The NFT market needs AI power to fight counterfeiting and inflation

The rise of non-fungible tokens (NFTs) ushered in a new era of digital ownership and investment. With a record number of new NFT collections launched in 2022, the NFT market topped $50 billion in sales volume for the first time. However, as a fast-growing market that operates exclusively in the digital world, it didn’t take long for the NFT industry to become a haven for fraudsters.

A recent report revealed that by 2022, more than half of the NFT activity on the Ethereum blockchain, the most popular network for NFT trading, was fraudulent. From wash trading to copycat collections, the NFT market entered 2023 with a set of critical issues that could only be resolved with advanced market intelligence and analytics. It is already difficult to assess a fair price for an NFT, since huge gaps between the floor price and the price ceiling are not unusual for collections. On top of that, malicious market activity only adds more confusion to users’ NFT investment or trading decisions.

Top 10 NFT collections in 2022 by sales volume, excluding wash volume. Source: bitsCrunch

While NFTs from popular collections such as the Bored Ape Yacht Club (BAYC) have enormous market value, it is relatively easy to copy the visual appearance of monkeys depicted in the collection as image files and then create fake NFTs based on copy material. The $1.53 billion sales volume of the BAYC collection in 2022 also presents a lucrative market for fake NFTs.

The impact of counterfeit NFTs

Counterfeit NFTs created by copying the image of original art can be difficult to detect in the digital environment, resulting in significant financial losses for buyers. The impact of fake tokens in the NFT market includes financial, legal and reputational consequences. Investors who lose confidence in the ecosystem due to fake NFTs are less likely to return to the market. Without significant demand, the prices of NFTs are bound to fall.

Without the right tools, NFT collectors can quickly become confused when trying to find an authentic NFT on the market and trace its history. Fortunately, recent technological developments in artificial intelligence (AI) now allow NFT buyers to be prevented from investing in fake content. NFT analytics provider bitsCrunch recently launched an AI-powered tool that checks major blockchains and marketplaces for potential copied or counterfeit NFTs.

Fake NFTs caught by AI

By analyzing over 800,000 assets on the top NFT marketplace OpenSea against the top 40 NFT collections on the Ethereum blockchain, bitsCrunch found that 144 copycat NFTs are exact visual matches to the BAYC collection. Also, 231 NFTs were flagged as near-exact matches, while “extremely similar” copies are as high as 814.

Over 140 counterfeit NFTs are indistinguishable from the original BAYC collection. Source: bitsCrunch

The bogus NFT problem is hardly exclusive to BAYC. Other trend collections, including Azuki, Otherdeed and CloneX, have tens of exact copies detected by AI-powered analysis. bitsCrunch detects counterfeit material across blockchain networks and flags newly minted and existing counterfeit NFTs by analyzing real-time data.

AI-powered price prediction for NFTs

Confusion across the NFT market also arises when users want to put a fair price tag on an NFT they are aiming to sell, as the floor price – the lowest price listed for a specific collection – rarely provides a reliable perspective.

Many factors, including trading volume and history, last traded price and the profile of previous buyers, come into consideration when determining the final price of a digital collectible. However, AI can now help buyers and sellers in the form of the NFT Price Estimation tool by bitsCrunch. Aiming to accurately determine the true value of NFTs, the Pricing Tool uses analyzed historical information and metadata for an NFT combined with the social media hype surrounding the collection to provide more accurate price estimates.

Price estimation helps users make informed decisions when buying or selling NFTs. Source: bitsCrunch

The AI-powered machine learning tool has studied over 30 million NFTs from more than 2,200 collections to use advanced data and analytics to benefit the user when making buying or selling decisions.

The full potential of the NFT space can only be unlocked via tools that combat issues such as laundering and counterfeiting that have plagued the market for the past couple of years. Users need AI-powered advanced analytics and intelligence presented on easy-to-understand screens to take advantage of market data.

bitsCrunch offers accurate NFT analysis and investigation with UnleashNFTs to provide users with reliable market insights. The platform provides in-depth analysis, research and statistics on the NFT ecosystem, helping buyers and sellers make better decisions with every NFT trade.

In addition, as part of its commitment to bring more awareness and data transparency to the NFT ecosystem, bitsCrunch has launched its startup program. Companies working with NFTs can join this initiative to get quick access to bitsCrunch tools to analyze and manage risk via API. Equipped with AI-powered analytics, NFT creators, traders and businesses can detect and avoid malicious activities while transacting, thus expanding the NFT ecosystem in a healthier direction.