Although NFTs have increased in mainstream awareness, they remain a commonly misunderstood asset by name. This is due to the blockchain’s relatively niche status as an emerging technology and industry, the abstract nature of its technology, and some fraudulent actors in the space. This has resulted in misperceptions and myths about NFTs and their potentially transformative use cases.
In this blog, let’s discuss these further and address these misconceptions.
Common NFT Misunderstandings
NFTs are a new type of digital asset leveraging decentralized blockchain technology, holding a lot of promise for various industries with their ability to facilitate business transactions, record uniqueness, and provide greater transparency and accountability on a global scale in the digital age.
- NFTs are a blockchain or cryptocurrency
Many still assume that NFTs are a type of blockchain itself or a cryptocurrency. In the first case, people confusing NFTs with a blockchain is easy to dispel. A blockchain is rather a type of decentralized shared network that tracks transactions on a distributed ledger. NFTs are one type of asset that can be issued and recorded in that ledger, making it visible to all nodes (servers) and users within that network.
In the second case, NFTs are sometimes misunderstood for cryptocurrencies. A cryptocurrency is a native underlying asset of a particular decentralized blockchain. It is commonly used to pay for transactions and smart contract deployments on that network. NFTs are digital token types issued on a blockchain network but a user or buyer/creator cannot typically pay a network fee or deploy contracts with the NFT itself.
- All NFTs have no utility
Another common misconception is that all NFTs have no actual utility. However, the true utility of some NFTs lies in their ability to digitally represent an asset and establish proof of ownership and authenticity for the asset. They can also enable greater liquidity for the asset, provide crowdfunding opportunities, verify membership in an organization, and a lot more.
NFTs can play significant roles in adding value to many business sectors and industries, including:
- Digital collectibles and avatars
- Online ticketing and event passes
- Document verification and certification
- Gaming items and virtual real estate
While there are too many benefits, here is a deeper look at some of the other business use cases for NFTs.
- All NFTs are a get-rich-quick scheme
While there have been scams and fraudulent activities associated with NFTs, it is crucial to understand that many NFTs are not inherently scams or get-rich-quick schemes. As with any emerging technology or market, bad actors seek to exploit the hype and lack of understanding surrounding NFTs.
However, the value of an NFT is ultimately determined by the underlying asset it represents and the market demand for that asset, not simply by the act of minting an NFT. Legitimate NFT projects focus on the actual value and utility they can provide rather than just being a tool for speculative trading.
Anyone interested in NFTs must conduct thorough research, understand the risks involved, and exercise caution when engaging with NFT projects to avoid falling victim to scams or fraudulent schemes.
In an increasingly digital world with commerce and business turning to online-based models, NFTs have a wide range of potential uses that businesses can seek to leverage.
- NFTs contribute to global warming
Another popular misunderstanding is the contribution that NFTs make to climate change. Years ago, the most used blockchain used “proof-of-work” to run their networks, an energy-intensive algorithm that can indirectly increase carbon footprint.
However, more networks issuing NFTs are now utilizing consensus algorithms such as “proof-of-stake” (PoS) such as Cardano which is a much more green technology.
Related reading:
- How to Mint a Cardano NFT (Part 1)
- How to Mint a Cardano NFT (Part 2)
- What is the tokenization of assets?
Today’s NFT industry barely impacts the environment. The PoS algorithm allows millions of transactions to be processed with the same energy levels as those needed to power a house.
- NFTs are just images
The first case for NFTs was media distribution, especially images. The most popular use collections were image formats such as .jpg or .png which were used to create NFTs in which one could own the image.
An NFT is a digital token with a unique ID that is recorded on a blockchain network. That property makes it unique, as developers can use it to attach information. Images were the first type of information attached, but other examples are:
- Legal contracts
- Shipment records
- Warehouse records
- Property deeds
These are some of the examples of data that can also be attached to an NFT in addition to images. They are a very versatile type of digital asset that can be configured to represent a very wide range of real-world assets on-chain.
Read more: Here is a deeper look at NFT use cases beyond images
NMKR: Anybody can create NFTs
NMKR is an NFT and Tokenization platform service leveraging the Cardano blockchain. It enables businesses and individuals to easily create NFTs by providing tools that do not require coding knowledge.
As an established platform, NMKR’s services have been used by businesses, gaming projects, creators, and more to successfully mint NFTs of various assets.
Its various products including NMKR Studio and NMKR Pay with multi-language support enable businesses and individuals to enter the Web3 space seamlessly and even provide traditional fiat payment options to mint NFTs.
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Disclaimer
You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by EMURGO to invest.
