Time’s Bot-Fueled NFT Drop Highlights Limits With the Market

Last Thursday, Time Magazine sent out a release flagging that its initiative, a randomized drop of non-fungible tokens of original works by more than 40 artists, broke records by selling out all 4,676 pieces in two minutes. The kicker is that a lot of that speed was down to rampant bot activity. This—plus the quick surge in demand sending gas fees soaring—highlights snags in the NFT craze as many buyers weren't able to make their purchase. Despite these hiccups, since Thursday, these NFTs have produced more than $26.2 million in secondary sales. Time and the artists involved will receive a percentage of that revenue in perpetuity. A percentage of the proceeds from all transactions will also be donated to charity. Top line Last week, Time released a new collection of NFTs offering “unlimited access” to its website until 2023. Called TIMEPieces, these 4,676 tokens were tied to digital artworks, each priced at 0.1 ETH or around $310. In the first 24 hours, the site nft.time.com received over one million pageviews. With so many buyers hunting down Time’s pieces, the Etherum blockchain transaction price, known as gas fees, went sky-high. One address paid $70,000 for the transaction of 10 of Time’s NFTs, the 10 NFTs themselves cost just over $3,000. Where there's hype, there's fraud. Even outside the crypto space, bot fraud happens around drops of exclusive digital assets, like concert tickets. Automated bots can buy up stock in seconds, then sell it for extortionate prices in a secondary market, known as scalping. Currently, the 100 addresses with the most NFTs own about 24% of the total supply, according to the blockchain explorer Etherscan, via CoinDesk. Buyers can also shell out for priority fees, which lets them cut the line—incentivizing miners to sell to them first. These market dynamics left some potential buyers disappointed. Between the lines Time has been knee-deep in crypto over the last year. It's one of the few publishers creating new revenue lines out of NFTs by folding it into its well-known cover store. Last April, it started accepting crypto payments for subscriptions. The publisher also has bitcoin on its balance sheet and stipulated that its incoming chief financial officer is comfortable with crypto. But this emerging tech has teething problems, exemplified by the publisher's drop last week. The publisher has been contacted for comment. Bottom line To try and prevent bots during last week's drop, Time capped the number of NFTs per address so that each buyer could mint only 10, though a single buyer could mint from multiple wallets. In the future, it will limit this down to one per wallet. It also filtered out addresses that looked suspicious. Despite the hiccup, NFTs are still a revolution the company believes in, president Keith Grossman tweeted Sunday, apologizing to disappointed buyers for bots and extortionate gas fees. To compensate, the publisher sent tokens to everyone’s wallet who had a failed minting transaction. Now, there are 2,231 unique wallets holding a TIMEPiece. 5 Questions to Ask When Choosing an NFT Marketplace Next time, Grossman tweeted, it will hold an event before the drop and issue Proof of Attendance Protocol, digital badges that prove attendance, to help increase security. “Please know this is our first step toward addressing the issues we saw arise and we will continue to focus on improving the experience, especially as it relates to gas fees and combating bots, where possible,” tweeted Grossman.