Sales of non-fungible tokens topped $24.7 billion in 2022, as measured by DappRadar. That was only slightly less than the $25.1 billion in NFT sales in 2021, and is all the more impressive when we consider the turmoil of cryptocurrency markets last year. 

For the uninitiated, NFTs are a kind of cryptographic digital token that lives on the blockchain. They represent the ownership of unique assets, which could be digital artwork or even a tokenized, real-world asset such as a physical painting or even a piece of real estate. 

The word “fungibility” describes something that’s interchangeable with an identical item. Paper money, for instance, is fungible. If someone borrows $10 from you, it doesn’t matter if they don’t repay you with exactly the same $10 bill. You’ll be just fine if they repay you with a different $10 bill, or even two $5 bills. That’s because they represent exactly the same thing. The same can be said of cryptocurrencies. If you own exactly one BTC, you’re in exactly the same position as someone else who has exactly one BTC in their crypto wallet. 

Because NFTs are non-fungible, it means they are not interchangeable. Rather, each one is distinct, and has a unique identifier. In the Bored Ape Yacht Club, one of the most famous NFT collections, there are 10,000 unique NFTs, all represented by a different image of an ape, based on a combination of 172 different traits of varying levels of rarity. As such every BAYC NFT has a different value. So, if you’re lucky enough to own a BAYC NFT, you wouldn’t be able to just swap it for another one, not unless one party is happy to lose money on the deal. 

It’s this non-fungibility of NFTs that makes them perfect for digital art. The owner of the NFT is recorded on the blockchain, proving its provenance, and this allows them to be bought and sold on an open marketplace. It gives artists a way to monetize their work, and prevents someone else from masquerading a copy as the original. 

But although NFTs help to solve problems around digital copyright, there is a growing problem in the industry. Because some NFTs have become so valuable, scammers have been busying themselves, creating counterfeit NFTs that are designed to look like valuable tokens, but are in fact worthless.  

What Are Counterfeit NFTs?

It is true that every NFT is unique, and so if you purchase one then you are guaranteed to be the sole owner of that token. However, just because an NFT is unique does not mean it is authentic. And this is what scammers take advantage of, copying the image of popular NFTs and then minting new tokens using exactly the same image, before claiming it’s part of the original collection. 

If you buy one of these counterfeit NFTs, it’s still unique, but of course it is only a unique copy. Hence, it is most likely completely worthless, despite the fact that you may have paid several thousand dollars for it. 

Unfortunately, fake NFTs have become a big problem in the crypto world, and it’s a problem that continues to grow. Last year, the renowned digital artist Aja Trier revealed on Twitter that her viral Vincent Van Gogh-style NFT artworks had been counterfeited on an unprecedented scale, with an incredible 86,000 fakes listed for sale on OpenSea, the world’s number one NFT marketplace. 

Counterfeits Prevent Adoption

With NFT scams so commonplace, the fear of being cheated and spending money on a fake makes it highly unlikely that the technology will be able to crack the challenge of mass adoption. And that’s a big shame because NFTs can actually do so much more than represent digital works of art. For example, NFTs can be used as digital tickets for physical events and concerts, they can represent virtual land ownership in the metaverse, or act as a verified digital identity, saving people from the hassle of repeatedly providing their identity documents when they sign up for new online services. Other uses include the distribution of music, the tokenization of real-world assets, digital asset ownership in video games, real estate titles and more. 

These wonderful applications of NFTs can potentially transform dozens of industries, but that will only happen if creators can successfully combat the counterfeits and ensure people are confident they’re paying for something that’s the real deal. 

The good news is that the NFT industry is looking to tackle the problem head on, and a number of promising tools have emerged over the last year that promise to make life much more difficult for scammers. 

Fighting NFT Fakes

The extremely useful MarqVision tool is an artificial intelligence-powered IP protection service that tries to help brands and artists combat NFT fakes. It works by scraping data from popular NFT marketplaces like OpenSea, Rarible and Superrare in order to flag what it suspects are forgeries. The basic idea with MarqVision is that it can automate the reporting of counterfeit NFT listings on these marketplaces, and flag them quickly before someone wastes money buying them. 

A similar tool called NFTSniff also relies on image recognition AI and when it finds a fake NFT, it will issue a takedown request on behalf of the artist whose work was copied. Meanwhile, Rarible has gone the extra mile and hired human moderators, while creating a mechanism that allows NFT creators to link their social media accounts so users can see that their work is verified. 

A trusted verification service is what the NFT industry needs more than anything else, and that is exactly what the Swiss startup Wakweli is bringing to the market. Wakweli’s novel protocol works by incentivizing NFT creators and human verifiers to “speak the truth”. With its platform, NFT creators can request a certificate of authenticity by staking cryptocurrency tokens in a smart contract. An independent certifier will then stake the same amount of crypto to check the NFT and attest that it is authentic. By doing this, the verifier gets to earn yield from the funds deposited in the smart contract as a reward for taking the time to check the NFT is genuine. 

If someone later discovers the NFT has been incorrectly certified as genuine when it is actually fake, they can provide proof to Wakweli to have that certificate of authenticity removed. If so, then the person who spots the fake will be awarded the funds deposited into the corresponding smart contract. So, creators, certifiers and fake-hunters alike all have a financial incentive to do the right thing. It’s a promising idea that is getting traction, with Wakweli now working with Polygon to ensure all NFTs on that chain are compatible with its protocol. 

With a total NFT market cap exceeding $3.26 billion, it’s unlikely that the scammers are going to give up trying to cheat people soon. But if the industry can continue to innovate and adopt more sophisticated tools to spot the fakes and certify those NFTs that are authentic, then there’s good reason to hope that the scammers will soon be forced to take their scams elsewhere.