Blur & LooksRare: “OpenSea Flags Hurt More People Than They Help”

Once upon a time, OpenSea’s biggest headache was their site going down during overwhelming periods of traffic. Despite the waves of frustration vented on Twitter when it happened, this was certainly a good problem to have in the grand scheme of things!

However, fast forward a year and a half to the present day and OpenSea are fighting much bigger monsters than a lagging server and waves of ‘BrokenSea’ memes.

Marketplace war heating up

As covered recently, Blur.io has emerged as a real contender to take a significant chunk of OpenSea’s market share. Their aggressive tactics have left public opinion split on whether they are a force for good or not in the NFT space – and you can revisit some of these features below to make your own mind up on the matter:

• “Money Printer Goes Blurrrrr”
• “$577 Million Worth Of Wash Trading Detected On Blur.io”

If OpenSea didn’t have enough on their plate dealing with Blur alone, it emerged last week that LooksRare has hot-tagged themselves into the contest by forming an alliance of sorts with Blur – with the two up-and-coming marketplaces taking aim at OpenSea’s highly controversial flagging policy as their target.

What Is The OpenSea Flag Policy?

Unfortunately, scams and thefts are rife in the world of Web3. The responsibility of self-custody is a double-edged sword, and many have fallen foul to hacks and social engineering scams, leading to their wallets being drained of their assets. As we know, there is no customer service hotline in Web3.

OpenSea, however, did implement a policy that tried to put themselves in the position of a customer service solution. If a user has their NFTs stolen, they are able to flag the assets as such to OS, who will then block the ability for anyone to buy or sell that asset ever again on their platform.

What Problems Did This Solve?

Many believe nothing was solved. It’s even been argued that it caused more problems! Let’s examine a scenario which often played out:

1. Scam occurs, user wallet is drained by a bad actor
2. Bad actor, now in possession of stolen goods, accepts the highest WETH bid on the asset.
3. Bad actor flees into the good night with a pocket full of WETH
4. Victim notices they have been scammed. Flags stolen asset to OpenSea
5. OpenSea blocks trading functionality on said asset.
6. New holder, the person who had their WETH bid accepted in point 2, is left with an asset which cannot be traded on OpenSea

Here is a live example of the above scenario which occurred in 2021. Bear in mind this was when ETH was trading at around $4500, so this problem was valued at around $180,000 for the new buyer: 

OpenSea revised their policy some time later, acknowledging the flaw in the system and implementing a pilot program that they say detects NFT theft in real time. Additionally, victims would need to file a police report within 7 days for the blocks to stay active.

Rivals Capitalize On Public Discontent

OpenSea is clearly in a tough position, as it is against US law to knowingly allow the sale and transfer of stolen items. “We do not want to incentivize theft by allowing our platform to be used to help sell stolen items.” OpenSea stated. A highly understandable stance, but the difficulty is that innocents are getting caught in the crossfire of the enforcement.

Blur.io, who have made themselves a very large and uncomfortable thorn in the side of OpenSea for a while now, announced on 24th February that they and fellow rival NFT marketplace, LooksRare, would no longer display these flags set by OpenSea as default:

To cater to users on both sides – those who support flags and those who do not – the visibility of the flags is an optional setting which users can switch on and off at will.

Final Thoughts

It’s certainly an interesting development in the marketplace wars which has got everyone talking.

Blur has garnered a lot of goodwill from traders since the airdrop earlier this month, and trading volume stats have indicated that many are now conducting their business over there instead of OpenSea.

Conversely, OpenSea’s reputation has taken hits from it’s responses to the attacks from Blur, so this announcement regarding flags – a highly scrutinized policy – appears to be a strategic assault to further damage the public image of OpenSea.

Ultimately, flagged items were more of an issue when OpenSea were the only real player in town. Now that the landscape is starting to shift, the impact of the policy is defanged to an extent.

A Note Regarding Security

The harsh reality is the responsibility of self-custody requires accountability for the security practices you enact.

Always use a hardware wallet for high value items, be suspicious of all DMs from unknown people, and think very carefully before clicking links and signing transactions on MetaMask.

Following those basic rules will decrease your chances dramatically of ever having to consider using OpenSea’s flagging feature.