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- Non Fungible Tokens are used as an investment
- The underlying asset of NFT is still not complete
- Innovations of Ethereum 2.0 and Cardano smart contract systems prove to be solutions for NFT loopholes
Money and cryptocurrency are fungible exchanges, meaning one part or quantity can be replaced by another component or amount. NFT (Non-Fungible Tokens) are like a certificate or a ledger for owning a real estate piece. It cannot be replaced by other property. The main reason why the property is valued is its location, and it is unique. Ownership of a file in NFT is tangible and unique. It is recorded in the owner’s name. It can be transferred to others through the process of blockchain on the Ethereum network currently.
NFT took the art world in a new direction
In no time, NFT has taken the art world by storm. On March 11, 2021, Christie’s auctioned a collage composed of 5000 digital pieces, and it was sold for $69 million. It is the third highest-ever sale for a living artist in all mediums. We can see NFT of the New York Times column earning half a million dollars for charity. Artists looking to monetize digital art and investors look to trade it like another commodity. The founder of Twitter sold one tweet for $3 million.
NFT’s will have different values for each asset, and it is only worth what the other party is willing to pay. Its price could increase depending on how much the buyer is willing to pay. The artists can receive the proceeds of the sales in each transaction; no matter how many times the deal happens, artists would receive the share.
Failures of NFT
An artist recently calculated why NFT is proving an excellent carbon emission for the planet. Six of his NFT, in ten seconds, results in the same energy consumption of his art studio in two years. Another resale of his work equals one more year of energy consumption. He tries to cut his energy usage yearly. Chains of supercomputers track whether the transactions are valid. Doing this consumes so much energy.
Around 70% of miners are said to use clean energy. Many are discouraging mining even in clean energy sources because this would encourage others to use where there is non-availability of clean energy resources.The main issue surrounding NFT is security. Technology is made to overcome forgery, not theft. If someone steals NFT and sells it to others, the new owner’s name would emerge on the file using the same platform. There have been instances of separate chains of origin of the same art that has been reported.
Technology itself is good, but underlying the NFT’s, some websites can be hacked. One of the major marketplaces of NFT is Nifty Gate. Thousands of dollars worth of assets were stolen and sold on other platforms, making technology not complete enough to handle hackers’ threats.
Ownership of the art is at stake
The question of ownership is an important part of the transaction. As a new technology, many arts are reported not of the original owner, but someone copies the file on artists’ websites and auctions it without their knowledge.
NFT files stored on the internet can be found either through URLs or IFPS, which can create multiple future problems. In URLs, files cannot be accessed if any problem in the server or any link is broken. IPFS files have a decentralized way of storing data; even if artwork goes missing or stolen, no one can tell what the token it means to represent.
In Conclusion
There is still no paperwork in NFT’s, stating the conditions in which the purchase of artworks is happening. NFT works based on trust that sellers are not screwing you over. Ultimately you are buying a collection of metadata defining what you own. The next big innovation is in ethereum 2.0. This is based on a less energy-intensive process called proof of stake.
Charles Hoskinson, the founder of IOHK, announces Cardano sets to focus on the NFT. marketplace. Cardano is a completely innovative smart contract solution that would be the solution for NFT challenges. Only innovations would answer how NFT is going to function in the coming times.
