Be the first to learn about Non-Fungible Tokens (NFTs) and the new craze to get rich quickly. This article will explain the basic structure of NFTs legal ownership, copyright, fraud, and opportunities. Find out should you trust and invest in NFTs? Is it the investors' dream or a nightmare?
Sellers of NFTs can come up with at least ten reasons to sell the NFT assets, but can the buyers find ten reasons to buy, and should you buy one – that is a million-dollar question. For some, the new craze for Non-Fungible Tokens (NFTs) is exciting to watch like a new blockbuster movie with popcorn and coke, but for some, this seems like an opportunity to make quick and easy money. For some – speculation and even an innovative fraud.
What is a Non-Fungible Token (NFT)?
A Non-Fungible Token (NFT) is a digital asset, also referred to as a crypto asset or virtual asset, that uses blockchain technology to record ownership and evidence authenticity. Put in simple terms, NFT is a unit of data stored on a digital ledger or blockchain, which verifies the existence of that particular digital asset. Unlike fungible tokens such as Bitcoin, NFTs cannot be exchanged or traded for another identical NFT. Today, the most popular NFTs authenticate digital works of art, collectibles like digital trading cards, frivolous memes, famous tweets or posts, or content like video clips, which visually appear in gifs, jpeg, or other media formats.
Legal Ownership and Copyright
So, what do you get when you buy the NFT?
NFTs do not give the buyer the actual physical asset or copyright to the digital asset. In simple terms, anyone can copy or re-distribute the NFT as much as they like. For example, you could be looking at ten pictures that all are the same without telling which is the authentic NFT and which one is a copy of the same.
When you buy NFT, you get a unique unit of data stored on a digital ledger or blockchain. Depending on how much it is worth to you or others, it has created a market of speculative opportunity where buying a piece of a code has become a way to trade these unique digital assets.
The NFT trading market is unregulated and does not follow any conventional legal framework. For example, most market trading online platforms require only basic due diligence checks to validate whether the person selling the “authentic” NFT work is the correct owner. Although NFT transactions can be tracked on the blockchain, as parties do not have to validate their identities to a particular transaction, it can be difficult, if not impossible, to trace those who are in breach of copyright. That makes it impossible for artists to obtain recourse for the illegal use of their unique digital images.
Most people realize that NFTs are open to criticism and vulnerable to fraud. The most heard of activities of fraud connected with NFTs are:
- Speculation - Pump & Dump: this is when fraudsters artificially inflate the price of a particular NFT through misleading marketing strategies to make them more attractive to a potential investor and then place them on the market for sale. It then follows that the price crashes and leaves the investor out of pocket.
- Wallet Hacks: similar to Bitcoin and other cryptocurrencies, NFTs are kept in wallets on the cloud or exchanges. They are constantly targeted by phishing scams or hacked to steal digital assets.
- Social Media Scams: this can involve various fake news and groups on social media. Some target active celebrities, well-known brands, or influencers who then direct their subscribers to buy NFTs that turn out to be worthless, non-existent, or fake.
- Counterfeits: this is when one takes someone else’s original piece of art and appropriates the authenticity and ownership of that asset. That is like impersonating someone else’s original artwork and then monetizing it for financial gain.
- Fake NFTs: some people try to sell the non-existent NFT assets based on the original NFT online stores by using similar web addresses, appearance, and style.
There are certainly legitimate ways to make money with NFTs. For example, this can open a new opportunity for artists to sell their unique pieces of work under the label and tag of “NFT”. As much as it sounds bizarre – NFT might bring in a unique selling point. Another example is developers of games – they are now keen to incentivize players by placing NFT’s in the games as a prize for achieving a particular goal. That is certainly something that would help them attract new subscribers and make more profits in the long term.
Currently, no framework determines the price of a particular NFT. It is open for subjective market interpretation and how much one is willing to pay for it.
Humans are creatures of habits, and we love all the opportunistic new and hate good old boring. Could NFTs be one of them? I hate to give you this boring answer…but the time will tell.