Try Quests to earn cryptoNFT Wash Trading on Ethereum
Exploring NFT wash trading on Ethereum on Opensea, LooksRare, X2Y2, Sudoswap and Rarible.
Background
Wash trading is non-known to be rampant in secondary non-fungible tokens (NFT) markets. Individuals can do so with the intention to drive up floor prices and/or farm platform rewards (such as LooksRare and X2Y2) or as means of money laundering.
- Problem: This artificial inflation in NFT sales volume distorts growth and platform metrics in an ecosystem. More recently, Bloomberg reported a massive decline in NFT trading volume since the height of the NFT bull run. Uninformed individuals/market watchers may come to the wrong understanding and conclusion of the market.
- Existing Solutions: Platforms like Nansen, includes wash trading filters that allow users to filter out wash trading. Hanson from Footprint has also utilised distribution analysis to identify wash trading.
- Scope of this dashboard: This dashboard aims to serve as a live dashboard, detailing the approach and methodologies used in filtering out NFT washing trades on Ethereum. Feedback and comments on the SQL codes used for this analysis are welcome :)
Concept Note on Approach
Identifying Wash Trading of NFT
Let’s assume two agents A and B are participating in wash trading. There can be two ways an individual can wash trade.
Point-of-sales washing (POS washing)
- A sells B an NFT for n1 ETH
- B sells A back the same NFT for n2 ETH
- And the cycle can repeat
Where the price of n1 doesn’t necessarily equal n2. This means that the same NFT essential has been through the same two users.
Either way, the volume (n1+n2) generated from the sales of the NFT should both be counted as washing.
Self-Funding washing (Self-financed)
- A transfers B with funds (ETH/WETH) and A sells B NFT
- The same process repeats with B transferring ETH and NFT back to A
Essentially, the sales volume generated by A and B on the day where transfers of ETH and sales of NFT occur can be counted as wash trading (highly likely that these 2 accounts are linked)
Transfer washing (v2 Update)
- When A sells an NFT to B → B transfers NFT back to A → A sells B the same NFT → repeat
- This is similar to self-funding wash
Limitation
One limitation of this approach is that multi-account transfers and washing A→ B → C… D → B → A may not be identified.
Method
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v2 Update: We will explore NFT sales volume in ETH denomination (ETH volume will be calculated with oracle prices) on Ethereum, using the ez_nft_sales schema.
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Currently, ez_nft_sales has data for the major NFT marketplaces on Ethereum (including Opensea, Looksrare, X2Y2, Rarible, Larva Labs & Sudoswap)
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Codes for identifying wash trading can be found in the SQL codes for the dashboard
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In brief, the wash trading transactions are identified by their tx_hash
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The final labeled table will include whether the NFT sales were labeled as a PoS wash, self-funded wash, transfer wash
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Outline
- How has wash trading trended over time?
- What is the volume dominance across NFT Marketplaces before and after according for wash trades?
- Who are the washers?
- What collections generated the most volume from wash trading?
- How much rewards from LooksRare and X2Y2 were claimed by washers?
twitter: pinehearst_
discord: pinehearst#1947
All Trades (Inclusive of Wash)
Minus Wash Trades
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From January 2021 onwards, we can see that over ~45% of the swaps were labeled as wash trades.
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The bulk of the wash volume spiked in after January 2022, when Looksrare was introduced, surpassing the normal (organic) sales volume in ETH.
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Since then, we have seen an overall decline in sales volume through but a steady volume of wash trades in the bear market.
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Wash trading only took a small proportion of the sales count, indicating that most wash trades are large-volume items.
Wash trading is evident on Looksrare and X2Y2, with the majority of ETH volume disappearing after removing wash trades (right). Clearly, if we do not account for wash trading, the volume dominance across platforms is skewed badly.
- From the % volume dominance charts, we can also see how wash trading volume has moved from Looksrare slowly over to x2y2 by April and the subsequent decline in Looksrare dominance.
- Without removing wash trades, one might conclude that X2Y2 is growing in volume dominance. But after accounting for it, we see that the % share was rather consistent in recent weeks. The Sudoswap has also gained a sizeable market share despite being a relatively new contender.
PnL is calculated by total USD value rewards at claim minus by the total USD fees (transaction, platform, creator fees)
- The top washer (no.1 no.2, A and B) washed a total of 1.75M ETH volume (at the time of analysis), paying 35k+ ETH for platform fees - this whale farmed on LooksRare, both
- The most popular platform at the moment appears to be Looksrare, followed by X2Y2. There were a fraction of users who wash traded on both Looksrare and X2Y2.
As mentioned above, most wash trades are large ticket items, additionally, as only a minority of users and sales are registered as wash trades. Hence, we do not see much of a visible change in distinct buyers after filtering out wash trading.
In general, we see that collections with 0% creator fees were commonly used for wash trading.
The median % of platform fees of the trades were usually ~2%, similar to what was collected at LooksRare or 0.5% at X2Y2
Terraforms and meebits constituted the majority of the ETH volume washed amongst the top 100 projects.
Ethereum NFT Landscapes
