What Is the Craze With NFTs? Are They Just A Ponzi Scheme?

2021 was a really great year for NFTs. OpenSea, one of the largest NFT marketplaces, had a transaction volume of $14 billion in 2021, which is 646x of that of the previous year. Around 29 million wallets traded NFTs in 2021.

But even now if you ask someone what an NFT is they’ll probably have no clue. Some people will tell you that it’s digital art and others will tell you that it is an asset. 

What is an NFT

Let’s say you make an ebook using a template. You plan to have a giveaway and award one of your subscribers this ebook. Since there is only one ebook, it has a perceived higher value, and the lucky subscriber will feel very special. You might even make three different ebooks on different topics for three lucky subscribers. (this is how ERC-721 works)

On the other hand, you can use this template to make a mass circulated ebook. Since there are multiple copies of the same ebook, the perceived value will be lesser than that of the first example. The template and ebook(in both cases) are analogous to smart contracts and NFTs respectively.

How are Nfts special?

Let’s look at how NFTs are being used right now. Creators make NFTs with images that they created. A buyer buys the NFT because they like the image. But the image is there for the public to see and anyone can download it. 

So why are people buying them? The only reason is hype. Thanks to great marketing, people have been sucked into buying NFTs of no value. What value does an image of a monkey have? People buy them hoping that the next person is dumber than them. 

Do NFTs have any value?

While NFTs are not being used in the right way, they do have value. They are proof of ownership validated by the blockchain. NFTs can be applied in any industry where proof of ownership is used, such as ticket sales, real estate, etc. 

A more straightforward use case is that it is proof that your content is stored on the blockchain. Putting your art on OpenSea, an art marketplace will ensure that it is stored on the Blockchain. Writing an article on dArticle.io ensures your writing lives on the Blockchain. 

Final Thoughts

Blockchain technology is still very new. Its true potential will only be realized when mass adoption happens. Till then, we will just see different ways in which people try to earn some quick money.