Buckle up and prepare yourself for some NFT myth-busting!
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NFTs in a Nutshell
#1 NFTs Are All Digital Art
For now, NFT artworks are the NFT sales that dominate the conversation in the mainstream media, mostly because of Beeple. Once Beeple’s “Everydays - The First 5000 Days” NFT sold through Christie’s auction house for $69 million, the world woke up to NFT artworks.
For instance, should we one day decide to store our identity data like passport information as NFTs on a blockchain, the passport data itself wouldn’t be placed on the blockchain as a token.
Instead, the NFT would act as proof of your passport details and would point to wherever your full passport details are stored off-chain.
For the next few years, most of the NFT sales you are going to read about will mostly be digital artworks. But in the future, we could see copyright, intellectual property, or even housing deeds stored on the blockchain as NFTs.
#2 NFTs Are Just a Fad
And now they are back, but this time saying that NFTs offer nothing more than a minor technical novelty and that they will be gone or worthless in a few years. Given the hundreds, if not thousands, of possible use cases for NFTs, it’s just not plausible to say that NFTs are going to disappear overnight.
Also, NFTs grew into a $41 billion market in 2021 and are fast catching up to the total size of the global fine art market, it’s fair to say that NFTs aren’t going away any time soon.
However, that’s not to say that some or even all NFT digital artworks will not lose some value over the years, because some of them definitely will. So can we say with 100% certainty that NFTs aren’t a fad? Of course not. But are they going away any time soon? Of course not.
#3 NFTs Are a Get Rich Quick Scheme
This is an odd complaint to have about NFTs, mostly because the majority of artists who sell NFT artworks, and the collectors who buy them aren’t getting rich. A few certainly are, and more probably will be, but for NFTs to be one giant rug pull, the vast majority of NFT collectors would need to be getting rich, which just is not happening.
As we said previously, it is certainly possible that NFTs will be worth a lot less tomorrow than they are today, but that doesn’t mean they are a scam.
To put it another way, think about NFTs as if they were diamonds or emeralds. If we all wake up tomorrow and agree that diamonds and emeralds are worthless, they are worthless. People have been making the same complaint about gold for a long time.
In fact, the legendary Wall Street investor Warren Buffet is famously critical of gold, saying “It doesn't do anything but sit there and look at you." Well, NFTs do a lot more than just sit there and look at you. As we mentioned before, NFTs have thousands of real world use cases.
Of the various complaints people have about NFTs, this is possibly the strangest. There is no centralized company producing and selling NFTs, nor is anybody trying to conscript other people to sell NFTs on behalf of a company in exchange for a slice of the revenue.
#4 NFTs Are Bad for the Environment
This complaint worries a lot of people and is the cause of a lot of vitriol and outrage online. To be fair, climate change is the biggest threat our species faces today and there is simply no excuse for buying something you do not need if it is bad for the environment.
That said, the narrative that each and every NFT trade or minting is always bad for the environment is simply not true. It is important to understand that the minting and trading of NFTs do not necessarily use a lot of energy.
Of course, Ethereum is where a lot of the NFT action happens. It is, therefore, the main culprit for NFTs' poor reputation for harming the environment. But all that will change sometime this year.
#5 NFTs Are Worthless and Useless
If a buyer believes an NFT has value, just as whether a buyer believes an artwork has value, then that NFT or artwork has value. Yes, it is very subjective. But beauty is in the eye of the beholder. So when most people talk about how NFTs are worthless, they really mean that one particular NFT artwork will not hold its value which might be true.
Here, you have to remember that the difference between the value of the concept of NFTs and the value of an individual NFT artwork is not the same. Whether NFT digital artworks will hold their value is certainly debatable, the market for these tokens is already so massive that they simply can not be worthless anymore.
But are NFTs useless? Well, for the next few years, NFTs will mostly be used for creative works like art and music. Still, going forward, the non-fungible tokens will have thousands of possible use cases in basically every industry.
For example, hospitals could store and share patient medical records or identity verification as NFTs, making it easier for medical centers around the world to collaborate. Or we might all be able to store proofs of our academic credentials or identity documents as NFTs as well, making moving across borders faster and easier. Entertainers could soon be selling tickets to their events as NFTs, which could completely eradicate ticket scalping.
In the end, even if NFTs were only ever used in the creative industries, NFTs still would not be useless.
#6 NFTs Are Easily Copied, Which Leads to Art Forgery and Theft
Digital art has had its place in the art world for a while now, but it has always faced the “right-click, save as” problem. In other words, it is really easy to duplicate and re-upload elsewhere.
And while NFTs certainly go a long way to solving the problem of proving ownership of digital artwork, people can still easily reupload artworks as NFTs and pass them off as originals. So how do you know that the NFT you already own, or the one you plan on buying, is legit?
For now, you need to do your homework before you hand over any money, regardless of which exchange you’re buying NFTs from. The only way you can get duped when buying an NFT from a legitimate exchange is by not bothering to check that what you are buying is the real deal.
So whenever an NFT artwork is minted and stored on a blockchain, an accurate and permanent record exists of when it was created, and by whom. While you can go and mint an NFT that is seemingly identical to a popular or valuable NFT, it’s child’s play to identify the fake one.
So while it is much easier to duplicate a digital artwork stored as an NFT than it is to, say, create a perfect copy of one of Rembrandt’s or Goya’s paintings, it is also quite simple to tell when an NFT is a copy. In the NFT space, just like in the art world, there will always be bad actors hoping to scam any unwary but well-intentioned buyers; you just have to be careful!
#7 NFTs Are Helping Criminals to Launder Money
Regrettably, crypto’s criminal reputation has bled over into NFTs, and people are claiming that criminals like tax dodgers and cartels are using NFTs to transfer stolen money across the world. But is this really true?
Money laundering costs the world economy between two and five percent of GDP every year, or between $800 billion and $2 trillion annually, most of which is hidden through offshore banking. While offshore banking is technically legal, and there are legitimate reasons for using it, its main purpose is to dodge taxes and wealth gained through criminal activity.
For obvious reasons, offshore banks do not share their records, and there are very few accounts showing how and when money was laundered. However, financial leaks like the Panama, Pandora, and Paradise papers have given us a lot of insight into how companies and individuals hide their wealth offshore in tax havens.
The truth of the matter is criminals and corrupt actors have had no problem whatsoever hiding their wealth from governments and regulators long before Bitcoin came along. And with the help from the traditional banking sector, they still do not struggle now.
As you can see, crypto’s role in helping criminal masterminds move their money around the world is negligible.
#8 Buying an NFT Means You Own the Underlying Asset
This myth is more of a technical misunderstanding. When you buy an NFT, you do not automatically take ownership of the underlying asset or copyright or intellectual property rights. In fact, unless otherwise agreed, ownership of the intellectual property stays with whoever made the NFT.
For instance, if you bought a CryptoPunk, you do not have the right to create and sell a range of CryptoPunks.
Much in the same way that buying a special edition CD or record from a band, or owning an NFT of a song, does not give you the right to sell the band’s music online or use their branding to sell your own music.
However, buying an NFT sometimes does include other rights as per the terms of sale, including the intellectual property, but this works on a case-by-case basis. Again, DYOR!