In the last year at the latest, interest in NFTs has really taken off. However, opinions about the objects represented by the blockchain differ widely: NFTs are polarized. For some, they develop significant momentum and represent a disruptive, forward-looking development. For others, it’s a gimmick without any deeper meaning – or just things to guess.
There are many traditional financial investors as well as among art collectors and cryptocurrency enthusiasts who are not convinced of the usefulness of NFTs. You can’t blame them either: if you search for NFTs on Google, you’ll see human images of cats, penguins, and monkeys with bored or sleeping faces. No more.
Then development is easily dismissed as an ephemeral phenomenon of Generation Z. People want to make a quick profit by converting their JPEGs to NFT files. In fact, players assume that the noise will soon disappear and be replaced by another trend in the virtual worlds. Confirmed by the huge price volatility of NFT art.
What is often overlooked is that NFTs are redefining the art world and opening up new possibilities for artists and collectors alike. Artists gain greater influence and rights without compromising the property rights of collectors.
How has it been so far? In the traditional art market, a hobbyist artist who is just starting his career will turn to various mediums such as art galleries and auction houses to sell their artwork for profit. If he succeeds, he will likely never see his artwork again. He also does not receive any commission if the value of his artwork increases to new dimensions. That may change thanks to NFTs. Artists can earn additional revenue from digital artwork in the form of NFTs with every resale.
It is indisputable that much of the current NFT market is driven by speculation and waning hype. But this is not unusual for a young market, and experience has shown that it can change again quickly. The potential is definitely there: Leading NFT groups are constantly adding additional benefits to their digital artwork. For example, the Bored Ape Yacht Club, currently the most valuable NFT group, provides NFT owners with access to exclusive clubs where like-minded people gather, participate in Discord community parties, and spark lively exchanges about art.
The NFT group itself will soon have its own video game. With Electronic Arts and Ubisoft, two of the most popular video game publishers also rely on NFTs. Exclusive equipment or land can be purchased through NFT contracts. Likewise, future Panini albums can be collected digitally and are very limited. Thus, in the future, NFT games will not only be for viewing, but hardware will also have practical and functional value for gamers.
Not only artists and the game industry, but also researchers and other enthusiasts are working on other use cases for NFT, such as NFT Certificates of Authenticity. There are actually cases where individuals have created NFT instruments to clearly certify their ownership of a particular property, commodity, or even patent technology. By using NFTs to store data values, the risks of tampering and falsification of facts are virtually eliminated.
This does not mean that the industry is currently free from fraud and unfair dealings. Caution and prudence are fundamental to the emergence of any new product or market, and NFTs are no exception. Since the market is still unregulated, many are trying to make money from the hype of NFT, especially scammers and scammers. Phishing or cyber attacks are now common in this field, as is money laundering and asset fraud.
On the other hand, there are the great benefits that NFT technologies are unfolding not only in the art world, but also in some industries:
For example, if passports are converted to NFT passports, this will lead to more security at airports. Boarding or entry tickets can also be stored on the blockchain. This reduces identity theft and provides more transparency. San Marino, for example, advances in terms of a “digital vaccination card”: since July 2021, the vaccination status has been registered here with the help of QR codes on the “VeChain Thor” public blockchain.
There may also be less fraud in the used car trade. The history of ownership can be recorded on the blockchain from the time a new car was sold. Due to the emerging chain of decentralized internet data, fraud is almost possible. Public offices such as tax authorities, insurance companies and workshops can also be involved. The car manufacturer can also earn money from reselling it through smart contracts.
The future advantages in logistics are greater. Balanced information flows are just as important for suppliers, carriers and recipients of goods. We can face the problems that can arise when supply chains are disrupted and transparency is lost. The basic accounting principle of the blockchain can help here. Blockchain technology can be used to verify and track data about shipping, approval processes, or the status of containers. This helps in the fight against criminal activities, but above all ensures more transparency in logistical operations. Efficiency increases, costs decrease – and most importantly – the sustainability factor is enhanced. Exporters and manufacturers can clarify without any doubt and know the source of raw materials by storing them in the blockchain. Counterfeit products are also detected more quickly in this way.
Wash trading is an activity in which traders create an artificial demand for a security by buying and selling the same financial instrument multiple times. The motive could be to artificially increase trading volume to show how popular the product is, or to generate artificial commission payments to brokers. The transactivation activity of NFTs is also artificially amplified. In most cases of NFT trading, sellers frequently trade from one portfolio to another to drive up the price of the asset.
Counterfeiting is another problem that NFT artists face. There are a large number of cases where scammers are posting fake listings in the market and impersonating stolen NFT artwork as their own. Some companies have recognized this problem and are using AI solutions to detect these scams. However, it is important that anyone delving into an unregulated market like NFTs does a thorough research before becoming a part of this decentralized future.
The cryptocurrency scene is currently down, and the NFT market is taking a breather. However, the crisis is not caused by a problem in the world of tokens, but by general global economic factors. In fact, metrics such as developer activity and the number of new users in the ecosystem are steadily increasing. So the market remains dynamic even in turbulent economic times. As a look at the practical benefits of NFTs reveals, there is still much to expect in the future – NFTs will be part of everyday practice. (hv)