Popular NFT Myths Debunked
Crypto Basics

Popular NFT Myths Debunked

8 months ago

Buckle up and prepare yourself for some NFT myth-busting!

Popular NFT Myths Debunked

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Did you know that NFTs are actually part of a massive pyramid scheme spanning the whole world? Or does it sound weird to you? There are lots of shady myths and “wonderful” claims people make about non-fungible tokens. We decided to put the most popular ones together in one place and debunk them. Buckle up and prepare yourself for some myth-busting!

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NFTs in a Nutshell

Before we start debunking myths, let’s quickly go over what NFTs are. NFTs, or non-fungible tokens, are one-of-a-kind digital items, like unique artworks, with proof of ownership stored on a blockchain like Ethereum.
Keep in mind that, while most NFTs are stored on the Ethereum blockchain, Ethereum is by no means the only blockchain that supports NFTs. Zilliqa, Flow, Tezos, Solana, Terra, Cardano, and the just-renamed BNB Chain all support minting and trading NFTs as well.

#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.

And naturally, most folks assumed that because Beeple’s NFT is an artwork all NFTs must be artworks. But the truth is that an NFT can digitally represent basically anything, not just artworks. For example, in-game assets like skins and weapons are increasingly being minted as NFTs and traded on the global markets.
Keep in mind though that whatever the NFT represents isn’t stored on the blockchain. It’s the NFT, in the case of Ethereum the ERC-721 token, that is stored on the blockchain. It points to an asset that lives away from the blockchain – somewhere else.

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

Plenty of people said the internet wouldn’t catch on, or else was destined to end up as a tool only used by criminals. In fact, a look at this article shows all the absurd predictions made about the internet 25 years ago. They also said that nobody would want to spend all evening staring at a box with moving pictures on it as well. Now, most of the people we know own at least one TV.

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.

We also have to account for the rising levels of corporate interest in NFTs already. Nike, for example, has patented a way to verify your trainer’s authenticity using a bespoke NFT system called CryptoKicks.

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

Despite all evidence to the contrary, some people are determined to keep harping on about NFTs being a get-rich-quick scheme or some new complicated cyber scam. This idea is based on the notion that demand for NFTs will suddenly dry up. And when it does there will be a few big winners and a lot of losers. In other words, NFTs are just one enormous rug pull.

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.

On a related note, there are a few people on social media claiming that NFTs are part of a specific type of scam called a pyramid scheme. It involves recruiting members by promising to pay them if they bring more people into the scheme.

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.

However, while the concept of NFTs is legit, as with any emerging technology, there are many people out there trying to make a quick buck of you. The ease of creating a new PFP collection promising to be the next CryptoPunk or Bored Ape is exactly the reason one must do proper DD before buying into an NFT project.

#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.

Blockchains using a proof-of-work consensus mechanism, like Ethereum, do use a lot of energy when minting or trading NFTs. But not all blockchains are based on this scheme. Many others, like Cardano and Tezos, use proof-of-stake to process transactions. This one uses considerably less 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.

After the Beacon Chain merges with the existing proof-of-work chain, Ethereum will use about 99.95% less energy per transaction. This was previously referred to as Ethereum 2.0, but it’s now just being called “the merge.” So once Ethereum’s merge happens, most of the claims about NFTs being bad for the environment will start drying up.
For now, we can at least take some solace from the news that crypto mining has become much greener in the past year. In fact, the Bitcoin Mining Council estimates that between 56% and 67% of all crypto-mining energy comes from sustainable sources. It means a higher proportion of the energy used for this activity comes from renewable sources when compared to the proportion of Germany or the UK’s energy.

#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.

But to understand why you can’t “steal” NFT art, you need to understand what a blockchain is and how it works. A blockchain is a distributed ledger on which you can store basically any information you want. But unlike other shared databases, information stored on a blockchain is immutable, meaning it can’t be changed or rewritten.

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.

This is one of the main advantages NFT artworks have over oil paintings and other classical art mediums. In fact, fake paintings and artworks are a big problem for museums and galleries, as identifying fakes is no easy task. As a matter of fact, back in 2010, the Independent reported that 20% of all paintings held by major museums were fake.

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

Unfortunately, crypto is stuck with its shady reputation from being the currency of choice on the Silk Road, which was a dark web marketplace where you could anonymously buy basically anything, like guns or drugs.

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.

So how much of the trillions of dollars in laundered wealth do you think came from NFTs and crypto? According to Chainalysis, it is about $8.6 billion, or less than 1% of all laundered money globally.

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.

For instance, HSBC was fined nearly two billion dollars not long ago for its part in a money-laundering scandal involving Mexican and Colombian drug cartels. And HSBC is hardly the only offender: Goldman Sachs and Standard Chartered have also paid billions in fines for their parts in money laundering.

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!

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