Bachelor's Thesis Baran Kalkavan

Last modified Feb 15, 2023

bachelorthesis

Towards an Online Service to Detect NFT Wash Trading Activities on the Ethereum Blockchain

Abstract

Non-fungible tokens (NFT) are digital assets that are widely used for digital art. According to NonFungible.com sales of non-fungible tokens worldwide increased 21000% in 2021 to exceed 17b dollars. There exist many different NFT marketplaces like OpenSea, Axie, and Rarible where the NFT transactions take place and these marketplaces support different blockchains and different tokens. The lack of legal regulations and the diversity in marketplaces lead to an increasing number of scams in the NFT ecosystem. Wash trading is amongst the most popular scams. A blockchain data platform "Chainanalysis" defines in their 2022 Crypto Crime Report wash trading as "a transaction in which the seller is on both sides of the trade to paint a misleading picture of an asset’s value and liquidity". It is a form of market manipulation and it is illegal.

The goal of this thesis is to create a web application for providing insights into the trading volume of an NFT collection in an efficient manner. Among other features such as displaying the number of invalid image URLs, most common trade partners, and the most expensive transaction in a given NFT collection, the main use case of the web application is detecting how much of the trading volume of a collection is generated by wash trading activities. With the help of this tool, users in the NFT ecosystem will be more informed about the collections and about possible wash trading activities that took place in a collection.

Research Questions

RQ1: Which research has been conducted so far on detecting wash trading on NFT marketplaces?

RQ2: What insights can an online service provide regarding an NFT collection?

RQ3: What are the most common wash trading patterns?

RQ4: Can wash trading be detected by an online service, in an efficient way?

RQ5: Can wash trading activity be avoided/regulated by marketplaces?

References

D. Das, P. Bose, N. Ruaro, C. Kruegel, and G. Vigna. “Understanding Security Issues in the NFT Ecosystem.” In: (2022).
S. Handagama. ‘Jack Dorsey’s First Tweet’ NFT Went on Sale for 48M. It Ended With a Top Bid of Just 280. 2022. url: https://www.coindesk.com/ business/2022/04/13/jack-dorseys-first-tweet-nft-went-on-sale- for-48m-it-ended-with-a-top-bid-of-just-280/.
C. TEAM. Crime and NFTs: Chainalysis Detects Significant Wash Trading and Some NFT Money Laundering In this Emerging Asset Class. 2022. url: https: //blog.chainalysis.com/reports/2022-crypto-crime-report-preview- nft-wash-trading-money-laundering/.
F. Victor and A. M. Weintraud. “Detecting and Quantifying Wash Trading on Decentralized Cryptocurrency Exchanges.” In: (2021).
V. von Wachter, J. R. Jensen, F. Regner, and O. Ross. “Quantifying suspicious behaviour in NFT markets.” In: (2021).
L. H. Wai. 10 OpenSea Statistics to Know in 2022. 2022. url: https://www. followchain.org/opensea-statistics/.

Incoming references

Files and Subpages

Name	Type	Size	Last Modification
Baran Kalkavan Final_Presentation.pptx	File	21,52 MB	15.02.2023
Baran Kalkavan KickOFF Presentation.pdf	File	1,47 MB	15.02.2023
Baran Kalkavan Thesis.pdf	File	1,05 MB	15.02.2023