NFTs were the hype topic in 2021. For example, users sent NFTs worth at least $44.2 billion on the Ethereum blockchain alone. In the current year, the figures are flattening somewhat, despite all this, sales are still several billion. A recently published report by the public broadcaster Frontal deals with the question of whether it is still worthwhile to enter the market. The title alone: ”NFT: The hype is over & you’re still not Rich – with Aya Jaff I frontal” is more than sensational and calls into question the objectivity of public broadcasting. 4 stated reasons should confirm the stated thesis, in addition, 2 experts will be interviewed. We present the arguments to you and respond to them constructively.
The task of the public broadcaster Frontal
First of all, the task of public broadcasting, which includes the station Frontally, must be considered. This consists of reporting on political and social issues in the most diverse and objective way possible. In principle, public media should contribute to the fact that citizens can form their own opinion on a wide variety of topics. The broadcasters thus provide a basic supply of information for the population while remaining politically and economically independent. Whether the task is always fulfilled is shown in the following.
Accusation 1 – Before you earn, others first earn
This decision is made head-on for two reasons. Because it costs money to offer your NFTs on most NFT marketplaces, such as OpenSea. The question is whether this is reprehensible. At most online marketplaces you have to pay a fee for offering goods. Thus, the principle is present in almost every industry and can not be blamed negatively on the NFT market.
Furthermore, expert Henryk Plötz makes the claim that it is less likely to make money with an NFT than to play the lottery. For this you only have to look at relevant figures from the market report of Non-Fungible.com look at it. Buyers lost just under $1.2 billion from trading NFTs in the first quarter of 2022. On the other hand, there is a profit from the sale of $ 3.3 billion. He does not explain how expert Henryk Plötz calculates a probability of winning that should be less than 1:140 million.
But this is not even his point of criticism. In the interview, he says the following: “It’s not even a zero-sum game, but a negative sum game, because with every action, really every action I do with it, transaction fees are incurred. These can be in the range of $60 per promotion […]. This is [das Prinzip]the bank always wins. The bank is the people who run the blockchain.”
This accusation is false in several respects. On the one hand, transaction fees are incurred when making a purchase, but they do not always have to correspond to the high amount mentioned. For this, it depends on which blockchain you bought the NFT on. If the NFT is traded on the Ethereum blockchain, the transaction fees can actually correspond to the amount mentioned. If, on the other hand, you buy an NFT on the Solana or Polygon blockchain, the transaction fees are close to zero.
Especially fatal is the statement that the bank are the blockchain operators. Because the transaction fees are primarily used to ensure that the miners receive an expense allowance. If you think about his statement further, the price of the respective coin could rise due to the NFT trade. This is where the owners of the respective coins would earn. The blockchain operators earn, as long as they do not own coins, thus neither on the transaction fees incurred nor on the price increases.
Accusation 2 – With Scam, only the scammer gets rich
Frontal addresses an absolutely important issue in this accusation. Because with the booming success of the NFTs, many scammers have also mixed into the market. This is how methods such as wash trading, bidding scams and rug pulls were created. In addition, Frontal criticizes the lax handling of the stock exchanges FTX and Crypto.com with the scams. So you see only visionary advertising spots, but no education about the risks.
We definitely agree with this. The responsibility of being allowed to offer a financial product should also be informed about the risks. Especially in the NFT market, where there are now a lot of scammers around, beginners need to be brought closer to these topics.
How to get the problem of scammers under control is still unclear. A tutorial could serve as a solution that everyone has to watch before they can buy an NFT. This allows you to teach beginners the basics in a short time. Furthermore, this can prevent FOMO purchases.
Accusation 3 – According to Frontal, NFTs do not provide a secure legal basis
Since the crypto sector is largely unregulated, the legal situation is usually unclear. Thus, the assertion of Frontal is comprehensible. What you can buy with an NFT has not yet been clarified. You have to understand that you are not buying a JPEG file, but only a link that is stored on the blockchain.
That is why the purchase of an NFTs is still associated with a risk today. Until there are no clear laws regarding copyright, you are in a gray area. The case of Yuga Labs, however, could provide an initial trend. The Los Angeles court is currently voting on the case of Ryder Ripps, who copied the Bored Ape Yacht collection “from satire” and sold it for just under 1.5 million under the name RR/BAYC.
If Yuga Labs wins the case, it should be a success for the industry. On the other hand, if you lose the case, the NFT industry could fall into a huge mess. Thus, until now, with the purchase of an NFTs, one always exposes oneself to a risk.
Accusation 4 – Frontal claims that energy consumption harms the market
Here it is necessary to refer to the first accusation. As always, it all depends on the blockchain that is used. The cryptocurrency Ethereum, which currently still uses the proof-of-work mechanism, currently consumes a lot of electricity. That is why the merge is a change to the more environmentally friendly proof-of-stake consensus mechanism. Solana and Polygon, which are also used for trading NFTs, are already using it. Thus, the energy consumption used is highly dependent on the blockchains and cannot be generalized.
It is also questionable whether a proof-of-work consensus mechanism is always environmentally harmful. Bitcoin already uses more than 50% of sustainable energy and is helping to promote the transition to sustainable energies. We explain the topic in this article.
Conclusion of Frontal – NFT are nothing more than fraud
The last section is devoted to the future of NFTs. Here, the expert Henryk Plötz asks whether NFTs can develop use cases in any industry. He answers as follows: “For every application you can think of, there is an easier way to do this and is already being done. There is no benefit except criminal fraud.”
This statement is just pure incitement. Definitely, one can find fault with the usefulness of PFP-NFTs and question it, but to declare the whole future as a scam is wrong. How else could a billion-dollar market have arisen, which is based only on fraud? Why should people invest over 12 billion in the market if everything is fraud? These two questions alone should be enough to refute the expert’s statement.
NFTs already offer a variety of use cases, be it as a means of crowdfunding for a football club, to monetize computer games or to create digital objects for the metaverse.
Did Frontal objectively report on the topic?
The question that remains open at the end of the report is whether Frontal has reported objectively on the topic. You can answer it with a yes. Because some accusations are definitely understandable and justified. Unfortunately, the reportage is worsened with inaccurate information and questionable experts. Thus, statements such as, “The bank are the blockchain operators” are simply not justifiable at the level of reporting. Furthermore, a credible expert who should be well versed in this area cannot claim that there are no use cases for NFTs.
If this were the case, no one would invest in the area. But assessing new technologies is never easy. It can be said that there is still a long way to go for NFTs. In the first place is currently the copyright issue. Because then the circumstances are better clarified and the market can continue to grow. In addition, as a result, fraudsters are declining and the market is becoming more sustainable. As a conclusion, we can say that NFTs are still at the beginning and you don’t have to approve every NFT trend so far. Nevertheless, the potential of NFTs is there and one can be curious how NFTs will develop in the future.