Five things you weren’t told about NFT's that you need to know
Five things you weren’t told about NFTs that you need to know
NFTs are increasingly popular on the Internet, but they are still a recent phenomenon and therefore represent a “mystery” for many people. Acronym for “non-fungible token” (“non-fungible token”, in free translation), this technology has opened a market for exchanging high-risk digital assets, which can expose users’ privacy and favor the application of millionaire scams. In addition to debates about the security and reliability of investments, NFTs also raise discussions about the environmental impact caused by the production of cryptocurrencies. In the following list, TechTudo addresses these and other aspects related to the NFTs market. visit 5score.com
NFT It’s easy to fall victim to scams. With the popularization of NFTs, scams involving digital assets are becoming increasingly common. Some were even responsible for millions in losses. In August 2021, for example, criminals used the artist Banky’s name to sell a supposedly original piece for £244,000, the equivalent of R$1.7 million at the time. In the end, the material was not the artist’s, and the buyer ended up at a loss. In September of the same year, an embezzler pretended to be a digital artist and presented an art collection on NFT to investors. He even showed some of the alleged 8,000 pieces on his Discord channel and pre-ordered 2,000 NFTs, sold for 0.5 Solanas, the cryptocurrency used in these negotiations. However, instead of receiving the artwork, buyers were given a random collection of emojis. The scammer is believed to have raised the equivalent of US$138,000 (or R$649,000). After the coup, the young man disappeared with the money invested. Similar cases have been reported, and there is a common point between them: the combination of anonymity and the lack of means to verify the authenticity of the material. As, in general, the inattentive user may not have mechanisms to confirm the originality of the content, nor the identity of the person who trades it, the NFT market ends up becoming an attractive option for scammers.
NFTs are traded through the cryptocurrency exchange And this electronic mining process is extremely costly from an energy point of view. As mining consumes a lot of electricity, it ends up negatively impacting the rates of carbon emission in the atmosphere and can significantly interfere with the increase in the greenhouse effect and the cycle of climate change on the planet. A 2021 study from the University of Cambridge in England indicates that mining virtual currencies such as Bitcoin and Ethereum for a year can represent a greater energy consumption than a country like Argentina spends in that same period of time. On a smaller scale, it is possible to compare an NFT purchase transaction to the daily consumption of an electric shower. The Ethereum currency is one of the most used in the token purchase process and can represent the consumption of up to 48 kilowatt/hour per transaction performed. This is equivalent to the monthly consumption of 30 minutes a day of a shower with about 3,500 Watts of power.
The notion of ownership of an NFT is questionable When you purchase an NFT, you are buying a digital certificate registered on the blockchain that gives you ownership of a digital file – be it a . JPG image, an animation, a video, or a song, among others. What not everyone knows is that the copyright of the piece remains the property of the author. Without authorization to explore the work, the buyer, in theory, could not even display the material in a gallery or website. Furthermore, it is worth asking to what extent it makes sense to spend money to have the right to own the original version of something that is perfectly reproducible. After all, do you need to own the original? JPG file of a meme or digital art, for example, to enjoy them? The answer, of course, is no. This helps explain why NFTs have increasingly become a speculative medium in which investors seek profits, and not necessarily appreciation of digital art and culture.
NFTs can compromise users’ security and privacy Cryptocurrency transactions operate in a tenuous context of anonymity. You may not even know who is behind a wallet, but you can clearly map your transactions onto the blockchain. NFTs, on the other hand, end up allowing user-identifying data to be easily intercepted. For example: if you buy an NFT of a certain image and start using that image as an avatar on a social network, it will be easy to identify the transaction related to the purchase. This consequently reveals your cryptocurrency wallet and your entire transaction history. Something similar happened to US TV presenter Jimmy Fallon. He bought an NFT from the Bored Ape Yacht Club collection and showed it on TV: within minutes, Internet users were able to identify the transaction that had made the purchase, the wallet used by Fallon, and all the transaction history associated with it.
NFTs are not a good investment If you look at NFTs as a form of investment, it’s important to know that tokens are high-risk resources. The moods of the NFTs market fluctuate a lot and, unlike government bonds or corporate stocks, there is no way to attest to the intrinsic value of the asset purchased. Today, for example, NFTs from the Bored Ape Yacht Club collection, which features images of bored monkeys, are valued in the thousands of dollars because there are buyers who agree with that value. The problem is that once this type of content goes out of style or the masses change their minds – and this happens quickly and with great frequency – NFT can quickly lose value. Thus, what was bought for a few thousand reais becomes an image quoted at just a few cents.