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The Dark Side of NFT: Top 3 Controversies Explained

NFTs

Non-Fungible Token, or NFT, is one of the biggest revelations in the crypto industry, allowing digital artists to bring their work to millions of viewers and hundreds of prospective buyers with complete ease.

But, the utility of NFTs goes beyond art. Companies are now using NFTs to facilitate customers’ exclusive products, events, and experiences. Thus leading to the skyrocketing popularity of the token in the last couple of years. However, as incredible as NFTs are, they are not without disagreements and backlashes.

So here we are unraveling the top three NFT controversies that you ought to be aware of. But, let’s begin with understanding what NFTs truly are:

What is NFT?

In layman’s terms, NFTs are one-of-a-kind digital tokens that provide someone ownership of a work of art, such as a film, song, or photograph, through a series of computer transactions on the Blockchain network.

Traditional cryptocurrencies, such as Bitcoin, are interchangeable. NFTs, on the other hand, are unique digital works of art. (It’s like how you can easily exchange a $20 note for two tens but not a Leonardo for a Monet.)

The market for purchasing and selling NFTs is growing at a breakneck pace. There’s a lot of cash on the table. And the world of non-virtual art is taking notice. Artists with a track record of work are creating NFTs, and prominent art auction houses such as Christie’s are organizing auctions for the new-age art investments. As a result, NFTs appear to be emerging as a new component of 21st-century art.

But, what appears to be the most revolutionizing moment in tech history from the surface, is actually riddled with confusion, disagreements, and controversies. Currently, the three significant controversies plaguing the growth of NFTS include:

The Climate Controversies Swirling Around NFTs

If you google NFTs and climate change, you’ll discover a plethora of publications on the subject. Obviously, with the rise in popularity of NFTs, the debate has gotten more heated than ever.

NFTs and their cryptocurrency counterparts have one thing in common: they use a lot of energy. The mining of Bitcoins is already emitting 38 million tonnes of carbon dioxide a year, more than Slovakia’s net carbon emissions. A study published in Nature Climate Change found that bitcoin emissions alone might lead to a two-degree increase in Earth’s temperature.

To put this in perspective, the daily carbon footprint of Bitcoin is roughly equivalent to watching 57,000 hours of YouTube videos. It also utilizes the same amount of electricity daily that an ordinary American family does over the course of 25 days. Similarly, NFTs have a comparable environmental effect since they require energy-intensive computer transactions to verify and sell the art.

The major factors contributing to the climate controversies of NFTs include:

  • The high energy requirement of minting, selling, and transferring NFTs
  • Power-hungry proof-of-work models of Ethereum and Bitcoin
  • Use of unsustainable sources of energy
  • Added electronic waste

Furthermore, miners are often driven to utilize inexpensive electricity to maximize earnings, according. Therefore the energy needed for these transactions is also a concern (like fossil fuels). There’s also the issue of the technology used: Hardware production and recycling only account for a small percentage. However, employing specialist computers for mining, which might become unprofitable in a few years, generates a lot of e-waste.

The Scams

There are a lot of concerns about the security of NFTs, and we are certainly in the initial stages of a fraud epidemic in this field as more money is invested in these digital assets.

Many experts believe that cryptocurrencies and non-fungible tokens (NFTs), both based on blockchain technology, are secure from hackers. Yet instances of scams still resurface from time to time. For example, a recent report of NBS revealed that in 2021 alone, scammers stole $14 billion in cryptocurrencies. A stark increase of 79 percent from 2020.

According to an article in the Verge, marketplaces where individuals may buy and sell digital assets are also at risk. For example, earlier this year, multiple accounts in Nifty Gateway were stolen, and the hacker was able to access acquired NFTs, swap them for other NFTs, and sell them for a profit.

However, the NFTs were not recovered, even if money was paid to impacted investors.

Other security concerns include Smart Contract vulnerabilities and scams, which are variations of phishing and false personas that criminals have used for years.

Copyright Issues

To an extent, buying NFTs doesn’t imply “complete” ownership. Given the digital nature of the asset, thousands of similar NFTs can be reproduced and downloaded with a simple screenshot.

However, despite an individual officially owning an NFT on the blockchain, digital art thieves can steal it in the form of a complete digital clone.

With the rise of NFTs, scammers have been converting many artists’ artworks into NFTs and selling them on various digital marketplaces. For example, Weird Undead, a Russian artist, discovered her current artwork at auction in the OpenSea marketplace.

Over the years, significant marketplaces, including OpenSea, have positioned internal authorities and tools to block the sale of stone artwork.

However, marketplaces are merely one way to connect with the blockchain. So, even if every significant NFT marketplace included measures to prevent stolen artwork from being minted and vetted by all of its creators—a vast and challenging undertaking in and of itself—no, there’s a method to deter someone from stamping stolen artwork on a blockchain like Ethereum with reasonable simplicity.

NFTs can only ever constitute proof of ownership of themselves in the best-case scenario. External data—artwork, digital objects, and so on—that NFTs relate to must still be verified by third-party systems.

NFT: Much More to the Pitfall

Given the practical characteristics of each blockchain, mapping out the exact structure of how each given NFT or crypto project might be exploited or downright scammed is not easy.

The dominance of technical intricacies in the NFTs and crypto market further makes the market extremely difficult for the audience to make a wise decision. However, simplifying the concepts also comes with the cost of fully comprehending the technology, thus opening gates for more severe privacy breaches and scams.

Currently, most major systems are fraught with critical security and privacy vulnerabilities, a confusing and deceptive feature set, and aspirational claims ranging from moonshots to the virtually impossible.

However, it took almost a decade for cryptocurrency to become mainstream and, the technology still has a long way to go to prove its viability and 100% acceptance (if that’s even possible). And, the same holds true for NFTs.

 

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