How NFT Bots Exploit Marketplaces

September 12, 2022
How NFT Bots Exploit Marketplaces like OpenSea & Magic Eden

In the world of cryptocurrency, NFTs are all the rage. NFTs aka non-fungible tokens are digital assets that are unique and cannot be replaced. Think of trading cards & rarity but digital and tradable. Crypto enthusiasts have been buying and selling NFTs for everything from digital art to in-game items for great profits. However, there is a dark side to the world of NFTs. Recently, marketplaces for NFTs have been infiltrated by bots. 

These bots buy up large quantities of NFTs sometimes 90% of the total supply and then sell them back to unsuspecting buyers at exorbitant prices. This bot effect also drives up gas wars on networks like $Ethereum. Programmable bots are great at automatically sweep floors of collections or sending out thousands of bids in a collection hoping for a paper hand shake out. All while the operator is doing something else, probably sexting.

Unfortunately, there is currently no way to prevent these bots from exploiting NFT marketplaces. The only way to protect yourself is to be aware of it. If you do choose to purchase an NFT, be sure to do your research beforehand and know exactly what you’re getting yourself into.

Programmable scalper bots

NFT scalper bots are a type of bot that buy and sell NFTs at a specific price point or make bids automatically. While there are many different types of scalper bots, all share the same goal: making small profits over time by buying and selling assets quickly or cheaply. These bots drive up gas on $ETH when in-demand projects launch oftentimes crashing the website with a DDOS(Denial of Service).

We have seen scalper bots in everyday things use automated software to get their hands on thousands of products seconds after hitting online stores. This is something many people are familiar with when buying tickets or sneakers online, but now this practice has extended into other areas such as NFT drops for limited edition digital collectibles like Larva Labs Otherdeed for Otherside. 

What are NFTs?

NFTs (Non-Fungible Tokens). This means that each individual asset has its own unique properties, metadata, which can’t be changed or altered by anyone else(other than the creator authority) – it’s completely secure and foolproof!

Now let’s think of rarity within collections or people paper handing(selling early), bots are extremely efficient at this process. This is where the money is made. Most of these digital assets are traded on OpenSea or Magic Eden.

Why are bots winning?

There’s no denying that bots are winning the NFT scalping game. Whether it’s due to their speed, accuracy, or ability to process large amounts of data, bots have a significant advantage over human NFT traders. Here are some of the reasons why bots are winning NFT scalping:

  • Bots are faster than humans: They can scan NFT marketplaces in real-time and make split-second decisions about whether to buy or sell. 
  • Bots are more accurate than humans: They can quickly process large amounts of data and make very precise NFT trading decisions. 
  • Bots don’t get tired: They can operate 24 hours a day, 7 days a week without ever needing a break. Waiting for the snipe. This allows them to take advantage of NFT market opportunities that human traders would miss out on because they need to sleep.

All in all, it’s clear that bots are winning NFT scalping. I mean if you do this consistently 24/7 how can you not win? Their speed, accuracy, and tirelessness give them a significant advantage over human traders.

How do NFTs work?

NFTs are digital assets that are stored on-chain. Unlike traditional cryptocurrencies, NFTs are not interchangeable and each one is unique. Again, think of trading cards with value but tradable online with a marketplace. This uniqueness makes them ideal large sums of money and bots looking to take advantage.

When you purchase an NFT, you are buying the underlying asset, which is stored on-chain. 

  • Secure
  • Tamper-proof record
  • Ownership
  • Verified by anyone
  • Trustless process

NFTs also have the ability to store additional information, such as metadata, which can be used to track the asset’s history over time. Purchasing an NFT is similar to buying any other digital asset, such as a cryptocurrency or a stock but we use Defi protocols to interact with these services.

To connect to these marketplaces you will need Defi wallets like MetaMask or Phantom Wallet. You can use exchanges like Binance.US, Coinbase, FTX, or Crypto.com.

On-chain NFT Networks

It is also worth pointing out that different blockchains can implement their own versions of NFTs, and some have already done so. Other blockchains present new opportunities to improve security, transaction speed, scale, and fees (gas or otherwise). At a very high level, most NFTs are the Ethereum blockchain. However, there are other “smart contracts” out there like Binance Smart Chain, Polygon Matic, Solana, Cardano,  and ALGO.

Easy Targets for NFT Bots

These days, it seems like everyone is talking about non-fungible tokens or NFTs. These digital assets are unique and cannot be replaced, making them perfect for use cases like gaming, collectibles, and more. However, NFTs are also a target for bots. Because they are stored on the blockchain, NFTs can be bought and sold without the need for a central authority, instantly. This makes them attractive to bot makers, who can create bots that buy and sell/bid for NFTs on exchanges 24/7

Additionally, because NFTs are often traded on decentralized exchanges, there are often no KYC or AML requirements. This gives bot makers even more anonymity when trading NFTs and risk to reward. As a result, NFTs are likely to continue to be a target for bots in the future and their sophistication should progress over time just look at RuneScape’s 07 botting histories.

Some of the common marketplaces people use to trade $ETH NFTs are OpenSea & Gem.XYZ. Non-fungibles have come a far way and are now featured in auctions like Christies and Sotheby’s! The biggest sale was for $69 million by Beeple.

Common NFT bots against marketplaces

Scalper bots

Spinner bots

Bidding Bots

Floor Sweeping Bots

Spoofing bots

Time Magazine’s NFT launch fell apart due to scalper bots

To see how NFT bots are manipulating markets, we only need to look at the NFT launch at Time Magazine. This was scheduled for September 2021, and the event fell apart, as scalper bots snatched up the collectibles, causing Ethereum “gas” fees to increase for the full network.

Called TimePieces, the 4,676 NFTs were each tied to a unique digital art piece and came with a subscription for the Time Magazine website. Each TimePiece would be sold at approximately $310 in ETH, working on a first-come, first-serve basis, yet you could only purchase 10 NFTs at the most. This limit was established to try and prevent mass buying from scalping bots.

However, this attempt failed miserably, all of the NFTs were bought in a matter of minutes, and unlucky prospective purchasers went to Twitter to complain about scalper bots. After the full supply had been snapped up, it only took a few hours for the prices on the secondary market to skyrocket. In fact, the lowest available price was $9,500, representing a massive 30 times markup in comparison to the initial price.

Preventing Bots During NFT Launch

As is the case with virtually all items with a high resale value, such as limited-release products, tickets, and sneakers, new NFT drops are prone to be targeted by bots. They can mint straight from the smart contract. Mint an NFT before the rest of the population and list it fast and maybe you make some rags to riches in one trade.

Bots can cause a whole host of trouble during product releases. From denial of service brute force attacks to taking NFTs out of real customers’ hands(by sending fake website links), bots can end up causing huge frustration and bring down your project’s launch.

Letting bots snatch your products from launch will wreak havoc on the economy of your project. Imagine if 90% of the supply is owned by just bots…

Try to use services like Cloudflare for DDOS protection so users have a better chance to load the website during mint(there is the risk that your product release is going to be ruined by crashing your point of access) if they are not minting directly through the smart contract like 99% of bots do. Captcha won’t stop them either.

As much as we would like to think that digital currency is immune to the manipulations of bots, the sad reality is that these automated programs can have a significant impact on the market

Bots can be a serious problem when it comes to online manipulation. But by being aware of the risks and taking steps to protect ourselves, we can help reduce the chances of being targeted by malicious bot activity.

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Conclusion on NFT bots

We’ve seen that NFT bots are a powerful way to automate interactions with decentralized applications(DAPs), and we can expect to see more creative uses for them in the future.

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