The non-fungible token (NFT) market is gearing up for a wild ride, with projections estimating it will soar to over $3.3 billion in revenue and attract more than 16 million users by 2028. NFTs are verifiable representations of digital and physical goods that exist on a blockchain.

Unlike cryptocurrencies, which are interchangeable, NFTs are one of a kind, representing ownership of a specific item — be it digital art, music, collectibles or even virtual real estate. This uniqueness is what gives NFTs their value and appeal.

From famous brands to prominent artists, NFTs have quickly gathered an audience that exceeds blockchain and crypto chambers.

Fraudulent activities threaten the NFT market

However, the NFT market’s rapid expansion has also opened the door to bad actors. Alongside the legitimate participants, fraudulent activities have proliferated the space, highlighting the lack of clarity.

Take the infamous rug pull scams, for example. These schemes lure investors with big promises only to disappear once the money is in the bank. The “Evolved Apes” NFT project serves as a stark example of this, where the creators disappeared with $2.7 million worth of Ether

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, leaving investors in the dust.

Similarly, the “Frosties” NFT project ended in a rug pull, leading to the arrest of the founders by the Department of Justice on charges of fraud and money laundering.

Scams within the NFT market aren’t limited to rug pulls. Pranksy, a well-known NFT collector, fell victim to a scam when he was duped out of over $300,000 by a fake NFT auction purportedly associated with famous artist Banksy. Although he managed to recover most of his funds, it was a stark reminder that the NFT landscape can be treacherous, even for the most experienced players.

A joint research from the University of Texas and the University of California further emphasizes the scale of the problem. Their analysis of 823 NFT projects revealed that 300 were fraudulent, illustrating just how widespread these scams have become.

In light of these issues, it’s worth noting that NFT sales volume tumbled by 54% in May 2024. This decline highlights an urgent need for initiatives to help investors distinguish between good and bad actors in the NFT space, ensuring the market remains a viable and trustworthy environment for all participants.

Trust mechanism for NFT creators

In response to the growing concerns over fraudulent activities in the NFT space, data ownership protocol Itheum has developed a solution that aims to bring greater transparency and trust to the market. At the heart of this innovation is the Liveliness mechanism, a system designed to differentiate between good and bad actors by leveraging the power of blockchain technology and crypto-economics.

Liveliness functions as a score that each Data NFT creator can earn by bonding a certain amount of the platform’s native ITHEUM tokens. Made popular by Itheum, Data NFTs are unique digital assets that represent tokenized data, allowing individuals to own and trade data in a secure, verifiable way.