Non-Fungible Tokes or NFTs have become a prominent part of Web3 over the past two years and judging by the numbers they are here to stay. A report by PR Newswire states that the NFT market is expected to grow at a CAGR of 35.27%. This will create greater opportunities for digital artists to flourish. NFTs have also been an excellent way for newbies to enter the crypto space.
But not all of it is going well in the NFT marketplace.
Since the beginning of 2021, the NFT marketplace has grown significantly but not consistently. Let’s examine the below graph to get a better idea of how the NFT market works.
Now, we will take you through the pros and cons that we have identified regarding the NFT space.
Today, NFTs have solved an important problem for digital artists – Proof of Ownership. Earlier, if you are a digital artist – the moment you release it publicly as a jpeg image, it loses its value immediately. With one click, someone can create 100 copies of your art that look just like the original. Today NFTs solve this problem by using blockchain technology to help verify who has the original of a digital product.
2. Sustainable Income
With the proof of ownership feature, anyone can see who is the original owner of the artwork, video, gif, etc. Artists can now sell their unique artwork for a much better price. It also gives the artists the power to sell directly to their audience and completely removes a third-party agent. They can attach a commission to the file. So every time the artwork gets resold, the artist earns a commission on the same. Thus, digital artists can get a sustainable income.
3. Accessible Platform to invest
NFTs today has become another method of investment. While investing in the stock market can be complicated because of all the regulations and guidelines. NFTs are much easier to invest in.
Many NFTs offer more value than just owning a digital artwork, thus improving the user experience. Some examples can be discount offers in stores, free concert ticket entries, receiving physical artworks, and exclusive memberships to enter digital events. NFT holders also get access to pre-launch sale messages when a new line of NFTs is dropping.
5. Creating a strong community
When people share the same passion for artwork, this builds a connection. NFTs have given like-minded people to come together, build a community and keep the conversation going. Doge Fighter NFTs serves as an excellent example of this in terms of building an educational community. It gives people a space – Discord– where they can learn about new investments in crypto and together navigate through each new wave of the crypto world.
1. Ecological effects
Most NFT transactions utilize Ethereum, which, to put it mildly, is not environmentally friendly.
NFTs are made fraud-proof by Ethereum’s proof of work security mechanism. A large number of computers must be running simultaneously all over the world for this procedure to work. This causes high electricity consumption. A single Ethereum (ETH) transaction is estimated to have a footprint on average of around 35 kWh, and this is ludicrously high. To put it into perspective, the ecological cost of tracking sales and bids on a blockchain is equivalent to flying an aircraft for 2 hours! Most NFTs use the Ethereum blockchain and Ethereum already has left a huge carbon footprint.
Climate change is a global issue that should make us question everything that contributes to it. But there are markets that are based on proof of stake and not on proof of work making it much more ecological.
There have been many cases where creators’ artwork has been minted into NFTs without their knowledge. People and bots are turning artists’ tweets into NFTs by tagging their accounts as @tokenizedtweets. When somebody steals a design/ artwork and makes physical copies of it by putting it on t-shirts you can file a legal complaint. But the case is different when things are digital. The buyers are anonymous, the markets are unregulated and there is no place to make a complaint because of NFTs lack of regulations. This forces artists to make their accounts private to keep their works safe. But this means that they are forced to take a hit on their commissions as they are unable to reach a larger audience.
3. Gas Fees
Gas fees are payments that users make on an Ethereum blockchain as compensation for mining on the network. This is different from the commission that artists pay for hosting their NFTs on the blockchain. But gas fees are constantly fluctuating and currently are at a new high. The artist can always look at other networks that do not charge gas fees.
In conclusion the NFT marketplace has its highs and lows but one thing is sure it is here to stay. We have given you the pros and cons now it is up to you to decide if you are ready to jump on the NFT wagon.