NFT Roundup #6: $2B in sales for Axie Infinity; OpenSea front-running scandal; John Cena's failed NFT, Snoop Dogg producer to sell an NFT; a contractor steals $3 million from an NFT

Buy the rumor, sell the news

This is a curated newsletter, covering news stories about NFTs. The NFT market is moving rapidly, and this is an attempt to provide some means of keeping up with its developments. Your curator is Dave Friedman.

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Sky Mavis hits $2B in sales for its NFT game Axie Infinity

Sky Mavis is the blockchain gaming company behind Axie Infinity. The company has generated sales of more than $2 billion:

Sky Mavis and its players have generated $2.05 billion in sales to date for Axie Infinity, an nonfungible token (NFT) game, according to measurement firm DappRadar.

The game uses NFTs to uniquely identify cute characters. Players spend real money to acquire those characters and engage in battles with other players. They can level up the characters and sell them to other players, and that generates income for the players.

The capability to earn money in games is called “play-to-earn,” and it has taken off in a variety of ways. DappRadar has been tracking the space and it said that Axie Infinity has hit No. 1 in NFT collectibles.

More than 615,000 traders have bought or sold Axie Infinity NFTs in 4.88 million transactions. This means that an average transaction for an Axie Infinity NFT is worth about $420. All of this is pretty amazing for a company that had $100,000 in sales in January.

Axie Infinity is an example of a “play-to-earn” game, in which player’s in-game accomplishments can generate income. Coinbase notes:

what’s more exciting is where Axie Infinity is taking off: in developing nations where players can often earn more playing the game and selling SLP [an in-game token specific to Axie Infinity] for their native currencies than they can with a typical day job.

With an estimate 50% of daily active users (DAUs) coming from the Philippines, the game is also picking up steam in other emerging markets like Indonesia, Brazil, Venezuela, India, and Vietnam.

NFTs are commonly criticized as having no utility, but this sounds pretty useful to me! One man’s trifle is another man’s treasure.

OpenSea’s product chief is out after insider NFT flipping accusations

As you have no doubt heard by now, one of OpenSea’s employees was caught front-running. In the traditional financial markets, front-running is the practice of a broker trading ahead of a client, based on information that the broker is aware of. It may or may not be inside trading; I am not a lawyer and legal stuff is complicated. But it is definitely front-running.

In any event, the employee was caught, and subsequently resigned:

OpenSea head of product Nate Chastain, who was recently accused of a form of NFT insider trading, appears to no longer be working for the company. His Twitter bio now includes the phrase “Past: @opensea.” OpenSea has not publicly named the employee involved in the incident, but CEO Devin Finzer says the NFT trading platform asked for and received their resignation.

Yesterday, Finzer put up a blog post saying an employee used knowledge gained from working at the company to purchase NFTs that were about to be posted to the popular trading site’s homepage (and would thus likely go up in value). While an investigation is apparently still ongoing, OpenSea does say that it’s implemented clearer rules to prevent employees from doing this kind of thing in the future.

Nascent markets rely on trust in order to make them sustainable. Participants in the NFT market have to be made comfortable that they will be treated fairly, that people with inside information don’t trade on that information, and that the markets are not manipulated. If people think that they will be screwed over, then market participation will never become widespread and it will decline over time.

To this point, OpenSea’s CEO reacted quickly to this story, implemented new policies meant to prohibit this behavior, and removed the employee in question. From a public relations perspective, those all seem like the correct steps to take. Whether this harms OpenSea or the broader NFT market over the longer term remains an open question.

WWE’s John Cena NFTs were ‘a catastrophic failure,’ says John Cena

Wrestling star John Cena tried to jump on the NFT bandwagon. It didn’t work out too well:

he Suicide Squad star shared that news while appearing at Florida SuperCon last weekend. Cena said that while he and WWE thought they read the market right in terms of price, it turns out they “were absolutely wrong.” He called the venture “a catastrophic failure”:

“I talk a lot about failure. This idea failed.”

Cena was apologetic when a fan expressed disappointment he couldn’t get the merch because he couldn’t afford the package price, but overall chalked up the experience as one to grow on:

“... it’s okay to swing big. It’s okay to be wrong and okay to take chances, but when you are wrong and do fail and you have a moment where you can learn, learn. Course correct, move forward, grow.”

WWE President Nick Khan has talked up NFTs as a revenue stream to investors, and to the public at large as a way for the company “to deepen our connection with the WWE Universe.”

I suspect that this story will repeat itself over the coming months as more celebrities try to take advantage of a hot NFT market to publicize whatever their pet project is, and make a quick buck.

But here’s the problem: there’s a nearly infinite supply of NFTs out there. So if you want your project to stand out, it has to be high quality, and it has to offer something of interest and value to buyers. Merely tagging a celebrities name to an NFT isn’t going to cut it.

NFTs for a better world: Music producer auctioning his personal Snoop Dogg Platinum plaque for philanthropic stand

A music producer associated with rapper Snoop Doog is issuing an NFT tied to the RIAA plaque he received for his work with Snook Dogg. RIAA plaques certify various albums as having sold especially well, and those involved in their production receive a plaque as a memento.

In any event, from the news story it doesn’t sound like this plaque is the one that Snoop Doog owns:

NFTs offer opportunities for fundraising since they, unlike crypto, offer something more than monetary donations. Instead, they allow celebrities and other individuals to auction off digital creations, with the proceeds going to a charity of their choice.

Tito Rodriguez is just one example of this use case put into action. Tito, also known as “The Hood Santa,” is a platinum record producer with previous experience working with artists like Snoop Dogg. Tito has since transitioned from the music industry to help his community through the establishment of the Local Hearts Foundation. This charity aims to give back to underprivileged families in the East LA area.

To do so, Tito has made arrangements to auction a 1/1 NFT. This NFT comes with the physical Snoop Dogg Presents Tha Eastsidaz platinum plaque. Collaborating with ZUZ Protocol, the winner of this plaque will also receive a Zeus NFT. With the Zeus NFT, owners will be able to do in-wallet gasless staking and earn rewards each month for the next eight months.

Tito Rodriguez may be a talented music producer, but he’s not a celebrity or household name. If anything this sounds like a cash grab, and I wouldn’t be surprised to hear that it performed as poorly as John Cena’s NFT effort.

‘Kia Sedona’ NFT sale goes belly up as contractor allegedly runs off with $3 million

A meme on cryptotwitter served as the impetus for the creation of an NFT, and, once the NFT was created, a hacker inserted code that drained the funds to a wallet the hacker controlled. This sordid and complex story highlights a number of issues that keep cropping up in crypto-world. Namely, smart contracts are complex, hard to secure, and susceptible to manipulation by hackers:

For a start, the NFT sale itself was quite strange. The whole idea was based around a recent meme on crypto Twitter, that of the Kia Sedona brand of car (the joke being that the Kia Sedona is a type of hard money). A group of 10 anonymous individuals who were behind the sale created a jazzy website and branded it “Jay Pegs Auto Mart.” (It was not affiliated with the car manufacturer in any way.)

The sale was for DONA reservation tokens. These could be purchased on decentralized exchange SushiSwap’s token sale platform Miso. Each DONA token purchased in the sale could be swapped for one 2007 Kia Sedona NFT — out of a possible 10,000.

And the token sale went well. It raised 864.8 in ether (ETH), worth $3.1 million. But what the anonymous team of shadowy super coders (another meme) didn’t expect to happen, when it chose to use Miso, was for all of its funds to be whisked away.

According to SushiSwap CTO Joseph Delong, an anonymous contractor inserted malicious code into the Miso platform, changing the destination address for all of the incoming funds in the token sale to their own address. Delong said that the Jay Pegs Auto Mart sale was the only one affected and that all the funds raised were stolen.

Delong added that SushiSwap has asked crypto exchanges Binance and FTX to identify the hacker — by providing their KYC information — but they have not done so. He said that if the funds weren’t returned by 8 AM ET, the platform has instructed Stephen Palley, a partner at legal firm Anderson Kill to file a complaint with the FBI.

As I’ve said repeatedly, about both NFTs and the broader crypto industry, if its participants are serious about “mainstream adoption” they had better eliminate issues like this. And whenever I press people in crypto world about these issues, I am greeted with whataboutism: “Yeah, but this stuff happens all the time in traditional finance.” First: no, it does not. Second, to the extent that it does happen, funds are often (but not always!) recovered and victims are made whole. One of the great things about the traditional financial system is that crime victims can often recover their stolen money.