Yesterday (28), a CryptoPunk was sold for 124,457 ethers (US$ 532 million), making it the biggest sale in the history of the non-fungible token collection (NFTs, the acronym in English) by a huge margin.
However, the sale was nothing more than a big trick.
According to records of the blockchain, the owner of CryptoPunk #9998 acquired the NFT from himself. This may not be new for NFTs themselves; There has long been a suspicion that accounts bought NFTs that were theirs at ever-increasing prices in order to make collections appear more valuable.
However, no wash trading of this magnitude had been recorded so far.
“Wash trading” is a type of market manipulation that makes the asset appear to be in more demand than it actually has.
Punk 9998 bought for 124,457.07 ETH ($532,414,877.01 USD) by 0x9b5a5c from 0x8e3983. https://t.co/dmT6jDRC1W #cryptopunks #ethereum pic.twitter.com/UQlmm1oqkj
— CryptoPunks Bot (@cryptopunksbot) October 28, 2021
The central issue is the amount of money involved. If someone decides to wash an NFT for an ether (ETH) – about US$4,300 – the person will probably be able to pay with their own money.
However, in this case, the owner of the NFT needed to have access to US$ 532 million to acquire their own token again – which is not such an easy amount to access.
The owner of CryptoPunk was able to access this kind of money by using a flash loan. This refers to large loans that are used to perform a certain function and the money is soon returned, all in the same transaction, in the same block.
If the money is not returned to the borrower in the same block, the transaction is not completed, and the money was never borrowed to begin with. As a result, lenders are more comfortable lending large amounts of money, but with less collateral.
So in the case of CryptoPunk, the owner of the NFT borrowed more than $532 million, used the money to buy CryptoPunk, and then sent the money back to the lender – all in the same transaction. This means that he made the purchase without having to disburse the funds.
Since this happened, other people have tried using similar tactics. Someone made a flash loan to bet 4,206 ETH ($18 million) on CryptoPunk #5362 and another bet from 20,400 ETH ($88.5 million) in various NFTs in the collection.
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
