Non-fungible tokens, or NFTs, have gained tremendous popularity in recent years. The total number of active wallets making NFT transactions, including buying, selling, holding, or using them in a blockchain application, increased from 89,061 in 2020 to over 2.5 million in 2021 (2,574,302); an increase of 1,822%, as per the 2021 NFT Yearly Report.
Though NFTs have moved beyond digital art and are slowly entering into the Metaverse, there are certain misconceptions or myths which have prevented people from growing their NFT collections:
Before going ahead, let us first understand what Non-fungible tokens or NFTs are.
What are NFTs?
Non-fungible tokens are unique pieces of art, with each having their unique identification
codes stored on blockchain technology.
The data stored in NFTs can include photos, videos, audio, or coded information indicating a real-world asset. In the majority of the cases, NFTs are minted on the Ethereum blockchain in several marketplaces because the blockchain supports smart contracts.
NFT’s cannot be deleted or counterfeited as each NFT is unique or “non-fungible.” Besides, they also give you ownership/copyright over your piece of art/digital assets, and when you sell your NFT in an NFT marketplace, this ownership shifts to the buyer.
What are the few popular myths surrounding NFTs?
NFTs are a worthless investment:
We often hear people say that art is a bad or worthless investment as it cannot be easily converted into cash and is mainly speculative. Meanwhile, in the artistic world, a drastic rise in the cost of some high-profile pieces can overshadow the belief that several other pieces only reduce value. The same is true for NFTs.
There are fewer chances that good-quality assets with provenance will depreciate. Usually, in a good collection, some can appreciate rapidly while the rest at least maintain their value.
NFTs don’t provide you any ownership over your assets
Those who argue that NFTs don’t provide you with any true ownership should note that NFTs are non-fungible. This suggests that the ownership of the NFT only lies with one person.
Since all NFT and digital assets are traded on a blockchain, a ledger cannot be modified, altered, or edited, indicating that the actual ownership of an NFT is set in stone. In this way, any piece of art that is copied or fakes created online is just fake.
There can be several copies of the same NFT, but only one original piece exists. We can all have a copy of Vincent Van Gogh’s oil-on-canvas painting “The Starry Night” with us on our hard drive somewhere, but there is only one original version of the painting.
This has been a constant debate on NFT’s impact on the environment. This has stemmed from the fact that NFT mining and trade require a lot of energy because of continuous mining. Currently, this can be an issue, as many NFT trades take place on the Ethereum network, which uses a considerable amount of energy.
However, this will no longer be an issue as Ethereum will complete its transition from the proof-of-work (PoW) to the proof-of-stake (PoS) model this month. The PoS process is known as energy-efficient because it is poised to decrease energy consumption by 99.95%.
Nevertheless, the industry is well aware of this issue, and efforts are on to find ways to reduce the impact of NFTs on our environment.