NFT fans lose millions in video game real estate sales

NFT fans lose millions in video game real estate sales

why does it matter: The creator of the most popular NFTs available has been back in the news for the wrong reasons. Yuga Labs, the creator of the Bored Ape Yacht Club, has recently made their collection of Otherdeed available for purchase. It announced NFTs as a way to provide users with the ability to gain ground in an upcoming crypto-based MMORPG. Unfortunately, many fans went instead with nothing but disappointment, high transaction fees, and stolen funds.

Yuga Labs sold Otherdeed NFTs via Opensea. The group sold (or at least tried to sell) tokens to claim real estate and resources in the upcoming yoga metaverse, Otherside. The NFT drop made nearly $310 million in just a few short hours.

Unfortunately for Yuga Labs, the sale generated a lot more traffic than expected on the Ethereum blockchain. This increase in traffic has resulted in Ethereum gas fees of up to $14,000 for some users and transaction failures for others. Gas fee is a fee that is passed on to users to compensate for the computing power to process Ethereum transactions.

To make matters worse, some of those who suffered from failed purchases kept paying for energy. According to Crypto Briefing, users paid $165 million in gas fees during the sale due to another company’s poorly developed smart contract code.

Smart contracts are a feature of Ethereum’s ERC-20 token, the bread and butter of Ethereum-based applications. Contracts are small programs stored on the Ethereum blockchain that are automatically executed at a specified time. Contracts do not require any third party intervention or action. Instead, they initiate an action between two entities when all pre-defined criteria are met and the transaction is validated across the Ethereum network. In this case, poorly developed smart contracts and ill-defined execution standards have resulted in massive congestion and high transaction fees across the Ethereum network.

But what good story about NFTs is complete without fraudsters trying to take their action? In addition to technical challenges and outrageous transaction fees, some NFT collectors have been lured and profited by phishing attacks via scam sites offering gas refunds and additional NFT coinage opportunities. Many scammers have asked users to sign up and connect their wallets for a full gas refund and gain access to yet another land lottery list, leaving their assets vulnerable to unintended access.

The attack resulted in millions of dollars being stolen from NFTs and sent to the scammer’s wallets. ZachXBTA “rug-pull” (fraud) survivor and an investigator of on-chain transactions identified several fraudulent sites and wallet addresses, and one of them appears to have earned more than $5 million from unsuspecting users.

This week, Yuga Labs said it has begun refunding gas fees to users who initiated failed transactions due to network conditions caused by the NFT Minting event. While this move might make some investors who tried it again, users who fell victim to the phishing scam weren’t so lucky (and any money they lost).

This hack is by no means the first targeting NFTs or the Bored Ape Yacht Club itself. In April, the company’s social media accounts were hijacked and filled with fraudulent links to a minting event. The hack resulted in millions of dollars in NFTs being transferred from user wallets to hackers’ wallets.

The volatility and potential for quick financial gains make NFTs and cryptocurrencies an attractive option for many who may not understand the underlying technology. Unfortunately, this creates a target-rich environment for hackers looking for unsuspecting victims. With no third party involved, users have an increasing responsibility to remain vigilant and protect their information and assets.

2022-05-07 14:07:53

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