Drs. Quinn and Jonathon Button spoke about the utility of NFTs and how the market for them is growing in a way that shapes worldwide economic markets. The development of NFTs over recent years has been rapid and controversial due to its revolutionary nature. While NFTs certainly have been given utility and value, there are still many questions and concerns that I believe must be addressed before NFTs are accepted as the new normal.
The Utility and Value of NFTs
There is no arguing that NFTs have value. Consumers have given them value in the same way as cryptocurrency, but even beyond the demand for the NFTs themselves are the utility they have been given within market spaces. This is really exciting from an entrepreneurial perspective because it has opened up ways to promote engagement with a company, better market, or add value to their own market space. Specifically, the use of a secondary market to drive up the price of an original good is something that I can see transforming the way we view economics. Partnerships between corporations, people in the entertainment industry, artists, and more using NFTs has created unique ways to reach consumers and added value to products that already exist while at the same time adding value to NFTs.
Lack of Transparency
While NFTs have certainly been given value about the consumer, it is certainly worth considering that these are high risk investments and that value is certainly not guaranteed. Specifically, some NFTs have no value at all when purchased, and it is simply based on whether that particular NFT gains popularity or the one selling the NFT decides to offer perks to being in their NFT “club.” This is particularly concerning to me as someone with an admittedly low risk tolerance because unlike traditional investments where you purchase something that has value and run the risk of it losing value, these investments have no value and they could eventually gain some value. When an NFT is purchased, there is no degree of certainty about what you are truly buying beyond the virtual artwork. This concept is a bit intimidating as someone who likes to know what I’m buying and make as informed of consumer choices as possible.
Difficulty Accessing Information About NFTs
While its certainly not possible to have perfect information about every purchase one ever makes, NFTs seem particularly tricky because there is a lack of information about them. Or at least the information about them is hard to access. The speakers made a point to mention that Google likely will not be much help in understanding what the world of NFTs is truly like. They went on to say that you must talk to people who have been in the NFT space for a long time and learn by investing yourself. This is already difficult enough for many people, but they also said that they don’t typically share all the information they gave us with others. If most people in the NFT space similarly hold information close to their chest, but they are the only gateway to understanding how NFTs work without jumping in and investing yourself, informed decision making becomes very difficult.
Questions about the Security of NFTs
NFTs are advertised to be extremely secure, and this is one of their main selling points over traditional money or investments. However, there are a few questions that need to be answered before I fully buy in to the argument of the security of NFTs. First, the company which spoke in the video following the presentation by Drs. Button mentioned that NFTs can be group owned. This seems to throw the idea of ownership out the window because if they are group owned, it seems that one person could steal the NFT for themselves if they had the correct code for it. It is possible that this is a misunderstanding of the technology rather than a flaw of NFTs. More importantly, there have already been many cases of NFTs being stolen from people which means that it is certainly possible. As technology advances, the capability of hackers to steal NFTs as they currently stand will grow. I am fearful that the advancement of this technology would require a complete restart on the NFT system with more secure technology, rendering currently held NFTs useless because of how easily stolen they will become. Growing technology is inevitable, but with a unique token NFTs seem to have a limited ability to adapt to this growing technology to maintain security into the future. This may make NFTs a poor long-term investment as are most technological purchases that tend to quickly depreciate.
I think it is clear that there is more than just a piece of art to NFTs, but there’s more than just the tangible that goes into the decision to buy them. These are still risky investments, so one’s own risk tolerance is important to consider based on personality and disposable income available. Additionally, one must consider the time they have to truly look into and understand the NFT space before they can make informed purchases, and this will likely be more difficult for NFTs than for other investments. I don’t see myself investing any time soon, but I am excited to watch the developments into the future.