NFTs. What are they? Are they good for the sector? Are NFTs good, bad, or pointless?

Hey, Kieron Cartledge here, AKA the Global Sales Director from Baanx Group Ltd. In this article, I am going to be discussing NFTs.

What are they? Are they good for the sector? Are NFTs good, bad, or pointless? Along with a couple of other points too.

I am not trying to sway any opinions here as we all have our own, right? This is what makes each of us individual. Anyway, now I’ve given the disclaimer, let’s jump into it.

?What is an NFT?

An NFT, or a non-fungible token, is a digital token that is unique and cannot be replaced with another. On the other hand, tokens like Bitcoin are fungible because they are equal in value; you can trade your Bitcoin for another, and you will end up with Bitcoin in both cases.

You can compare NFTs to something like Pokémon Cards - one-of-a-kind trading tokens that if you trade one for another as you did in the school playground, you will receive a token that’s completely different from the one you gave away. Some collectors even trade NFTs for other NFTs, which is known as swapping.

NFTs can be anything you want them to be! They can be a jpg image, music, digital art or trading cards.

Are they good for the sector?

There are many opinions out there about NFTs and whether they are good or bad for the sector. The excitement around NFTs feeds a similar narrative to other recent price surges we have seen, such as the Dogecoin price increase in 2021.

We’ve seen many celebrities, music artists and YouTubers like Logan Paul, Grimes, Akon and many more releasing their own flagship NFTs to ride the wave. Big brands are also jumping on board, with companies like Adidas, Nike and Bape gearing up for the Metaverse and the future of Web3.

But there are more than just the big brands that are benefiting from NFTs. We must look at the humble unknown or underappreciated artists, games developers, music artists and many more that NFTs are helping to get their names out into the world. We can use the Bored Ape Yacht Club as an example. This project was created by four friends who just wanted to see if they could test their skills and create something ridiculously dope.

Well, they did! BAYC was built on the Ethereum network and has an average price of 16.4 ETH and a total volume of over 400 ETH.

If we look back in history, it will tell us to be careful about dismissing NFTs as a passing fad! A lot of other technological innovations often become clearer once the hype dies down. If we take a step back in time to the late 90’s during the first wave of the dotcom era, many people believed it was a bad move. Fast forward to the present day and EVERYONE is using it! How many of us wished we had listened to the crazy guy in the office raving about Bitcoin in 2017, when the price of a coin was about $250? Now, one BTC is approximately $45,000 per coin!

Are NFT’s bad?

The main concern facing NFTs are simple:

1)????The environmental impact

2)????Rug pull NFT scams

3)????NFTs are in their own bubble

What is the environmental impact of NFTs?

Let’s start with the environmental impact of NFTs. The NFT space is highly reliant on cryptocurrency mining, which consumes huge amounts of power. The most used blockchain for NFTs is Ethereum, which uses on average the same amount of power of a small country, while a single Bitcoin transaction uses more power than a million Visa network transactions. Meanwhile, a single Ethereum minting transaction can use around 35 kWh of power - more than the average UK household does in a day!

We can flip this argument though, with the creation of blockchains like Solana, Polygon and of course Tezos, who is a long-standing believer in the adaptation of a greener ecosystem. For instance, minting or mining on the Tezos blockchain uses the same amount of power as sending a tweet - a whole lot less than the power of a whole country!

We could also argue that having a trading card NFT game is no different to cutting down trees in the Amazon to create a real-world trading card game.

What is a rug pull and why is it bad?

Now let’s look at rug pull scams.

In simple terms, a rug pull occurs when an artist, creator or project suddenly stops backing their idea. The results of this would be that the price of the NFT falls to zero and in turn, means the investor or holder of the NFT is out of pocket.

Let’s take Frosties as an example of this. The creators were super active on social media about the project and managed to build up a HUGE following, while their NFTs were flying off the shelf. However, on January 10th, the Frosties website, Discord and Twitter accounts had completely vanished! The creators had withdrawn nearly $1.1 million of ETH over two days to their own crypto wallets. This left investors out of pocket and at a huge loss, not only financially but also in the NFT market. This was the biggest scandal of NFT fraud in 2022.

There are many other examples on the web, but platforms like OpenSea or Tezos-based marketplaces have been able to limit losses of such scams. However, the biggest downside of this type of scam is that it’s almost impossible to blame a single person or party, so the likeliness of regaining funds is very low.

What we have to remember though is that every sector has a similar “rug pulling” mentality. In other words, there are these types of scams happening across all sectors, not just cryptocurrency.

NFTs are in their own bubble

The hype of the NFT space, the sheer speculative and the gains made from minting, buying, selling and creating tokens have led to many people (both in and out of the crypto community) to believe they are in a bubble that could burst at any point! This is because people are over buying NFTs, expecting their investments to soar, which in turn could result in no one being able to sell them, as the prices will become unaffordable.

The underlying issue is that people are treating NFTs merely as profit, and not as a useful piece of technology innovation. Some people have even gone to say that NFTs have no fundamental value at all. On the other hand, some would say they create artificial scarcity to inflate the value of certain digital assets.

Ubisoft recently put their hat in the ring and have said that they are going to get involved in NFTs. This created a huge wave of arguments throughout the NFT and gaming space. Some gamers believe it is hard to see how they can benefit from the move as it is not at all clear how NFTs can serve to make games better. Many argued that platforms already offer in-game purchasing for mods, and so the feeling is if it isn’t broke, don’t fix it.

Summary

To summarise, there are both pros and cons of NFTs and I think it is down to the individual to get involved in the space if they want to. I, as Kieron Cartledge, like them, I own them and I play P2E NFT games. I feel they have a great influence on the market - we could use them as a form of digital identity for travel, KYC and more. I also like how they help new artists get seen - it’s basically digital graffiti!

As for the environment, there are lots of blockchains out there that are looking to adapt this space to make it even more eco-friendly, such as Tezos and Solana.

I also think bringing NFTs into the gaming sector is a great idea too. Just think - cross-platform transferring of data and mods, as well as being able to trade mods offline. Isn’t this one of the reasons BTC was first created in the days of WOW?

Again, this is my opinion. You can make up your own mind and there are plenty of publications out there in the market that is discussing NFTs. One piece of advice I would stress though is to ALWAYS do your research before buying anything!