The topic of NFTs has been gaining popularity in recent months, mostly because of celebrities’ engagement in them. It has been a recurring topic in the space of crypto, as some investors decided to put huge amounts into some tokens. The case of the $69 million purchase of a digital art piece by Beeple has been the prime example of the scale of some NFTs.
When popular influencers, Logan Paul, for instance, started to speak more and more about their NFTs, the wider publicity got suddenly interested in the topic. So, for all of those, who are not yet familiar with the concept, let us explain it briefly. Basically, the tokens are something unique that could not be duplicated or replaced, and therefore granting the owner the full ownership of the said file. This could be anything, from the mentioned art piece to some abstract concepts, or even the video of LeBron James dunking (this particular one got sold for $208,000).
How was the concept of NFTs greeted?
There were two distinct reactions among the public to the NFTs. On one hand there was an important question about the main purpose of it, as it could seem abstract to pay such sums for something that could be literally watched online. Others believe that NFTs are an important step towards the new digital era, as they allow implementing the new basics of digital private property. NFTs show us (on a smaller scale), how the proofs of ownership should be handled.
Nick Ayton, who founded and is the CEO of Chainstarter Ventures, has been trying to answer the question whether NFTs are anything other than Emperor’s new clothes. As he has a huge experience in AI (Artificial intelligence), as well as quantum computing, his expertise became really valuable when it came to assessing the vulnerabilities of NFTs, and the possible trouble with third-party involvements. Finally, he stressed how NFAs (non-fungible assets) should replace NFTs (non-fungible tokens).
There is still a lot to be found out about NFTs
The transactions are still something new, and there is a high risk that a lot of people engaged in it do not really understand the risks that it brings. Of course, currently there is a big hype around the tokens, but we can never know how the prices will behave, once the dust will have already settled down. There is also a popular misconception about the non-fungibility notion, as the tokens are not digital assets. Rather than that, NFTs should be considered as digital certifications, an online ownership verification tool.
Nick Ayton argues that tokens are a proxy. They really do not hold any value, and do not represent it. In general, NTF is a simple mean of exchange, and when you are purchasing one, you are buying just the token. The fundamental issue with it is that the transaction is not peer to peer. In fact, it’s separated with a different one, being done between an individual and miner. To put it in short – you’re not buying anything from another ‘user’, but rather making a transaction between your wallet and miner.
To read more about this very problematic topic, you should definitely join the Disruption Banking website, where you will find a brilliant piece by Benjamin Jenei. The author gives a really interesting and in-depth analysis of the possible dangers, and what is more important, precisely explains the nuances of how the NFTs work.
In the piece, you will also find a really compelling interview with Nick Ayton, who as an expert in the field. Through his impressive experience, he was actually able to shed some more light on some pressing issues that appear with NFTs. Ayton is currently working with Zenotta AG, the Switzerland-based company. It has an aim of establishing a sustainable electronic trading system that would be based on peer-to-peer transactions. That is where the proposal of non-fungible assets comes in. If we manage to make data intelligent and (what’s most important) unique, we’d actually be able to make it have some value. Currently, this is impossible in the token-based model. To see why, use the link and access the brilliant piece by Benjamin Jenei: