I’m a science fiction writer, so naturally I think everything futuristic and technological is cool, right? Wrong. I’m actually conservative when it comes to technology change. Heck, I hung onto my twelve-year-old laser printer until it got too expensive to maintain. I insisted on keeping 1947 rotary-dial Western Bell hooked up to my VOIP landline until two years ago. Worked great, until they turned off pulse dialing. I’m saying all that so you understand why I’m giving this PSA: NFTs are bad. The technology, while interesting, is too prone to manipulation. We don’t know who’s using them, we don’t know what their long-term ramifications are, and until we do, I’m treating them as a scam. Let’s take a deep-dive on why:
First of all, what are NFTs? Non-fungible tokens (NFTs) are unique (tokenized) virtual items that you can buy or sell. When someone buys an NFT from the creator, they obtain ownership in the sense that it becomes their property. After all, an NFT is a digital certificate of ownership representing the purchase of a digital asset, traceable on the blockchain. This means:
- NFTs are not interchangeable
- NFTs are not available in unlimited supply
- No NFT has intrinsic value to it
But how does that work? To understand that, we need to understand how blockchain works:
If you continue reading the article linked in the picture, you’ll learn that ‘Blockchain is a distributed or decentralized, public ledger on which transactions of different kinds can be recorded. For cryptocurrency, these transactions are financial. For NFTs, these transactions or data record the nature, location, and ownership of tangible and intangible assets. Now, the copies of these NFT linked digital assets like artwork, music, stories, films, videos, etc., are still available online. But what an NFT buyer gets is exclusive ownership of the original asset. At the same time, the creator of the asset can retain its copyright, patent, or any other IP right, while selling the right for personal ownership. Similarly, the license to commercially use a digital asset can also be distributed through NFTs.’
If you find that confusing, please know that I had to simplify that explanation to understand it better myself. Essentially, it means you can purchase via blockchain the right to say you own the NFT of something, whatever that is. It doesn’t mean you own the thing, it just means you own the NFT of the thing. Actually ownership of the thing is a separate purchase, which also may be done by NFTs if the owner agrees to it (but they probably won’t).
This technology changes the nature of purchasing goods and services. NFT transactions may, in the future, extend to purchasing things like cars, homes, intellectual property. You can’t fake an NFT, it’s ownership cannot be questioned.
Understanding that will help you understand why, as this Redditor points out, there’s a lot of people who feel that they’ll be worth a lot of money someday, that digital art can be treated the same way as physical art objects you can buy and hold. Enough people believe that these will be valuable in the future that they’re willing to spend lots of money on them now. But we’ve seen speculative collectable markets like this in the past and they rarely end well. Consider some examples:
It gets worse, there are examples of NFTs being stolen and resold by unscrupulous scammers, taking away the opportunity for artistic and creative people to (God forbid) actually profit from their hard work:
These unfortunate examples do not mean that NFT technology is bad unto itself. No, we can all agree that the technology is good, but what it’s being used for is bad. Selling me a bridge you don’t own, even if the bridge itself contains cutting-edge innovation, doesn’t change the fact YOU’RE SELLING ME A BRIDGE YOU DON’T OWN. Nightmare stories about scammers taking billions via cryptocurrency leave me no other conclusion but to say that NFT transactions are not ready for my money.
I’m saying that because discussions around NFTs often skirt the real and unsolved problems of a virtual market selling virtual ownership using real money. We’ve seen this type of behavior before, from the Tulip mania of 1637 until now, how many well-intentioned people lost fortunes of money on speculative bubbles. I have no intention of being one of them; until NFT transactions can demonstrate how they won’t be used to facilitate speculative bubbles, I recommend you to do the same.
But let’s say you know all this and you want to try anyway? Sure, you do you. I’m not your dad. Some people successfully find that fine path through the chaos to fortune and success. If you think you can be that person, I won’t stand in your way and I wish you the best of success. Just remember, the early bird gets the worm, but the second mouse gets the cheese.