Non-fungible token (NFT) marketplace OpenSea has been a hive of activity recently, with auctions and sales pushing gas prices higher. However, it appears that there may be something dubious going on.
As reported by BeInCrypto, OpenSea and other NFT platforms have surpassed DeFi in terms of Ethereum usage and fee burning, knocking Uniswap off its perch.
Ultrasound.money is reporting that OpenSea has burnt almost 1,900 ETH, or $6 million, in transaction fees over the past week since EIP-1559 went live.
Bots running the NFT show
OpenSea is a marketplace where NFTs can be resold on secondary markets in auctions for investors. It appears that the auction system is being exploited by bots according to recent research by The Defiant.
It observed that Ethereum wallets appear to be canceling orders at a surprising rate with more than a quarter of the last thousand transactions using the OpenSea contract getting canceled.
Industry researcher Mike Dudas blamed these bots in a tweet on Aug 10:
“The bots are beating Opensea at the moment bidding below floor on pieces, then cancelling bids once accepted but prior to executing. Effect is to pull prices of series + editions lower and lower until they strike, then pull the reverse move to lure price higher after buying up,”
According to a well-known Solidity developer, the bots watch to see if anyone is going to accept their bid and then front-run it by canceling the bid so the acceptance fails. “That makes users frustrated and desperate and they try again but this time at a lower price,” the developer told The Defiant.
Issues to address
The report added that many users have also reported “execution reverted” errors which OpenSea claims is usually due to an item being locked or non-transferrable. Canceling bids is not free and escalating gas prices may make the entire auction system futile if bots are front-running.
The report stated that that NFT space has been portrayed as a decentralized avenue for creators to monetize their digital works for avid collectors, “not a place where artless bots manipulate value.”
Owen Fernau who penned the article concluded:
“With the rumors of bots swirling, users complaining of slow rendering NFTs and slow responses to support tickets, as well as eight engineering positions to fill, OpenSea has plenty of issues to address.”
At the time of press, average gas prices had surged to around $20, their highest level since late May.