Recently, the NFT market has proven to be a fool-proof way to become incredibly wealthy overnight. As impressive as that can be, there's a dark side to the world of NFTs, something that needs a healthy amount of research if you're considering entering the game of digital artwork. This blog looks at the drawbacks and opposing sides of the NFT game.
NFTs and Issues Around Theft
When it comes to NFTs, they seem to be all the rage; this is especially true within the art community. Suddenly, artists could sell their artwork and become established, making a name for themselves and making a profit. Fraudsters are always looking to cheat the system and make a quick buck where there's money.
As great as that sounds, this isn't to say NFTs don't have their fair share of problems. One of the biggest pitfalls for NFTs is how ramped issues around copyright infringement show no signs of slowing down. Many artists have seen their artwork swiped profit under their noses and sold for a hefty price tag, making them lose millions of dollars.
Dr. Andres Guadamuz, a lawyer specializing in copyright law, states that NFTs are "a cryptographically signed receipt that you own a unique version of a work." Think of NFTs as a digital certificate authentication tied to a piece of art, music, or something someone made. This certificate is on the blockchain, which details the owner's name and all required information.
The famous artist, Derek Laufman, found his original artwork for sale on Rarible, a popular NFT marketplace. Simon Stalenhag also found his work on an NFT marketplace without his knowledge or consent. Both were devastated, seeing their work stolen and sold for enormous sums.
The problem is that when someone takes work that isn't theirs, they can easily sell it on a virtual marketplace and quickly become very wealthy, even though the work is stolen. For some, what can seem like a quick way to become rich can sometimes quickly become a nightmare.
NFTs and the Impact on the Environment
Even digital art doesn't mean our physical world isn't somehow affected or damaged. When it comes to any discussion around NFTs, the environment is always on the back burner. The numbers show that for every NFT which goes up for auction, the effects work the same as flying a plane for over 2 hours.
Most NFTs work off the Ethereum blockchain, using the Proof Stake (PoS) algorithm. The PoS needs tons and tons of computers to function, keeping track of every transaction and handling all complex calculations. These computers need electricity, and I mean a lot of electricity, to work non-stop.
In fact, on average, Ethereum uses 48.14 kWh per transaction. On average, it is about 48kg per transaction. That means massive amounts of fossil fuels are being burnt and pumped into the atmosphere (some places still need to switch to hydroelectricity). It's unfathomable to think how enormous that carbon footprint must be, which is happening worldwide.
NFTs and Investing
It's difficult not to get hooked on the NFT market, hearing about how someone, somewhere, made millions by selling some mundane image. But as the saying goes, whatever goes up must come down. NFTs are no different; the bigger you can win, the more significant the loss; the danger lies.
Most NFTs get all their value comes simply from mere speculation. For example, I pay $100 for an NFT and hold it for a while; when I sell it, I hope someone else will want it for $200. But if someone is looking to buy what you're selling, that's when things can go very wrong.
Some say that NFTs are one of a kind because there isn't another like it. They feel that it makes it very desirable. This idea is only sometimes the case for these digital assets. NFTs have a high ill-liquidity; converting it quickly into cold, hard cash can be tricky or even impossible.
The next point that needs mentioning, NFTs tend to be highly volatile. These unique, one-of-a-kind art pieces can be worth millions on Monday, not a dime by Friday. So, the more significant the price, the bigger the gamble; overnight, you could have all your money tied up in an NFT, and suddenly, things could change, and everything you thought you had will be gone forever.
Hungry for more? Join me each week, where I'll break down complex topics and dissect the latest news within the cybersecurity industry and blockchain ecosystem, simplifying the world of tech.
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