Is There Anything but Scams in NFTs?
At the beginning of 2022, global non-fungible token (NFT) sales surged past the $4 billion mark. People all over the world are on a spending spree, buying up.
JPG images with apes, beluga whales, kittens, you name it. The more people buy it, the more Google searches for “NFT scam” there are. It is easy to come up with such a conclusion, as high price tags on regular memes make you think that NFTs may be a get-rich-quick-scheme.
Moreover, many celebrities fuel this idea by suddenly becoming engaged in buying NFTs. We made an attempt to figure out if it is only about the scam and whether there is a potential for something good.
A quick reminder on what an NFT is
The key is in the word “non-fungible,” which basically means that the item is unique and can’t be interchanged for anything else. This works for many personal things one has, as you are unlikely to go selling pictures you drew as a kid, and you won’t try to exchange your dog for somebody else’s.
On the contrary, fungible items are things that make the economy work beyond barter relations, i.e., money. You may exchange your dollars, euros, yuans, rubles, or yens to the same amount of the corresponding currency.
The token part in the name means that each NFT has its unique ID on blockchain and is governed by a set of rules, known as smart contracts. By “tokenizing” a certain digital asset, you sign it, making it one-of-a-kind. Thanks to blockchain, you may trace all operations with it, thus, having royalties from all transactions.
The idea of NFTs is easier to understand when comparing it to collectibles. This probably explains why celebrities prefer the hyped hi-tech to old coins and postage stamps.
NFTs are often an image, music, or video, and storing that much data on the blockchain would be mind-bogglingly expensive. To make it work, NFT smart contracts include a URL that points to the asset, which means that by buying a token, you get just a link to the image. This was supposed to be a temporary decision but turns out that it is here to stay.
That’s where things get tricky, as the smart contract proves that you own the token on the blockchain, which links to the asset. This means that NFTs have nothing to do with copyright and can’t help in the court of law, should a dispute arise.
Read why NFTs are not Copyrights here
Another problem is that there is no way to justify the price of an item. It is set by a buyer and nothing stops the price from rising by enormous amounts until there is hope to sell it at an even greater price. The fact that some collectors are willing to pay massive amounts of money just for the uniqueness of a product only further inflates prices.
Paying $600,000 for an image anyone can save from their browser can be unsettling. But most NFT traders don’t read that part, with fear of missing out (FOMO) gripping hard and making them buy the stuff. This problem leads to a growing number of scams, and we are going to give you a few tips on how to avoid them.
NFT scams and how not to fall victim to it
First of all, think carefully about whether you really want to buy a tokenized picture, tweet, or music piece. Let’s face it: you can’t get rich quickly and with no effort, and anyone who tells you otherwise is apparently a scammer.
Second, if you still want to do so, only use major NFT marketplaces. Do not trust people direct-messaging you on Discord promising to provide you with a “uniquely unique NFT of uniqueness” for $10. Do not click on links they offer, as most likely this is phishing.
Then, if you have obtained an NFT, store it on an external disk known as cold storage, to preclude it from being stolen from you.
Finally, think again about whether you really need to buy it beforehand. Because even with all the scammers around, the main danger of NFTs is that all your investment in them may be rendered worthless in a very short period of time.
But is it all bad? Isn’t there a positive side of the NFT technology that can actually help honest artists and designers? Yes, there is.
The good side of NFTs
As we stated earlier, buying an NFT means owning a unique hash on the blockchain with a record saying that you now have a hyperlink to your favorite meme. This doesn’t mean owning the artwork itself. It doesn’t even equate to printing an artwork’s photo because, in this case, you at least have a physical copy. This happens because there is no international compliance on NFTs.
Two distinct features of NFTs that make them highly valuable are:
- authentication of ownership and origin
On most NFT marketplaces, creators are given royalties of the sale price each time a piece of art is sold. Artists may choose their royalty percentage, and all the payments are carried out automatically.
Signing files by tokenizing them may help to determine the time of creation, as well as the fact that you are the creator of it. But the technology must first be viewed by courts as trustworthy, and also there must be ways of preventing people from tokenizing things they do not own.
Naturally, not a single country will allow anyone to claim that they own any rights on the image of the country’s historical landmark. But in terms of transferring copyright on things like CAD files, it may improve the lives of millions. It would require an open and understandable regulatory framework that would minimize the possibility of fraud.
We work hard developing BORIS, an Autodesk Inventor plugin for securing your CAD files.
Our solution also plans to employ NFT technology to develop software for managing individual licenses. The derivative NFT structure will help BORIS manage digital contracts (NDAs, NNNs and licensing agreements).
Also, the structure makes it possible to authenticate the ownership and origin of a tokenized item (3d model), thus, additionally securing your CAD files.
So we are on the way for NFTs to become a trustworthy tool for transferring copyright and protecting IP.