Non-Fungible Failure: NFTs and The Crash of an Oversaturated Market

I’ll spare you the complicated and highly technical jargon surrounding blockchain and intellectual property rights: simply put, NFTs were not built to last. And really, they’re already dying. In early April 2022, crypto entrepreneur Sina Estavi listed his NFT of Twitter founder Jack Dorsey’s first tweet for $48 million on the major NFT marketplace OpenSea. He had purchased the NFT in March 2021 for $2.9 million. The highest offer he received last week was $6800. In a direct message to Reuters, Estavi stated, “My offer to sell was high and not everyone could afford it.” But perhaps “affording it” is only half of his issue. It doesn’t particularly seem like anyone wanted it, either.

To grossly oversimplify the concept of NFTs, they are code that exists on a blockchain. A blockchain is a public ledger in which information is stored, much like a database. Cryptocurrencies use blockchains to maintain a secure and decentralized record of transactions, and once info is in the blockchain, it cannot be altered. Anyone can view the information stored in a blockchain, which is touted as transparency… but really just leads to dangerous privacy issues. 

NFTs really exist to persuade people to purchase cryptocurrency. As author David Gerard put it, “NFTs are entirely for the benefit of the crypto grifters. The only purpose the artists serve is as aspiring suckers to pump the concept of crypto.” As people buy into Ethereum with the purpose of purchasing or minting an NFT, they raise the value of Ether – Etherium’s cryptocurrency). NFTs don’t have much use otherwise, even in a technological sense. 

In fact, I would argue that NFTs are one of the most reprehensible pieces of digital tech we have seen in a while. The tokens themselves are not the art, nor the tweet, nor the sex tape. In a simplified sense, those files are too large to store on the blockchain efficiently and inexpensively. NFTs are simply alphanumeric cryptographic signatures that both buyers and sellers agree are connected to the work in question. The tokens contain code, a microprogram known as a smart contract — an almost laughable name. Most of these codes simply lead to a link where the image is stored. But these are just as vulnerable to link rot and Ddosing, like any other HTTP link. So it really isn’t as “eternal” as NFT enthusiasts claim–but don’t panic! That alphanumeric cryptographic signature is. In fact, it isn’t unique or even scarce. It is incredibly easy to mint an NFT, so the market is plagued with art thieves. The use of aliases in the marketplace and the natural anonymity allowed by crypto makes it impossible to know whether one is truly buying from an artist or not, with DeviantArt reporting over 80,000 pieces of stolen art listed on NFT marketplaces as of January. The very nature of NFTs makes it far too easy and even rewarding to steal art.

Additionally, the amount of code able to be stored within an NFT is miniscule. Any program, even one just vaguely complicated, needs to be broken up and minted onto multiple tokens. Once minted onto the blockchain, the code is extremely difficult to update, so in a realistic sense, NFTs do not work as a logical or viable piece of useful tech. They are, by design, useless.

The flaws in the NFT market are growing increasingly apparent, and the market is slowing. According to market tracker NonFungible, the average sale price of an NFT is now below $2,000, down from almost $7,000 in January 2022. Cumulative daily sales have dropped from $160 million in January to $26 million in April. Yet, this illusion of a “stable” NFT marketplace continues to be pushed onto consumers, largely because, of course, the NFT community wants it to be pushed on consumers. This has been the mindset since the beginning. This is the false dilemma, the “if you’re not in, you’re out” fallacy. There is a disturbing amount of resistance to skepticism in the NFT community, something not really seen in any other sphere of investing. In NFT spaces, one cannot have a genuine discussion about a project’s viability because everyone has bought in, and wants everyone else to believe it is going “to the moon.” Questions like “What assets do the team possess?” and  “Why should we believe they will deliver on their promises?” are dismissed as antagonistic. Ask these valid questions, and you are a doubter, and you are “not going to make it,” and to quote one of the NFT community’s favorite acronyms: HFSP. Have fun staying poor. 

These questions are not being asked because no one has the answers to them. But truly, those answers do not matter to the project creators, because if they are able to sell a collective fantasy, a reality in which they have succeeded, then they do not need concrete answers. They only need people naive enough to buy in. They capitalize on the “fear of missing out,” or “FOMO,” that is ever so prevalent in the online era. 

Crypto enthusiasts constantly preach about the “long life of NFTs” and “immortality of the market” because they have already bought in — and they only benefit if everyone else does too. The value of NFTs, and crypto in and of itself, is based entirely on public perception. The quite literally intangible market could crumble at any moment, and good god is it crumbling.

By Lyla Guthrie

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