Non-fungible tokens, or NFTs, have become somewhat of a buzzword in recent times as world markets open up to the possibility of trading and generating revenue through non-traditional means. NFTs are unique digital components that can be traded virtually using blockchain technology. Each asset traded in the NFT markets is “non-fungible” and one of a kind. In other words, if you trade an asset for another, the asset you acquire will be entirely different from the one you previously owned.
What makes NFTs special?
Although NFTs have picked up steam of late, having generated a turnover of $25 billion in 2021, much public unfamiliarity regarding the digital asset base remains.
As established earlier, NFTs can be anything from a digital piece of art to even a tweet. Operating on cryptocurrency, NFT markets are projected to eventually grow into digital art collecting spaces.
When compared to traditional tangible assets, NFTs have much more to offer with regards to seamlessness and safety in the form of hacker-proof blockchain technology that tracks and records each and every transaction made over the platform(s).
Additionally, NFTs can aid in the bifurcation of asset ownership, including physical assets like real estate and jewelry. Branching out to NFTs can also help investors diversify their portfolio, while facilitating marketplace efficiency by doing away with middlemen.
The dark side of NFTs
As fascinating as NFTs have come to become, there is also a dark side to the digital asset trading platform(s), marred by fraud and illegality.
A recent Reuters report revealed some questionable practices in the NFT markets where assets sustained unusual price hikes within a short period of time, contributing to the growing concern of NFT trading platforms aiding in dark, and even unlawful trade practices.
A notable example would be of the image of a person from “Meebit”. The digital image was sold in crypto with a value amounting to a whopping $50.6 million in the NFT market. But in a strange twist, the original owner was able to repurchase the NFT in just five minutes for about $49.6 million — a million dollars less than the previous selling price.
In addition to that, industry analysis organization, Chainalysis, reported that the NFT market is also turning out to be a hub for certain illicit activities like wash trading and money laundering. Even though each transaction is recorded on the NFT blockchain, it does not store information of the parties involved.
Moreover, since NFTs operate on cryptocurrency, they also pose a significant risk to the environment as crypto mining consumes an immense amount of energy. However, experts contend that NFTs are on track to curbing pollution by reducing travel and the need for workspaces, thereby reshaping global markets.
NFT markets posit an attractive investment opportunity with an increasing number of users joining related trading platforms. However, investors are advised to proceed wisely when it comes to investing in NFTs, and should be mindful of volatility and the factors that drive markets.