NFT also has insider trading? ! Regulatory challenges for NFTs

What is OpenSea?

OpenSea is an NFT store. It is like eBay, amazon, and Shopee. It is full of various NFTs. Currently, OpenSea is the world's largest NFT store with more than 20 million kinds of products. The total transaction volume has reached 5 billion US dollars, and the monthly transaction volume is constantly reaching new highs.

In other words, if you want to sell your own NFTs, the current first choice is to go to OpenSea, and the sellers will go to the Shopee store if they want to put on the shelves. However, recently, the FTX exchange also reported that he plans to launch an NFT store within a month. It is worth watching how this will change in the future.

How can NFT have insider trading? !

The most easily understood definition of insider trading is to know the information that will be disclosed in the future through one's own position, identity or other channels, and because of knowing this information, buy and sell transactions.

There will be recommended NFT products on the homepage of OpenSea, just like there will be recommended focus apps on the homepage of the app store, products exposed on the homepage on the shopee store, and stocks recommended by the stock market.

On the homepage of OpenSea, after the homepage is recommended, the NFT of this model will instantly become popular, and the price will be instantly fired up, and it will continue to pile up. This is like a stock that is recommended by a hymen that will be fired in an instant.

Therefore, the so-called insider information is to know in advance the products that OpenSea will be exposed on the homepage, and then buy the products that are about to be exposed and the price will be raised in advance. The product manager of OpenSea, Nate Chastain, first bought several NFT products through this layer of information, but it was exposed shortly after the purchase, and he easily earned hundreds of thousands of Taiwan dollars by changing hands in an instant.

How did you find out?

In the world of blockchain, the most important point is openness and transparency! As long as anything is on the chain, the exchange trajectory and transaction records can be traced back, regardless of whether it is the previous hand or the previous hand, that is, all the records handled can be traced.

However, although all records can be traced, what is traced is a very complex code (wallet address), and it is usually impossible to know who owns the wallet from the wallet address.

Netizens tracked the flow of NFT and found that something was wrong. Then Nate Chastain, the product manager of OpenSea, announced his wallet code (natec.eth) on Twitter, so netizens can easily track his wallet address from the wallet code (0xa3a4548b39DA96Eb065FF91811cA30da40431C0D)

Finally, netizens spread the relevant information on Twitter, which led to the OpenSea CEO promising to improve the situation of insider trading, and the product director Nate Chastain resigned immediately.

The regulatory model of NFT?

In the past, it was almost impossible for ordinary people to find insider trading in the stock market. Although it can be estimated from the status of the chips whether this stock has potential insider trading (for example, whether the insiders have an abnormally large amount of buying, go and buy stocks). However, it is very difficult to specifically catch who is operating insider trading, especially if it is possible to evade reporting by using a head account, or by means of redemption every other day, etc., except that the procuratorial organ can use its public power to obtain information, it is impossible to catch it at all. to insider trading.

But this incident shows that the openness and transparency of the blockchain has changed the paleness of ordinary people in the past (although the technological threshold is still quite high, it still allows netizens to catch clues).

In the past, in criminology, it was advocated that through openness and transparency, non-compliant behaviors can be effectively suppressed, so that the advantages of unequal transactions and unequal information can be reduced. For example, the advertisement of the industry distribution cannot pretend to be news. When the news is to be placed, it must be clearly marked that it is not news but an advertisement. Or the fact that the CCP's Agents Law requires news stations that are propaganda inside Taiwan before accepting foreign governments to accept the money.

If on NFT transactions, you can imagine,

In the past, NFT commodities with high prices were exposed on the homepage of OpenSea. Through the disclosure of the transaction track, netizens can know whether the reason for the exposure is that the insiders of OpenSea bought this commodity or because of its uniqueness and collectability.

If the situation that was exposed on the homepage was made public because of insider purchases, the purchasing power of netizens should be effectively reduced, so that price fluctuations would not be so intense and return to market conditions.

However, to what extent should this level of openness and transparency be? In the blockchain world, we cannot rely on government regulations at present. Instead, we need to create an open and transparent system through netizens/exchanges/blockchain companies. This transaction is because the product manager's own wallet is published on Twitter, so that everyone can follow it. In the future, it is necessary to disclose the transaction trajectory of each commodity or to require insiders to prohibit the purchase and sale of commodities. And whether the insider is involved in NFT trading, because the real identity of this person cannot be inferred from the wallet address. Therefore, how to be open and transparent and how to open the transaction trajectory depends on what kind of world the participants in the blockchain world want to create.

But what is certain is that a new order of openness and transparency will be revealed on the blockchain.