At this point, we have already explored many facets surrounding NFTs’ controversial existence. On the one hand, there is a potential for NFTs to be the next type of authenticated virtual asset.
On the other hand, there’s the probability of chaos and implosion of the NFT bubble, especially because there is uncertainty about the future value and utility of NFTs.
What we haven’t thoroughly explored, though, are the pros and cons of NFT cryptos. This article will take an in-depth look at the best and worst aspects of NFT cryptos. If you haven’t decided to take the crypto plunge into non-fungible tokens yet, then this short, comparative discussion of what they really are may aid your decision.
Pros of NFT Ownership
1. Direct authentication for automated platforms
This is probably the most promoted advantage whenever NFT cryptos are mentioned in media or tech guides. Long story short, because a blockchain network is decentralized, multiple machines can independently confirm any activity that happens within.
In fact, the processed bits of data themselves are verified across different physical locations, even if the asset is only hosted in one specific place. This ensures that any unauthorized possession of the officially minted one is practically impossible.
Specifically for NFTs, this means that ownership data, transaction processing, and other important information such as copyright agreements are infused within its existence.
In theory, a JPEG file might be copied indefinitely, but its original tokenized form will still show who officially owns it, dictate how it can be used, or if anything can be enforced against its illegal distribution.
Of course, there are still loopholes to this implementation of NFT cryptos (more on that later). But at the very least, on platforms that can generate their NFT automatically, such as crypto games or collectibles, this advantage means that you now instantly have a way to authenticate digital assets and verify transactions between these items.
Unlike NFT art, where the asset could only be as authentic as the creator user verifies themselves to be, system-generated assets are, by themselves, already counterfeit-proof.
No matter how many times in-game NFT cryptos are traded, for example, you can be absolutely sure that they came from the game itself. Regardless of where you got your Topps baseball NFT, you can rest easy knowing that it wasn’t just some fake card that was coded into existence.
2. Additional economic opportunity as a creator
Ideally, NFT cryptos are capable of economically assisting artists and other creative professionals by opening an entirely new avenue to sell their exclusive, out-of-commission works. This, of course, has the same caveats as modern art of questionable value to the layperson.
But, because it is an NFT, the asset can theoretically be verified as an authentic item much quicker and easier. Build up your reputation, and you might eventually be able to get first-hand sales into the triple Ethereum digits and beyond.
Another important facet of NFT art that supports this fundamental option is NFT royalties. They work somewhat differently from traditional copyright royalties. But the end objective is the same: it supports the original creator even if the finished work itself is resold for higher values.
Sell some NFT cryptos for pennies at the start of your career, and still reap the rewards of the same assets years after when they eventually become prized collections.
3. Assets from verified or official sources can stay forever
Complementing our pro no. 1, if a crypto asset was created and materialized as your possession, it becomes more or less permanent for as long as your supported blockchain network remains alive.
This is quite revolutionary since, traditionally, collectibles require very extensive preservation techniques and hardware in order to keep them in pristine condition for many decades.
With a virtually tokenized version of these items, users no longer have to worry about wear and tear through time. You no longer need to frame a fragile painting to preserve its quality. You don’t even need specialized weather-proof cases for your prized collectibles.
The bits and pieces of data that represent it within the blockchain’s decentralized network, plus the hosted media, will retain their value so long as it is not resold and as long as the owner is still alive.
Do take note, though, that there are a few exceptions that could result in the willful removal of = entire NFTs, such as:
- Suppression of access due to violation of marketplace rules
- Using a shaky, potentially incompatible cryptocurrency standard
In fact, if the conditions above can be avoided, NFT cryptos may continue to exist, even if the user does one day pass away. If one can somehow get hold of the late user’s crypto wallet through legitimate means, then the archived NFT cryptos could also be re-accessed (and preferably transferred to the recipient’s crypto wallet).
Cons of NFT Cryptos
1. NFTs are massively, outrageously overhyped
Sensational news surrounding NFTs always focuses on the biggest successes and the hardest failures, giving it the impression of some next-generation investment standard. Headlines, such as “JPEG sold for $69 million”, or “12-year-old kid earns six-figures by selling NFTs”, certainly make for the spiciest news stories in the business tech space.
And like any other thing in the world that is overvalued, the reality of their existence, and the implication of NFT cryptos’ technical implementation, becomes grossly overlooked. For example, a relatively recent report from Reuters summarizes the notion that many individuals are scrambling to purchase NFTs like crazy in the hopes of selling them big.
While skeptics are focused more on an eventual bubble burst scenario due to this frenzy, the more disturbing issue is that many of these individuals staking their wealth most likely do not really know how NFT cryptos work on a technical level.
In addition, like some other negative reports show, there are ultimate limitations to their existence. For example, even if the NFT data is inherently robust due to the blockchain’s decentralized nature, the assets themselves still exist on designated platforms (hint: data storage hardware).
Long story short, users need to dampen their expectations with NFTs. Pro no. 1 still holds true, but you can’t randomly pick trending NFT artists to buy low and sell high, and you can’t enter into an established marketplace thinking you’ll hit big within just a few months.
2. Can still be forged outside the blockchain platform
If buying NFTs from burgeoning crypto artists is already a risky enough game on its own, imagine the possibility of finding out that the NFT information wasn’t really as authentic as you thought it would be.
If you remember our previous discussion about creating NFT art, you might remember that they are actually just regular digital art that’s been registered, or minted, on a (hopefully reputable) NFT marketplace.
This means that the “minter” doesn’t have to be the original artist so long as the authentication process can be bypassed using some technical loophole. To be fair, bigger, more established NFT creators might not need to worry as much.
The risk is generally much higher for budding crypto artists, who may have created very interesting NFT art, but might not have undergone verification (processes) just yet.
A few common modus operandi that you should watch out for with these external NFT scams are:
- Breaking into official channels to fake authenticity – on August 2021, an NFT was sold for the equivalent of $336,000, allegedly created by Banksy himself. Turns out, the NFT sold was a complete dud, and the scammer was reportedly able to gain limited access to Banksy’s main website, using the official link on a crypto auction as a show of faith for the item’s authenticity.
- NFT minting by some third-party scammer – stolen artwork being minted as NFTs by another user has been plaguing many independent artists over the last few months. The initial idea is to pose as that artist, although some could even get away with blatant forgery if the artist is a relatively unknown figure, or if the art in question is old or obscure enough. There are a few systems that even automate these scams, though thankfully administrators are at least not sitting idle with this issue.
- Legit-looking NFTs altered later into questionable NFTs – earlier this year, DarpaLabs, an “anonymous digital art collective,” was shut down and denied access to its marketplace when it began altering its seemingly innocent Elon Musk-themed NFT art to give the impression that the group is an official SpaceX affiliate entity. The NFTs and the accounts were apparently altered “in-transit” (as the transactions are completed).
3. NFTs Are As bad for the environment as cryptocurrency itself
The biggest criticism of blockchain as a whole is that it is a volatile system. In the computer hardware context, it means data within its networks requires a constant amount of power simply to exist. And we’re not just talking about maintaining a few servers to keep them online 24/7.
We’re talking about large crypto mining rigs all over the world: tons of high-power GPUs or ASIC units chugging carbon fuels to crunch complex mathematical calculations for every bit of cryptocurrency its user receives.
Because NFT data is part of the blockchain, it is also included in the environment question as well. Even more so because Ethereum (which at this point is the de facto cryptocurrency for NFTs if you don’t count Ravencoin) is still largely in its “proof-of-work” stage.
This means there is still an incentive to use every bit of available energy, regardless of how it is produced, in order to keep crunching those numbers to generate more Ethereum that would keep these NFTs alive.
Of course, people already know this issue, and there have been efforts to make blockchain technologies more power-efficient. For example, discussions have been ongoing for years about moving Ethereum away from proof-of-work to the theoretically far less energy-intensive proof-of-stake system.
Though then again, most of these efforts to regulate blockchain technologies aren’t exactly done with benevolence in mind. Just ask China.
Once More, at the Crossroads of NFTs’ Future
And so, after looking at the potentially best and worst aspects of NFT cryptos from our limited perspective, we once again ask the eternal question: does it have a future in our society?
In our opinion… the answer would still be a resounding yes.
NFT art does get put under a myriad of issues surrounding its implementation, nature, and the infancy of the technology it uses. But, when removed from the exaggerated news media coverage of both its success and failures, we realize that it is just the same as many of the other everyday digital technologies that preceded it. Remember how My.Doom and ILOVEYOU also exploited the relative simplicity of the internet back then?
NFTs as a whole would most likely suffer even more growing pains related to cryptocurrency at large moving on. But as shown by NFT collectibles and NFT in-game assets at least, a more mundane, more normalized version could be the key to it finally becoming what early adopters originally intended.