A lot of discussion and debate has happened surrounding non-fungible tokens, and not all of it is true! In fact, you’re likely to have heard some myths about NFTs that are completely false. Let’s take a look at three of the most common myths about NFTs and see why they’re wrong!
NFTs in a Nutshell
A non-fungible token is a type of digital asset stored on a blockchain. They are unique and therefore cannot be replaced by another token. NFTs can be used to represent a wide range of things, from digital art to in-game items. Unlike Bitcoin or other cryptocurrencies, you can’t use NFTs to make purchases or payments. Rather, they are more like investments or collectibles.
To debunk some myths, let’s quickly go over what non-fungible tokens are. Non-fungible tokens, or NFTs, are digital items with proof of ownership, just like unique artworks, stored on a blockchain, such as Ethereum. While most NFTs are created and stored on the Ethereum blockchain, there are many other blockchains which can create, store, and trade them, too. Such blockchains include Zilliqa, Flow, Tezos, Solana, Terra, Cardano, and the new-rebranded BNB Chain.
#1 NFTs Are All Digital Art
Most of the non-fungible (NFT) artwork seen in the mainstream media is through Beeple’s Everyday collection that sells out of auction house Christie’s. As soon as Everydays – The First 5000 Days sold for $69 million, the world became acutely aware of NFT artwork. Which begs the question: are all Non-Fungible Tokens (NFTs) artwork? Not exactly. While Beeple’s NFT may be an artwork, an NFT could be an element of any product. One example of this is when in-game assets, like skins and weapons, are converted into NFTs, which are traded on the global essentially, it’s as if these NFTs exist inside a traditional computer game. Still, whatever the NFT symbolizes is not kept 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.
The passport data itself would not be placed on a blockchain as a token, should we decide to store our identity data as NFTs one day. As a result, the NFT would simply serve as proof of your passport details and would point to wherever your full passport details are stored off-chain. You will mostly be reading about NFT sales of digital artwork for the next few years, but we could see copyright, intellectual property, or even housing deeds being stored on the blockchain in the future.
#2 NFTs Are Just a Fad
25 years ago, a lot of people said the internet wouldn’t catch on or that it would end up as a tool used only by criminals. In fact, this article tells us all the absurd predictions that were made 25 years ago about the internet. In addition, they said nobody would want to stare at a moving picture all evening. Nowadays, most homes have at least one television. Now they say NFTs offer nothing more than a minor technical novelty, and that they will disappear or become worthless in a few years. NFTs can be used in hundreds, if not thousands, of different ways, so it’s just not plausible to conclude that they will disappear overnight.
It’s fair to say that NFTs aren’t going away any time soon, as they grew to be a $41 billion market in 2021 and are fast catching up to the size of the total global fine art market. Also to be taken into account is the growing interest of corporations in NFTs. 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 won’t lose some value over time, since some of them definitely will. So can we say with 100% certainty that NFTs aren’t a fad? No, they aren’t going anywhere anytime soon. Not at all.
#3 NFTs Are a Get Rich Quick Scheme
Despite a lack of hard evidence, some people insist that non-fungible tokens are nothing more than a new type of sophisticated cyber scam, like people will no longer have an interest in these types of transactions in the near future. This time, when the bubble pops, there will be only a few winners and a lot of losers. As for long-term Non-Fungible Tokens, it’s equivalent to playing roulette. Although NFTs will surely be a windfall for some, it’s also an unfortunate circumstance for many others, with most of the profit coming from a small number of artists and collectors. There’s no proof that non-fungible tokens will become less valuable tomorrow than they are today, but this doesn’t make them a scam.
Think of NFTs as diamonds or emeralds. If we all wake up tomorrow and agree that diamonds and emeralds are worthless, they are worthless. For decades, people have been complaining about gold.
The legendary Wall Street investor Warren Buffet famously criticises gold, saying, “It sits there and looks at you.” Well, NFTs do a lot more than just look at you. NFTs have thousands of real-world applications, as we mentioned earlier. Several people on social media claim that NFTs are a form of pyramid scheme that involves recruiting members by promising to pay them if they recruit more.
People complain about various aspects of NFTs, but this is perhaps the strangest one. There is no central company producing and selling NFTs, and no one is trying to recruit people to sell NFTs on their behalf for a fee. Although the idea of NFTs is valid, there are many people out there trying to take advantage of you. An easy way to create a new PFP collection promising to be the next CryptoPunk or Bored Ape is exactly why one needs to do proper due diligence before investing in an NFT project.
#4 NFTs Are Bad for the Environment
A lot of people think that because NFTs are digital, they must be bad for the environment. But that’s not necessarily true! In fact, there are a number of ways to make your NFTs more eco-friendly. For example, you can use a service like OpenSea to buy and sell your NFTs without ever having to create a new one. Plus, there are a number of eco-friendly cryptocurrencies out there that you can use to power your NFT transactions. So don’t let the myths stop you from enjoying the benefits of this new technology!
There are a lot of myths out there about non-fungible tokens (NFTs), such as whether they’re harmful to the environment. But it turns out that most of these fears aren’t based in fact! For example, one myth is that if you have an entire collection of NFTs then each one needs to be stored on a unique blockchain which would be very bad for both your devices and our environment. Luckily OpenSea uses an ERC721 solution that lets you store all your NFT collectibles on one blockchain while still letting you trade them with other users who may be using different systems. So don’t believe everything you hear!
#5 NFTs Are Worthless and Useless
It’s a common misconception that non-fungible tokens are worthless. In reality, they have a lot of potential value. For example, they can be used to represent ownership of digital assets, like art or music. They can also be used to create unique experiences, like in games or virtual worlds. And because they’re digital, they can be easily traded or sold. So don’t write off NFTs just yet – there’s a lot of potential there.
It’s true that non-fungible tokens have some important limitations. For example, because they’re not fungible (which means interchangeable in value), they can’t be used as currencies. But it’s important to remember that their value doesn’t come from being a currency – it comes from what they represent. And as we just discussed, there are plenty of things for which a digital token is much more useful than traditional currency. For example, you might use an art or music NFT to collect original works or support your favorite artists. Or you might use virtual good or game items to buy unique experiences in virtual worlds.