OpenSea Steps in After NFT Art Theft Raising Questions About Decentralization

What is OpenSea?

OpenSea is a decentralized market place, where users can buy, sell, and trade rare digital goods. Rare goods, in the form of Non-Fungible Tokens (NFTs), can range from art and collectibles to gaming items.

At the time of writing, Mutant Ape Yacht Club ranked number one by 7-day trading volume, with a volume of E19,045.19. Bored Ape Yacht Club came in second, with a volume of E11,452.77. Notably, Mutant Ape Yacht Club was up 227% over the last 7-days.

Art and the Non-Fungible Token Market

Non-Fungible Tokens, better known as NFTs, continue to grab the news headlines. Unlike cryptos, NFTs are both individual and unique. The key characteristics, therefore, are that they cannot be copied or duplicated. These very attributes have made NFTs particularly popular within the arts and entertainment world. For the art world, NFTs remove the need to authenticate art and the costs associated with authenticating pieces that can prove costly.

Similar to art, supply and demand dictates the value of an NFT. As each NFT is unique, high demand can result in significant price increases.

OpenSea Freezes Stolen Bored Apes

Overnight, news hit the wires of Todd Kramer, a famous art gallery owner, having his NFT collection stolen from his hot wallet. In response to a request from the gallery owner, OpenSea froze the stolen assets, reportedly worth $2.2m.

In total, OpenSea reportedly froze 16 Bored Ape and Mutant Ape NFTs. Since the freeze, the NFTs are no longer tradeable on OpenSea.

Kramer had stored his valuable NFTs on a software wallet connected to the internet. This allowed the theft by way of a phishing scam. The use of a cold wallet would have protected Kramer from such a scam.

Another hot debate stemming from OpenSea’s intervention, however, was the issue of decentralization. According to the article, cries of foul hit Twitter, with many highlighting the OpenSea move as a break from the ethos of decentralization. From an OpenSea perspective, inaction could have raised other concerns. Ultimately, the heart of the issue, however, was the use of a hot wallet over the use of a cold wallet and the risks associated with holding valuable art NFTs on an internet linked wallet.

In December 2021, Pak’s “The Merge” officially became the most expensive NFT ever sold at $91.8m. 28,983 collectors reportedly pooled together to purchase “The Merge”. Until December, the most expensive NFT had been Beeple’s collage titled “Everydays: the First 5000 Days”. A single collector had purchased the NFT for $69.3m.