While going through the unfamiliar process of wrapping NFTs, Riley accidentally sent the asset to a burn address, permanently deleting the NFT from circulation.
A nonfungible token (NFT) from the CryptoPunks collection worth 77 Ether
$1,752 was sent to a burn address to be permanently destroyed. However, the collector intended to borrow some money against it to buy another NFT.
NFT collector Brandon Riley added CryptoPunk #685 to his collection on March 13 by paying 77 ETH, hoping to hold it for the long term.
As a seasoned investor, Riley knew the importance of procuring new NFTs right before crypto markets took off into a new bull market. As a result, he decided to borrow some money against CryptoPunk #685 by using a popular technique known as wrapping.
While going through the unfamiliar process of wrapping NFTs, Riley accidentally sent the asset to a burn address — which permanently deleted the NFT from circulation, as shown below.
“I was told to follow the directions exactly, so I did,” explained Riley, but in the process, he ended up losing 77 ETH, which was worth $135,372.16. He explained:
“I was not wrapping this punk to sell it on Blur. It was to be my “forever punk.” The number is exact reverse of my ape. I was only wrapping it because I needed to borrow some liquidity from it.”
While members of Crypto Twitter believed that the NFT collector must have had “deep pockets,” Riley contradicted the rumors by revealing that he had purchased CryptoPunk #685 through borrowed money.
“I just shouldn’t have attempted this on my own, I guess,” was Riley’s takeaway from the experience. On the other hand, Crypto Twitter also blamed confusing user interfaces and complex instructions for the investor’s loss. As a result, the community unanimously agreed on the need to revamp the front-end processes for crypto ecosystems.
NFT wash trading increased by 126% in February, confirmed a CoinGecko report. The top six NFT marketplaces are Magic Eden, OpenSea, Blur, X2Y2, CryptoPunks and LooksRare. X2Y2, Blur and LooksRare saw a rise in wash trading for the fourth straight month, with a total volume of $580 million.
As Cointelegraph previously reported, the issue of wash trading stems from a lack of clear regulations.