NFTs have been making a big splash in the general mainstream news media for the past year and a half. Be they Beeple’s works or even LeBron James Clip that have been sold for millions of dollars. NFTs have flooded the market and have now become a mainstay of the mass market as compared to their previous status as a niche. This trend of pouring in huge amounts of money is making big splashes everywhere, be they traditional news media, or even digital such as social media sites. Many platforms even have integrated features to make them profile images. At the start, they were making news but not of the good kind, wherein only those able to afford it would be players in this emerging market. But now anyone with sufficient monetary assets can get into this market. This is especially a boon for creators that have found a new way to achieve financial freedom by minting their own artworks as trading tokens.
NFTs or Non-Fungible Tokens in their most basic form are a unit of data stored in a digital ledger, termed blockchain that makes sure that these valuable assets remain absolutely unique and hence non-interchangeable. Think of NFTs as unique pieces of artwork, like the Mona Lisa, there is just one of its kind and they can be traded for cryptocurrency. While anyone can have a copy of this NFT or Mona Lisa, only the original owner of the asset will be provided with proof of ownership which is even more prestigious than copywrites. </p?
(1) Prior to the cryptocurrency era, we weren’t able to own certain pieces of digital data such as images, videos, audio, animations, and posters. But with the advent of blockchain and subsequently, NFTs allow creators to license, sell, or even display their artworks. This then enables tracking of the original creator of that asset and provides them with recognition for their work which was not possible in the pre-cryptocurrency era.
(2) In addition to this recognition, the technology that enables creators to mint these tokens also enables them to come out with different editions of the same artwork with slight deviations. This ensures that the asset doesn’t get devalued as was the case when copies flooded the market in the pre-crypto era.
(3) The NFT technology also enables creators to earn royalties for their work. This works in the way that whenever the asset changes hands via a sale or transfer, the creator of those assets receives a certain percentage of the paid amount thus ensuring that creators receive their due for their work.
(1) The main drawback of this new NFT market is that it is based on the Ethereum blockchain, a digital ledger that uses Etherium as its currency. The blockchain is extremely volatile, this is mainly due to the decentralization that is the main feature of cryptocurrencies. While it is a boon for being untraceable it is this same feature that makes it unpredictable. This can finally cause the price of the assets to regularly fluctuate and may cause creators to lose out on money for their work.
(2) Another limitation of this technology is yet again related to blockchain technology. This is the inclusion of gas fees in every transaction that takes place on the blockchain. Since everything that relates to crypto technology is based in the digital world, it usually takes a certain amount of computing power to enable transactions on this network. The network then charges users a certain amount to enable this transaction, this is what is known as gas fees. This inclusion of gas fees usually drives away lower-end users of the blockchain that are daunted by the huge value hence driving away valuable customers for the creator.
In conclusion, NFTs are a powerful technology that can solve cases of ownership and royalty fees that are the mainstays of the traditional art market. But as is with any new technology it comes with its own set of drawbacks.