How did NFTs lose their brightness?

Enthusiasts promote NFTs as a user-friendly entry into the crypto space.

A host of celebrity endorsements helped inflate a multi-billion dollar bubble around digital tokens over the past year, but cryptocurrencies are collapsing and some fear NFTs may be next.

NFTs are tokens associated with digital images, “collectible” items, avatars in games or properties, and objects in the evolving virtual world of metadata.

People like Paris Hilton, Gwyneth Paltrow, and Serena Williams have bragged about owning NFTs, and many under the age of 30 have been persuaded to gamble for the chance to make a quick profit.

But the entire industry is currently suffering from a rout with all major cryptocurrencies depreciating, and the signs for NFTs are mixed at best.

According to the non-Fungible analysis firm, the number of NFTs traded in the first quarter of this year fell almost 50 percent from the previous quarter.

They believed the market had digested the large amount of NFT created last year and the resale market was just getting started.

Tracking firm CryptoSlam reported a dramatic drop in May, an all-year low, with just $31 million spent on art and collectibles in the week to May 15.

A symbol of the struggle is Twitter founder Jack Dorsey’s attempt to resell the NFT of his first tweet.

Dorsey managed to sell NFT for almost $3 million last year, but its new owner can’t find anyone willing to pay more than $20,000.

year of fraud

Molly White, one of the crypto’s leading critics, told AFP there are many possible reasons for the downturn.

“This may be a general drop in hype, there may be fear of scams after many high-profile scams, or there may be people tightening their belts,” he said.

The industry’s reputation has been hammered for most of the year.

Main exchange OpenSea admitted in January that more than 80 percent of NFTs created with its free broker are fake – many of which are copies of other NFTs or famous works of art that have been reproduced without permission.

“OpenSea has a little bit of everything,” said Olivier Lerner, co-author of “NFT Mine d’Or”.

“This is a huge site and not curated, so you really have no idea what you’re buying.”

LookRare, an NFT exchange that outpaced OpenSea in volume this year, has faced similar issues as its rival.

According to CryptoSlam, 95 percent of transactions on its platform were found to be fraudulent.

Users were selling NFTs to themselves because LookRare was offering tokens on every transaction no matter what you were buying.

And the amount lost due to fraud this year is eye-watering.

The owners of Axie Infinity, a key driver of the NFT market played by millions in the Philippines and elsewhere, have managed to lose more than $500 million in a single scam.

‘Like the lottery’

“As soon as you have new technology, you immediately surround yourself with scammers,” attorney Eric Barbry told AFP.

He pointed out that the NFT market has no specific regulation and thus law enforcement is left to piece together a response using existing frameworks.

Molly White said that while strong regulation can help dispel excessive speculation, it can also take away the main appeal of NFTs – that they can bring quick profits.

“I think less hype would be a good thing – in its current form, NFT trading is extremely risky and probably unwise for the average person,” he said.

NFTs are often compared to the traditional art market because they have no inherent benefits and their prices fluctuate wildly depending on trends and hype.

But Olivier Lerner suggested a different comparison.

“It’s like the lottery,” he said, for those who want big profits from NFTs. “You play but you never win.”

Nike sues shopping platform StockX over sneaker NFTs

© 2022 AFP

Quotation: ‘Extremely risky’: How NFTs lost their shine (2022, May 22), on May 22, 2022 Retrieved from.

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