NFT enthusiasts will often tell you that non-fungible tokens are revolutionary because they can prove you own a piece of digital art, for example. But while the theory may add up, the reality is far more nuanced. Read on as we bust the biggest NFT myth…
Who Really Owns Your NFT?
Supporters will tell you that tokens are unique and stored securely on a blockchain, demonstrating ownership. But when you buy an NFT from a marketplace like Nifty Gateway or Rarible, you don’t acquire ownership of the underlying asset, for example, a piece of art, music, or an item in a game. The non-fungible token simply contains a link to the asset hosted elsewhere. And importantly, it does not give you ownership of the copyright, storage or even usage rights to the underlying asset. What it gives you instead is possession.
Confused yet? Let’s look at an example…
If I steal your watch, it’s generally still believed to be yours. But with an NFT, the owner is whoever holds the asset in their wallet. So, if I steal your Bored Ape NFT through a phishing scam, the ETH blockchain will consider me the new owner.
Now, trading platforms like OpenSea could intervene and suspend the sale of any stolen assets. But this creates a fundamental issue – centralised, profit-seeking entities have the power to decide who the real owner is.
Is Your NFT Really Unique?
NFTs get even more convoluted when you look at their ‘uniqueness’. Non-fungible tokens are only truly unique on the blockchain they were built on. But Rarible, for example, has three different blockchains when you mint a token. So what happens if people mint the same asset on each blockchain? Now you have three original tokens. Deciding which one is the unique asset then becomes a problem for exchanges and social networks to pass judgement on.
Let’s look at another example…
Twitter has started supporting NFT profile pictures in a hexagonal frame. However, the social media giant only accepts tokens from the Ethereum (ETH) blockchain. This means non-fungible tokens from other blockchains, such as Tezos and Flow, are not supported (despite being cheaper to mint on).
Now Twitter could change this policy or perhaps even develop its own blockchain. But then we’re back to our original problem – central companies and platforms have the power to decide what is real and what isn’t.
The plot continues to thicken when you realise that limited measures are currently in place to prevent someone from creating multiple NFTs of an image on the same blockchain. In fact, head over to OpenSea and you can find duplicates of original tokens on sale right next to the supposedly ‘unique’ asset. Moreover, the exchange recently conceded that over 80% of the tokens listed on its platform were either scams, plagiarised art, or fake collections.
This is because blockchains do not verify that the individual minting an NFT possesses the rights to the asset they are minting. Instead, we leave that to central exchanges and investing platforms to determine. And while platforms like OpenSea may be taking steps to fix the problem by upping its verification of collections and accounts, you will have to forgive me for not putting all my faith in private companies looking to maximise profits.
Where does this all leave us then? Are we saying never buy another NFT? Not quite. Instead, go into the process with your eyes open to the fact that non-fungible tokens can only ever prove ownership with help from third-party providers verifying the external data, i.e. the digital art that the NFT refers to.
Find out more about NFTs here.