Liveliness: A Trust Mechanism for NFT Creators

The non-fungible token (NFT) market is gearing up for a wild ride, with projections estimating it will soar to over $3.3 billion in revenue and attract more than 16 million users by 2028.

The non-fungible token (NFT) market is set to explode in the coming years, with projections indicating that it will generate over $3.3 billion in revenue and attract more than 16 million users by 2028. NFTs are unique digital identifiers that are used to represent ownership of a specific item, whether it be digital art, music, collectibles or even virtual real estate. Unlike cryptocurrencies, which are interchangeable, each NFT represents a one-of-a-kind asset.

This uniqueness is what gives NFTs their value and has led to the formation of an audience that spans beyond blockchain and crypto enthusiasts, encompassing a wide range of collectors, investors and enthusiasts from diverse backgrounds.

However, the rapid expansion of the NFT market has also opened the door to bad actors. Alongside the legitimate participants, fraudulent activities have proliferated the space, highlighting the lack of clarity and presenting a significant challenge for investors who are attempting to distinguish between the two.

Take the infamous rug pull scams, for example. These schemes lure investors with big promises only to disappear once the money is in the bank. The “Evolved Apes” NFT project serves as a stark example of this, where the creators vanished with $2.7 million worth of Ether ( ETH ) ($2,523), leaving investors in the dust.

Similarly, the “Frosties” NFT project ended in a rug pull, leading to the arrest of the founders by the Department of Justice on charges of fraud and money laundering.

Scams within the NFT market aren’t limited to rug pulls. Pranksy, a well-known NFT collector, fell victim to a scam when he was duped out of over $300,000 by a fake NFT auction purportedly associated with famous artist Banksy. Although he managed to recover most of his funds, it was a stark reminder that the NFT landscape can be treacherous, even for the most experienced players.

A joint research from the University of Texas and the University of California further emphasizes the scale of the problem. Their analysis of 823 NFT projects revealed that 300 were fraudulent, illustrating just how widespread these scams have become.

In light of these issues, it’s worth noting that NFT sales volume tumbled by 54% in May 2024. This decline can be attributed, at least in part, to the growing awareness of fraud in the NFT market, which has led to a decrease in investor confidence and enthusiasm.

However, this decline also highlights an urgent need for initiatives to help investors distinguish between good and bad actors in the NFT space, ensuring the market remains a viable and trustworthy environment for all participants.

To this end, several innovative solutions are emerging, aiming to bring greater transparency, trust and user empowerment to the NFT market. One such development is the Liveliness mechanism, introduced by data ownership protocol Itheum.

At the heart of Itheum’s innovation is the concept of Data NFTs — unique digital assets that represent tokenized data, allowing individuals to own and trade data in a secure, verifiable way. These Data NFTs are created by bonding a certain amount of the platform’s native ITHEUM tokens, enabling creators to participate in the Liveliness system.

Liveliness functions as a score that each Data NFT creator can earn, starting at 100% when they bond their tokens for a minimum of three months. This score gradually decreases as time passes, reflecting the time remaining until the bond expires. It's important to clarify that the decrease in Liveliness does not reduce the creator’s original ITHEUM bond.

Visible in Itheum’s Data NFT marketplace and other NFT marketplaces that integrate the Liveliness score, this score acts as a dynamic indicator of the creator’s ongoing commitment and activity within the ecosystem, helping potential buyers assess the reliability of the NFTs they are interested in.

The bonding mechanism behind Liveliness is straightforward yet effective. When a creator wishes to mint and trade their data as a Data NFT, they first need to bond ITHEUM tokens. This bond secures their participation and charges their Liveliness score.

The higher the score, the more trustworthy the creator appears to the public. If a creator maintains their Liveliness by renewing the bond before it expires, they can continuously demonstrate their commitment, reinforcing trust in their offerings.

Creators can also renew their Liveliness score with a single click, restoring it to 100% by rebonding for the full period. This simple yet powerful mechanism provides a clear and verifiable way for NFT creators to build and maintain their reputation within the ecosystem.

The Liveliness system is overseen by the Protocol Curation DAO, a decentralized autonomous organization (DAO) that monitors the ecosystem for bad actors. The DAO has the power to slash bonds if malicious behavior is detected, adding an extra layer of security and community-driven accountability.

Moreover, the Liveliness system also functions as Itheum’