Opinion,  Technology

NFTs are Overhyped

Why the vast majority of NFT projects are a complete waste of money

What is an NFT and why do they matter?

NFT is a term that has been appearing all over social media and the news in the last few months. An NFT is a Non-fungible token, stored on a blockchain, which is essentially a digital ledger. NFTs function similarly to a cryptocurrency like Ethereum or Bitcoin. The major difference between interchangeable tokens like Ethereum and an NFT is that each NFT is uniquely different, hence the word non-fungible. An NFT can be a digital picture, song, file, and much more.

Ownership of an NFT does not confer copyright or the ability to use legal action. Instead, it is more of a status symbol, and ownership is unique. Sure, someone can copy the image of your NFT and use it in their profile picture, but that doesn’t mean that they own it. Ownership is unique because there is specific code in the blockchain that ensures only one person at a time can own the NFT token.

There are lots of blockchain networks that NFTs are traded on, the most popular being Ethereum. Others include Solana, Avalanche, and Polygon, but there are hundreds to choose from. OpenSea is the most popular trading platform, recently raising over $300 million in Series C funding. Throughout 2022, I expect NFTs to continue to grow and move into the public eye in more ways than they did in 2021. Celebrities like Jack Dorsey, Snoop Dogg, and Quentin Tarantino, to name a few, all had NFT projects last year.

NFTs have a huge potential to make creators, artists, and buyers large sums of money. It gives artists more ownership, and a more direct and easy way to sell their art, so what’s the problem?

OpenSea Twitter account

Celebrities and NFTs

There has been so much hype around NFTs that the value of most of them are severely overinflated. Some of the top projects, like CryptoPunks, has gained a big enough legitimate backing and following to where the valuation of the tokens makes sense. On the other hand, most of the other projects are cheap knockoffs of the top projects, or just cash grabs from influencers who want to make a quick buck then cash out. Even the big traders who make millions off of NFTs will tell you that most projects are worth absolutely nothing and are flat out scams. There is no intrinsic value or usage for most projects, and some people are paying thousands in ETH to buy a random JPEG of a monkey that will lose all its value after two days, and never go back up.

Rappers, YouTubers, and other social media influencers will hop on the NFT bandwagon, advertising projects that supposedly give all sorts of benefits and gains to its holders. One example of this is rapper 6ix9ine’s Trollz NFT project, that many claim turned out to be a scam. He said in an Instagram post that those that minted it would receive different types of rewards and royalties, and that some of the money would be donated to charity. None of that happened, and his Insta post has since been deleted. There have been thousands of projects like this, where buyers spend a couple hundred to a couple thousand in ETH to mint a token, not to mention the gas fees. They then find that all the tokens end up not even selling for half of what they paid to mint them, and the prices never go up.

The problem with NFTs

Investing is all about the risk to reward ratio. When buying into stocks you ask questions like: will this company make decisions that will make the shareholders happy? Do I think this company is going to continue to grow in a positive direction and will the CEO make the right decisions? When buying into cryptocurrency you ask questions like, does this token have a real use case? Is the team that works on this token marketing it right and moving the coin in the right direction?

When investing in NFTs, at least how they currently stand, it’s hard to ask these questions, because each NFT is fundamentally unique. If you’re minting an NFT from a series of 10,000 NFTs, and the creators say that theoretically 10 of the NFTs from the project will be worth a lot of money, is it really worth it to invest? It’s hard to invest in NFTs, because there are so many things that need to go right for them to appreciate in value, and even if those things go right, they still may not. NFT price really derives from status, if people are willing to pay more for them, then the price increases, otherwise, they are practically worthless. Someone actually needs to buy your NFT, it costs money to list them on a website like OpenSea. Also, literally anyone can make an NFT, it is easier than you think.

The future

It’s easy to look at all the hype and buy into it. The hype around NFTs has created a temporary bubble. The NFT market is overvalued for where it currently stands. The functionality of the market isn’t on par with the volume of money moving through it. While there are some legitimate projects that are both useful and interesting, the vast majority of the current market is full of useless, scam projects.

All that being said, there’s a really bright future for NFT technology. Our world is becoming increasingly digitized, anyone who denies that is living in the past. More of people’s social, professional, and person lives are online than ever before. That isn’t going to change anytime soon. NFTs give a new meaning to digital ownership. Right now, they’re far from perfect; there’s the issue of the carbon footprint, along with the sometimes absurd gas fees. However, there is the idea that artists of all kinds can claim full ownership of their work without a middleman, NFTs can really give power to the people. When that idea catches on, instead of the idea that you can make quick easy money off of selling pictures, the NFT community will finally be moving in the right way.


 You May Also Like

Elijah Pollack is editor-in-chief of Modern Consensus. He has previously co-hosted the Audible podcast Extra Credit. Elijah has published work in the past for Book and Film Globe and The Observer.