Although anyone can create unrestricted NFT tokens, once the "zero cost" NFT floods the market, the supply of creation overwhelms the demand, which may eventually lead to a price collapse.
NFT, is it another blockchain trend, is it capital for investors to show off, or is it a bubble that is about to burst?
When a digital artwork was sold at a stunning price ($69.35 million) at Christie’s auction, the winning bidder did not get anything tangible—no sculptures, paintings, or even prints.
Instead, he/she got a unique digital token, which is called "NFT", or non-homogeneous token.
Note: The picture above shows the digital mosaic "Everydays: The First 5000 Days" by encryption artist Beeple (formerly Mike Winkelmann), which was auctioned off at Christie for a final price of US$69.35 million
The so-called "non-homogenization" in NFT means that no two tokens are the same and interchangeable, and each token is unique.
Traditional fiat currencies (such as the Indian rupee and the US dollar), and even common cryptocurrencies such as Bitcoin and Ethereum can be interchanged with each other and have the same value. For example, the 100 US dollars in your hand is essentially the 100 US dollars in my hand. no difference.
If you send someone a bitcoin, he/she will return it, and the returned bitcoin must not be the one you just sent.
However, each NFT has unique attributes, so it cannot be interchanged with another NFT. In the digital world, NFT is an "asset" that can be bought and sold like any other physical asset.
Why do we need to apply NFT to digital collections and artworks?
In the digital world, all content is reproducible. If you want to forward an image to 10 people, just keep the original image and create 10 new copies at the same time.
However, blockchain technology does not allow people to copy the cryptocurrency NFT, nor does it allow people to spend the same token twice.
Why does the market hype about NFT?
As people spend more time looking at the screen with their mobile phones, our lives have become digital. In fact, in the past few years, we have had unique digital products such as game tokens, game props and other collectibles. They are all uniquely marked and can be transformed into NFT in essence.
Of course, the concept of tokenization has existed for many years, but in the recent period, one is the upsurge of cryptocurrency, and the other is that digital art sold through NFT has been sold at extremely high prices. Both have greatly stimulated Market interest, such as:
Well-known investors such as the owner of the NBA Dallas Mavericks and billionaire Mark Cuban have been exploring the NFT. On the NBA Top Shot website, you can see many exclusive stars’ "highlight moments" video NFT.
In February of this year, the digital collection distribution and trading platform Foundation tweeted that the Nyan Cat digital animation artwork created by artist Chris Torres was sold for 300 ETH (approximately US$585,954) in the NFT auction.
Twitter co-founder Jack Dorsey (Jack Dorsey) launched the first ever Tweet NFT, bid up to 2.5 million US dollars.
Any unique digital “asset” can carry the NFT label. Under the current market boom, these NFTs can obtain high valuations in a short period of time, and the range of assets is also all-encompassing, such as the new release of the rock band Kings of Leon. Albums, various cute cartoon cats (mostly in the name of digital art), or many other things in between.
Are there any benefits to NFT?
It is undeniable that NFT has solved many problems existing on the Internet. As everything becomes more digital, it is necessary for the digital world to replicate physical attributes such as scarcity, uniqueness, and proof of ownership. In the Netflix science fiction series "Black Mirror", even human consciousness can be uploaded online in the future. The introduction of NFT actually solves the uniqueness of digital goals to a certain extent .
Every NFT has an owner, and the owner's information is recorded in the public blockchain, and anyone can easily verify it. Artists and other creators can not only enter the global market through NFT, but also retain the ownership of their works, and can even directly request for resale royalties.
Of course, NFT may have other benefits, and maybe you can use NFT as collateral for decentralized loans in the future.
It should be noted that NFT valuation has experienced traditional hype and bubble cycles. Even the digital artist "Beeple" admitted this in an interview with the BBC (an NFT artwork created by "Beeple" was recently sold for $69 million).
What are the caveats of NFT?
However, NFT is essentially the only label for assets, and the value of NFT should not increase just because of the label.
If you have to make a comparison, NFT may be very similar to the unique barcode affixed to the package in the express service. Each package has a barcode. Although the barcode is useful, it does not have any impact on the value of the package itself.
In essence, NFTs are no different. They are like unique barcodes, except that they are decentralized and based on the blockchain.
In addition, NFT also has a dark side, especially some media hype, making people think that they can make a lot of money in the NFT market, plus Twitter founder Jack Dorsey and Tesla founder Elon Ma Industry leaders such as Elon Musk are also actively promoting the NFT trend, causing many people to be very excited about this emerging Internet concept. Looking back on the past market development, perhaps we can see some clues:
During 2016-2017, we saw a bumper harvest in the "Initial Coin Offering" (ICO);
During 2018-2019, we saw a boom in "securitized token products";
During 2019-2020, we have found that Decentralized Finance (DeFi) has become a hot topic in the market;
Now we have NFT.
For those who are not optimistic about NFTs, one of their biggest "accusations" against NFTs is that they feel that this emerging field has formed a scarce market because everyone can create unrestricted NFT tokens. In the real world, artworks are not made at "zero cost", which is the biggest difference from NFT.
However, once the "zero cost" NFT finally floods the market, it will cause more and more creators to try to profit from this craze, supply will overwhelm demand, and eventually cause prices to plummet.
On the other hand, although the essential value of NFT is a kind of "authenticity proof", the problem is that people can even create an NFT for a "thing that does not exist at all." For example, if an artist has never created a painting, but publishes a fictitious NFT online, who can verify it?
From the perspective of energy use, both cryptocurrency and NFT transactions seem to be unsustainable. The energy consumed by a Bitcoin transaction may be equivalent to the energy consumption of 700,000 credit card swipes; Ethereum transactions are very slow and gas costs are expensive. .
It is said that the performance of NFT transactions is even worse. A single NFT transaction involves multiple digital processes. From creation, purchase, to sale and resale, each step requires a lot of energy. Statistics show that the average power consumption of NFT is about 340 kWh, which means that the carbon footprint is as high as 211 kg.
Another uncertainty is that, in essence, the value of NFTs may be completely separated from the digital goods they mark, thereby destroying their original value.
For example, if a certain NFT marks a painting, after the NFT is sold, the original author can actually change his paintings, and all the "only NFTs for new paintings" can still get copies for free, then those sold in the past What is the value of NFT?
So, if you are still considering buying NFT, please consider carefully and carefully read the contents and questions mentioned in this article.
Unless you are a creator yourself, NFT will not provide any cash flow. Not only that, if by definition, NFT is not even a real asset.
If you want to make money, the only way is to find other NFT buyers. This means that once the bubble bursts, you may only have the "right to brag".
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