Joel Jojo is a freelance writer and a postgraduate in Business Administration from India. He likes to write regularly about current events from across the globe. You can read more of his works on joeljohnsjojo.wixsite.com/portfolio.
NFT: A Revolution Or A Passing Fad?
If you’re like me, you may have heard about the so-called NFT hype popping up at least once or twice in your daily web feeds. It is being dubbed as the next revolution for digital artists while simultaneously being accused of creating the largest digital economic bubble since the Dot-com bubble that peaked and crashed in the late 90s.By now, some of you might be curious to at least learn about NFTs, and maybe even profit from them. So let’s learn about NFTs below and hopefully, after reading this you won’t have to scratch your head next time when you read about how a picture of an animated ape sold out for millions of dollars.
What is an NFT?
A non-fungible token, otherwise known as NFT is a unit of data encrypted on a blockchain (such as Ethereum). They are digitally represented in the form of images, audio, and videos, which can be traded as well as sold. What makes these tokens different from standard blockchain cryptocurrencies like Dogecoin or Bitcoin, is the fact that they’re uniquely individual, meaning that they are not interchangeable with one another.
How do I get started with NFTs? (For Buyers)
To get started, you need an Ethereum (ETH) wallet as well as some ETH in your wallet which is equivalent to money. Coinbase, MetaMask, Fortmatic, Trust, Bitski are all some well-known crypto wallets that can carry your ETH.
The next step is to find a suitable NFT marketplace. OpenSea, Rarible, Mintable, SuperRare are all such NFT markets that help you find your perfect NFT.
How do I get started with NFTs? (For Creators)
Many NFT marketplaces allow you to create your own NFTs. This process is called Minting. But to keep things brief I am just going to talk about one example of these marketplaces called Mintable. Mintable allows you to create anything, be it artwork, video, graphics, 3D models, or anything as such.
You have three ways to go about it once you sign up for an account on Mintable:
1. Create Your Store
This is the standard way to create NFTs as you make a smart contract on the blockchain that you solely own and control.
2. Use Mintable’s Store
The upside to using Mintable’s store is that everyone can use it for free. This saves you on transactional fees that you’d have been required to pay had you been creating your own store on blockchain.
3. Gasless Minting
In my opinion, this is the best way to get started on NFTs as you’d be able to mint directly on Mintable’s store without the expense of any sort of additional fees including transactional ones.
Problems with NFT
1. Snake Oil Syndrome
Since NFTs are intangible speculative assets, many of its critics have labeled them to be just another snake oil scam arguing that the supposed value in the underlying asset is nothing short of imagination.
2. Right Clicker Mentality
Since NFTs are conceptually separate from the original artworks, many have opted to duplicate NFT works by saving a copy of the work through a right-click.
3. Link Rotting
NFT works are usually stored outside the blockchain due to storage issues. This leads the tokens to work similarly to that of an ownership certificate, with a URL linking to the respective artwork, making it subject to link rotting.
4. Environmental Issues
NFT trading and blockchain transactions are often done at the expense of heavy energy usage leading to greenhouse gas emissions.
5. Gas Fees
NFT markets charge fees for minting, selling, listing, and claiming. Statistics point out that most NFT artworks sell for less than $200, with a third of sales going for less than $100. The ones selling below $100 were paying market fees between 72.5 and 157.5 percent of that amount, leading to the conclusion that such artists were on average paying more in fees than they were earning in sales.
Many cases have come up of artists having their work sold as NFTs by unknown third parties. Pursuing legal action against NFT plagiarists has become difficult due to the anonymity of minting as well as the general ease of stealing digital artworks.
7. Insider Trading
Since NFT trading is unregulated, no legal action could be charged against those who gain insider knowledge of NFT markets. The BBC recently reported an incident of an OpenSea employee who bought certain NFTs before they were even released with the prior knowledge that they would be promoted on the website’s front page.
8. Ponzi/Pyramid Scheme
The NFT market structure has been accused of being similar to that of a ponzi/pyramid scheme, where early investors profit immensely compared to later ones.
9. Pump and Dump Scheme
NFT sales are more often than not boosted through aggressive marketing campaigns rather than the artistic value of the works. This phenomenon has led some creators to adopt a pump and dump strategy to sell their works with the most influential creators enjoying added leverage in this race.
Are NFT’s really worth it?
Well, that is the million-dollar question with no right answer. Some might say that NFTs are no different from picking rock from the ground and claiming it to be worth something while others will join in to see how far they can push this bull market to the top.
But if you do decide to play the NFT game, always remember to follow the golden rule of investing: “Never invest money you can’t afford to lose”.
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