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NFT is a pretty controversial topic. Some people say this technology was created to launder money or support terrorism.
How can a digital picture be worth 69 million USD (Beeple NFT)?
The value proposition for NFTs can vary, although the basic idea stays the same. With blockchain technology, we are able to price, monetize and own digital information.
Before blockchain, almost every piece of information (or a bit of information) was stored on a centralized server owned by a big company like Facebook or Google.
When you write a blog post it’s not yours, when you publish a digital artwork its not yours. This problem is especially relevant in the digital art industry, before NFTs there was no way to check the authenticity of digital artwork.
Blockchain is a trustless, distributed public leader which in simple terms means that it is a fully independent, trustworthy and transparent server (anyone can validate any information).
NFT means Non-Fungible Token, it differs from cryptocurrency in the fact that it is unique. One NFT token =! the other one even if the information that it represents is the same.
So what are the advantages of NTFs?
- Ownership – anyone can own a part of the internet
- Authenticity – NFTs allow validating the authenticity of a digital information
- Creation of Economic Opportunity – Ownership is transferable, which means that you can sell or exchange an NFT for anything else. Imagine you are a popular pop star and you write a song. You can make this song an NFT and easily sell for example in a charity auction.
And what are the disadvantages?
- It isn’t easy to buy an NFT – it requires to setup a cryptocurrency wallet and have knowledge about blockchain technology
- Creation of an NFT is expensive – it can cost up to hundreds of USD.
- Price is extremely volatile
- Most of the projects are scams.
Many of these arguments are a far cry from the objective truth. They more resemble a stereotype than an argument.
Yes, it isn’t easy to buy an NFT or to create it. But the adoption curve is extremely steep and it is getting easier every day. It wasn’t easy to use a spreadsheet in the 1990s too.
The same can be said with respect to the cost of NFT creation. The cost is connected to the very fundamentals of blockchain which at this point has limited transactional capacity, but it is improving. For example, in September there was a major update of the Ethereum blockchain (the most-used blockchain in the world), which improved the number of transactions per second from 15 to a 1000.
Volatility is the price for growth. The faster technology moves the more ups and downs on the road. This is especially relevant to expectations connected to the specific technology. This leads to bubbles and manias like the dot com bubble or NFT bubble in 2021.
To sum up, in my opinion, NFT technology has unprecedented potential to revolutionise all digital secotrs of the e-economy. Social media, gaming, the creator economy and many more. All the disadvantages are only connected to the status quo of the technology adoption cycle and their significance will decrease with time.
Sources:
- https://cryptopunks.app/cryptopunks/details/3101
- https://seraf-investor.com/compass/article/know-when-hold-em-know-when-fold-em-timing-exits-coincide-key-company-inflection-points
- https://101blockchains.com/advantages-of-nfts/
- https://thenftbrief.com/why-are-nfts-bad/
- https://medium.com/@qubecryptospace/what-is-nft-and-why-is-it-so-popular-64b3ee62d86a