NFTs - The Good. The Bad.

Blockchain, NFT -

NFTs - The Good. The Bad.

The thought of someone placing value on a digital asset is probably foreign to a lot of people out there. I mean, why would anyone want to own a digital asset when, instead, they could go to an art gallery, trading-card shop, sneaker store, or anything else and hold a physical item before a purchase? My guess... it's just the world we're starting to live in. The younger generations have grown up in a digital world. They've grown up with smart phones. A constant connection to the internet is their norm. People are spending hundred to thousands of dollars on digital skins for games like Fortnite, League of Legends, Call of Duty, Apex Legends, and many more. They're just virtual items, but it's a way of making yourself look unique while playing with your peers in a digital universe. In other words, sometimes gamers just need to flex on some kids... in the digital world. My nephews don't want to do chores so they can go purchase a physical item a physical store. They want V-Bucks; Fortnite's digital currency that can only be obtained through purchases with real world currency through the game's digital store.

But now NFTs have entered the arena (non-fungible tokens). There has been a lot of talk about NFTs over the past ~9 months along with a MASSIVE HYPE TRAIN the past couple of months, I'd say. NFTs are amazing, but there are also some short-term negatives that I'm concerned about. Let's dive in...

I'm not well-read on the underlying technology of NFTs (blockchain) but the TLDR version of NFTs is that the blockchain acts as a certificate of authenticity for the digital asset; the NFT. Marketplaces are popping up all over the place where someone can go create (aka "mint"), buy, & sell these digital assets. Since the asset exists on the blockchain, there is a safe record of who the current owner of any NFT is, and since an owner of a digital item can now be tracked that means they can sell their assets. They can also purchase other works from other people. Every transaction is logged on the blockchain, maintaining data integrity so it's known who the creator is and who the current owner is. For the first time ever, an artist can make royalties off of 3rd party sales of their asset in perpetuity. Typically, you sell an artwork, take the profit, and that would be the end of any income from that asset. With NFTs and these marketplaces, if someone sells an acquired artwork for a higher price, the original artist will rake in a percentage of the sale; a percentage value that they set when they originally minted the item.

In recent months, the hype train has come chugging through at high speed. We're starting to see tons of "communities" pop up around randomly generated avatar project. Basically, a group of people get together, create some art pieces that can be layered on one another (eyes, mouths, ears, hates, glasses, hair, etc.), and run these images through an algorithm to generate a full avatar (a donkey with gold fur, sunglasses, pierced nose, gold grill, and a cowboy hat). The average amount of these avatars being created seems to be around 10,000. 10k unique avatars that are generated, minted, and sold for a set amount of cryptocurrency. Most of these drops are selling out immediately, and most people making the purchases are looking to get rich quick by reselling that same avatar. Unfortunately, a lot of these buyers are going to lose a lot of money. Artists & engineers saw the massive potential to make money, and now we have multiple avatar drops happening per day. Granted, some people want to form a legitimate community around their projects, but I'm fairly certain there are some grifter amongst us. BAYC, for example, has a strong community and I'm sure will survive after this train crashes and burns. But the majority of these project are creators & buyers just looking to make some fast money, and I don't think this is going to end up well for a lot of the buyers.

Speaking about buyers losing money, I wish that the influencers with these large followings would put warning labels on their posts. I'm sure some of them are 100% genuinely excited about NFTs the their future, but when you have thousands or hundreds of thousands of people listening to what you have to say, you need to warn people and tell them to do their research. Not every now and then. Every message should have a warning label. Warn them to be carful of the hype because it's not a true expression of the market's value right now. I'm seeing far too many influencers posting about NFTs & certain projects they've bought into. I'm sure they know that some of those followers are going to immediately buy in on a project they're promoting, and it just feels icky when they aren't warning others about what they're getting in to. I'm sorry for sounding so doom & gloom over here! I just feel it's necessary to talk about the negative impact the hype is going to have.

So, if you're new to NFTs, please do your research! I've yet to purchase my own NFT, but I have my eyes on one extremely promising project. It has a strong community with a lot more to offer than just hype, an avatar, and FOMO. Don't take my word for it though, check it out yourself --- https://discord.gg/thehundreds.

NFTs are at the forefront of the digital frontier. Come on in & be careful.

- Austin "Panda" Keller