assets lost to attacks, database connection issues, and questionable approach to transparency have resulted in reputation damage for the company.
In the previous months, OpenSea introduced several security upgrades, including an update to account verification and collection badging system, and an automated system for identification and prevention of copyminting instances (tricking users into treating fake NFTs as original ones).
The new system for early scam detection is the last and arguably the most advanced step in a series of recent security enhancements. The company views it in the broader context of reestablishing trust in the crypto ecosystem and removing barriers to wider NFT adoption.
OpenSea collaborates with other crypto organizations to develop safer ecosystem
OpenSea stresses that it has "invested significant time, resources and attention to help improve authenticity and address ecosystem-wide trust challenges – to ensure today's users are safer, and that we're building and supporting an ecosystem that is safe and welcoming for newcomers as well".
The company also claims that it's "working closely with other marketplaces, wallet providers, analytics organizations, and others, to develop holistic scam detection and prevention systems." More news on this is due soon.