NFTs were the buzz in 2021, with users sending at least $44.2 billion in NFTs on the Ethereum blockchain alone. In the current year, the numbers are slightly flattened, despite all this, sales are still several billion. A report recently published by public radio Frontal addresses the question of whether it is still worth entering the market. The title alone: ”NFT: The hype is over and I’m still not rich – with Aya Jaff I frontal” is more than shocking and questions the objectivity of public broadcasting. 4 reasons the thesis should be confirmed, and 2 experts will be interviewed. We present arguments and respond constructively.
The task of the public broadcaster is in front of me
First, the mission of the public broadcasting service, which includes the broadcaster Frontal, must be considered. This consists of reporting as diverse and objective as possible on political and social issues. In principle, public media should help citizens form their own opinions on a variety of topics. Hence broadcasters provide an essential supply of information to the population and remain politically and economically independent. The following shows whether the task has always been fulfilled.
Accusation 1 – Before you win, others win first
I came to this decision for two reasons. Because offering your own NFTs in most NFT marketplaces, such as OpenSea costs money. The question is whether this is to blame. Most online marketplaces charge a fee for listing goods. Thus the principle is present in almost every industry and the NFT market cannot be criticized negatively.
Moreover, expert Henryk Plötz claims that he is unlikely to win money from the NFT from playing the lottery. All you have to do is have a look at the relevant numbers from the Non-Fungible.com market report. Buyers lost approximately $1.2 billion trading NFTs in the first quarter of 2022. This is offset by a gain on the sale of $3.3 billion. He did not explain how expert Henrik Plotz calculates a winning probability of less than 1:140 million.
But that’s not even criticizing him. In the interview, he said the following: “It’s not even a zero-sum game, but a negative-sum game, because every move, really every action I do with it, there’s a transaction fee. It can be anywhere from $60 per promotion […]. this [das Prinzip]The bank always wins. The bank is the people who run the blockchain.”
This accusation is wrong in several respects. On the other hand, transaction fees are incurred when making a purchase, but these fees do not always have to correspond to the stated high amount. It depends on which blockchain you bought the NFT on. In the case of NFT trading on the Ethereum blockchain, the transaction fee might be the amount already mentioned. On the other hand, if you buy NFT on Solana or Polygon blockchain, the transaction fees are close to zero.
The statement that the bank is a blockchain operator is particularly deadly. Because transaction fees primarily serve to ensure that miners receive an expense allowance. If you think more about his statement, NFT trading could drive up the price of the coin in question. This is where the coin holders will earn. Unless they own any coins, blockchain operators do not earn from transaction fees incurred nor from price increases.
Accusation 2 – The deceiver is the only one who gets rich with deceit
In this claim, Amamieh addresses a very important topic. Because with the booming success of NFTs, many scammers have entered the market as well. This is how methods such as the laundry trade, bid scams, and rug pulling have emerged. In addition, Frontal criticizes the lenient handling of scams by the FTX exchanges and Crypto.com. So you only see advertising sites with a vision of the future, but no information about the risks.
We definitely agree with this. With the responsibility of being able to offer a financial product, the risks must also be explained. Especially in the NFT market, where there are now a lot of scammers, beginners should be brought closer to these topics.
It is still not clear how to control the problem of scammers. The solution could be a tutorial that everyone should watch before they can buy an NFT. This allows beginners to learn the basics in no time. It can also prevent FOMO purchases.
Charge 3 – According to Frontal, NFTs do not provide a secure legal basis
Since the crypto sector is largely unregulated, the legal situation is often unclear. Thus, Frontale’s assertion is understandable. What you get with NFT is not yet clear. One has to understand that one does not get a JPEG file, but only a link that is stored on the blockchain.
Therefore, buying an NFT is still associated with risk. Until there are clear laws on copyright, you are in a gray area. However, Yuga Labs’ case could provide an initial direction. A Los Angeles court is currently hearing the case of Ryder Rips, who copied his Bored Ape yacht collection “from irony” and sold it for about $1.5 million under the RR/BAYC name.
Should Yuga Labs win the case, it should be a win for the industry. On the other hand, losing a case may throw the NFT industry into disarray. Thus, to date, buying an NFT always involves a risk.
Charge 4 – He claims to me that energy consumption is detrimental to the market
Here the first claim is indicated. As always, it depends on the blockchain being used. Cryptocurrency Ethereum, which is still using a Proof of Work mechanism, is currently consuming a lot of electricity. So, with merging, you’re switching to a more environmentally friendly Proof-of-Stake consensus mechanism. Solana and Polygon, who are also used to trading NFTs, already use this. Thus, the energy consumption used is highly dependent on block chains and cannot be generalized.
In addition, it is questionable whether the Proof of Work consensus mechanism is always harmful to the environment. Bitcoin already uses more than 50% of sustainable energy and is helping to encourage the transition to sustainable energy. We explain the topic in this post.
Conclusion from Frontal – NFT is nothing more than a scam
The final section looks at the future of NFTs. Here, Frontal asks expert Henryk Plötz if NFTs can develop use cases in any industry. He answers, “For every app you can think of, there is an easier way to do it, and it has already been implemented. Criminal fraud is useless.”
This statement is just a hoax. One can certainly criticize and question the usefulness of PFP-NFTs, but calling the entire future a scam is wrong. Otherwise, how could a multibillion dollar market based solely on fraud emerge? Why do people invest over 12 billion in the market when the whole thing is a scam? These two questions alone should be enough to invalidate the expert’s statement.
NFTs already offer a variety of use cases, be it as a means of crowdfunding a football club, monetizing computer games or creating digital objects for the Metaverse.
Has the Front submitted an objective report on this subject?
The question that remains open at the end of the report is whether Frontale reported objectively on this subject. You can answer yes. Because some of the claims are certainly understandable and justified. Unfortunately, reports are deteriorating due to inaccurate information and questionable experts. So statements like, “The bank is the operator of the blockchain” simply cannot be justified at the reporting level. Moreover, a trusted expert who is supposed to be familiar with this field cannot claim that there are no use cases for NFTs.
If that were the case, no one would invest in the area. But evaluating new technologies is not easy. It can be argued that there is still a long way to go for NFTs. First of all it is a copyright issue. Because then the conditions are better clarified and the market can continue to grow. In addition, as a result, scammers are on the decline and the market is becoming more sustainable. In conclusion, one can say that NFTs are still in their infancy and that not every direction of NFT has to be approved. However, the potential for NFTs is there and it will be interesting to see how NFTs will develop in the future.