Right-click save? 4 NFT myths and why they’re misunderstandings

The dialogue surrounding NFTs is full of confusion and misunderstanding. The technology is complex, and many people spread misinformation as a result. Let’s explore the truth behind four of the most common NFT myths.

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@enter.artPUBLISHED 27TH APRIL 2022

Myth 1: NFTs are an environmental disaster

The environmental impact of NFTs has been a major talking point since they first entered the conversation over a decade ago. The perceived issue is this: the proof-of-work model used by major NFT blockchain networks like Ethereum requires enormous amounts of electricity. Miners use supercomputers which are so specialized that they are difficult to recycle and resource-intensive to make. Many headlines highlight this energy consumption, comparing Bitcoin’s energy consumption to that of entire countries.

There is some accuracy to these criticisms, but in reality, the issue is far more nuanced than these headlines would have you believe. First of all, not all blockchains consume equally. Bitcoin is the worst offender, currently consuming around 130 TWh hours annually. Ethereum, by comparison, used to consume around 26 TWh annually. After their recent transition to Proof of Stake, Ethereum now runs the blockchain on a mere 0,0026TWh a year - a whopping 99% reduction in energy consumption. 

The transition to more energy-efficient systems goes much deeper than just introducing more efficient networks. The traditional proof-of-work model is slowly being eclipsed by the proof-of-stake model, which requires no specialized equipment and is estimated by some to be up to 99.99% more efficient than proof-of-work. When more blockchains transition to the new model, energy concerns will be negligible, especially with more and more electricity coming from renewable sources.

Don’t get us wrong, we understand the need for more energy efficiency, but progress is steadily being made and all signs point to this becoming less of an issue as this new industry gains more momentum. Ethereum already has already transitioned to Ethereum 2.0 and vastly reduced their energy consumption. Meanwhile, other networks like Avalanche have already become carbon neutral.

Myth 2: NFTs are worthless

This is maybe the silliest NFT myth, but it’s common nonetheless. When people see stories about NFT collectors spending millions of dollars on pictures of cartoon apes, they think the whole world has gone crazy. If you don’t know what NFTs actually are, the idea of a digital image or short video being owned and traded might seem silly. Some go so far as to joke that they’re ‘stealing’ your property by right-click saving images of an NFT.

The truth is, when an NFT is sold on a blockchain network, a permanent record of the transaction and the new owner is coded into that network. It can never be altered. Even when sold, the old record will continue to exist. Someone might save an NFT image, but they will not own that NFT and can’t sell it. It doesn’t exist as an asset to them. It’s akin to little more than taking a picture of someone else’s original painting.

Much like traditional art, NFTs are worth what someone is willing to pay for them. Value changes are based on basic supply and demand economics. It should be clear based on the countless NFT sales that occur every day that they aren’t worthless.

NFTs have far more applications than just digital art. NFTs can be used for many other purposes that also have an established monetary value, like providing tickets to an event, a discount on merchandise for a brand, or access to exclusive content like new skins in a game or bonus tracks on an album. As time goes on and blockchain technology develops further, new applications will provide new sources of value.

Myth 3: NFTs are a Ponzi/pyramid scheme

The term pyramid scheme gets thrown around without being properly understood often, so let’s briefly define it. A pyramid scheme is a business model in which money is constantly collected by new investors and given to previous investors, making it look like their investment is actually making returns when in reality, their asset is worthless. Pyramid schemes can only continue as long as there are new investors. Pyramid schemes are technically illegal, but they continue to exist in various forms anyway, including some multi-level marketing schemes that spread through social media.

There are several reasons NFTs don’t fit this description. First of all, a hallmark of pyramid schemes is that investors are constantly recruited and promised a return. It isn’t a secret that NFTs and cryptocurrencies are risky and speculative investments, and there is no guarantee of a return. 

Additionally, nothing deceitful can be hidden in an NFT sale. The smart contracts that make the existence of NFTs possible are transparent and immutable. Anyone can view a smart contract and verify what it does, then make a decision about a purchase based on factual information and their personal risk tolerance.

Another hallmark of pyramid schemes is that the asset in question is either useless or worth far less than is promised. While some NFTs exist solely as a speculative asset, many have real utility. For instance, if you buy an NFT that acts as a concert ticket, you’ll be able to get into the concert in question (assuming the smart contract is developed properly). NFTs with utility are becoming more and more popular, and if your goal isn’t to resell an NFT at a higher price later, any resemblance to a pyramid scheme disappears completely.

It is possible to buy an NFT and find it to be worth less than you invested in the long run, but this risk is no different than investing in a small tech startup or any other high-risk, high-reward asset. Yes, buyers should be wary, but the system isn’t predatory by nature.

Myth 4: NFTs are too confusing to become widely accepted

If you’ve ever tried to explain blockchain technology to a friend or family member who isn’t tech savvy, you may have left them scratching their head. The concept is admittedly pretty difficult to wrap one’s mind around. As a result, it’s seen by many people as too niche to gain widespread acceptance. How can blockchains and associated technology like NFTs and cryptocurrency become a part of mainstream culture if it only appeals to a small, tech-forward subset of the population?

Because blockchain technology is so new, it’s still finding a name for itself. Many people want to understand how it works before getting involved. The truth is, though, that we’ve already reached a point where you can interact with blockchains without understanding them in a deep way. You can buy crypto coins through apps that resemble stockbroking apps. You can buy NFTs on marketplaces where the process isn’t much different than buying retail goods.

The average person doesn’t understand how a debit card works, but they still use them. The same can be said about countless other pieces of technology that we use on a daily basis like microwaves, televisions, and computers. Those interested in learning the details of how blockchains work will always have the option, but it’s far from necessary. Over time, it’ll become easier and easier to participate regardless of your depth of understanding.

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