NFT: a popular trend or the future of the digital world?
There is probably no one today who would not talk about NFT. Last year alone, the trading volume rose 400 times and exceeded the mark of $13 billion. The trend became a real outbreak for people who wanted to get rich quickly by drawing some staff in Paint. So while they keep attempting to do that, let's try to take a realistic look at NFT and its role in the crypto industry.
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What do we know about NFT? To put it simply, it is nothing more than a digital signature stored in a blockchain, which shows that the owner of a non-fungible token has the moral right to own some digital asset, such as a picture, a music track, a video fragment, etc. Yeah, I didn't misspell - the one who bought an NFT has only the MORAL right to own it. No one grants you the legal right to intellectual property. That is why you can often see on the news how someone buys an NFT and announces to commercialize the purchase. At the same time, commentators and lawyers smugly tell him that there are no rights to do that, and if he releases a commercial product, he may face a lawsuit from the rights holder.
Still, in most cases, NFT adepts try to ignore such news, calling out that they can make a lot of money from it. Their arguments involve various celebrities who create and sell off their mainly miserable drawing talents for hundreds and thousands of dollars. Poor fellow Banksy tried to convey his attitude by painting Morons (White), which depicts an auction of collectors with the caption "I can't believe you morons actually buy this shit." However, the Injective Protocol company bought the work for $95,000, created an NFT, and destroyed the painting. Evidently, they missed the message Banksy was trying to communicate. Or they were just in such a hurry to make money that they didn't read the inscription.
So, as we see in the example above, the new technology has a lot of drawbacks to be aware of for anyone who wants to step into this field deeply and permanently.
Key NFT drawbacks
We have already briefly mentioned the first disadvantage: the lack of legal regulation. Buying a digital asset does not give you any legal rights unless a copyright transfer agreement backs it. Another thing that complicates the situation is that the seller, as well as the various buyers, are not prevented from making new copies and trying to sell them as well, even with this contract in place. Especially when it comes to a genuine creative product such as a unique picture, a good music track, etc.
The solution to this problem could be if lawmakers equate the sale of NFTs to formal buy-sell transactions subject to all the duties prescribed therein. This would help solve the problem of asset ownership, but only in those countries where such laws will be introduced. It will require an effort to establish international legislation and ratification by most countries of the world to make this possible worldwide.
We also mentioned the second problem above: the desire to make money doing practically nothing dominates today's society so much that people are simply unable to critically evaluate digital assets for their uniqueness, exclusivity, or usefulness.
As a result, pixel pictures that any school-goer can draw cost hundreds of thousands of dollars. In contrast, buyers pay so much money just to be able to resell such pictures even more expensively. Just business, nothing more.
Unfortunately, the solution to this problem exists, but it will make suffer NFT owners, and this solution is the economic crisis. In times of crisis, the prices of useless things drop rapidly and, in most cases, go down to zero. This means that all owners of such assets will simply lose all the money they invested. It happened in Holland in 1636-1637, only instead of NFT, everyone was buying tulip bulbs, it happened in the 1990s during the dot-com boom, and it will happen in the crypto industry soon.
The third global problem is money laundering. Riding on the wave of hype, there is nothing to stop criminal organizations from laundering enormous amounts of money. By the way, money laundering makes a good background for those who believe that NFT can bring good money - they don't realize that the money was earned elsewhere and that NFT is just a way to transfer it out of the shadow economy. While the assets supporting this goal will still be sold for a lot of money, while all the rest (except for rare cases and the work of celebrities) will meet an unenviable fate.
This problem can be solved by legal regulation and stricter control on the part of law enforcement agencies. In the U.S., The Internal Revenue Service has already announced it will be more closely inspecting investors in this area.
Despite such serious problems, I still think the NFT has a future. Although, it won't be what most people believe it to be right now.
The future of NFTs
Non-fungible tokens have the potential to become a universal ownership certificate for intellectual property. Here's a simple example: you write your own songs. To earn money on them, you must spend a lot of time finding a studio that agrees to buy your songs. Then this studio will do PR and sell your songs on its own. Most of your income in this situation goes to intermediaries.
As for the crypto industry, you can easily create a limited collection of NFTs for your songs and sell them. Moreover, if the first assets can be sold for next to nothing, then with the growth of popularity of your songs, their value will grow, and you will be able to earn even more. You can sell them to the whole audience worldwide. Of course, there will still be the problem of making copies and distributing them illegally, but this can be easily dealt just as it is done now.
Another possible future will be blurring the boundaries between stock markets and improving financial transactions. Companies will be able to issue their shares as NFTs and trade them all over the world rather than in a particular country on a particular exchange under local law. The same will be true for commodity exchanges - futures and options will be redeemed in real time by any companies worldwide, contributing to the creation of the proverbial free market, ensuring the global movement of capital.
The third major change will concern the IT market. Programmers will be able to transform individual codes or even entire software into NFTs, selling them directly to anyone who is interested. Although initially just analogues of existing programs will be purchased, in the future people will be able to create their own versions of personal operating systems by buying different NFTs for different software and combining them with each other.