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Opportunities & challenges of NFTs in 2022

Although the NFT space is very vibrant and innovative, there are a set of risks and challenges enthusiasts tend to encounter whilst participating

sparkworld
Image: SparkWorld

The recent years of largely remote work and entertainment have pushed both us blockchain enthusiasts and even those unfamiliar with Web3 to search for solutions that would better our day-to-day lives. 

The introduction of technologies like NFTs and DAOs has made even the mainstream media aware of where the digital world is heading in the midst of a global pandemic and a variety of other factors affecting the environment we live in. 

NFTs have changed the way we see and appreciate value. Likely the best example is the art industry.

For generations, only the elite has been able to access the finest pieces of art, but today, when a number of NFT digital verifiable art marketplaces have come into play, everyone holds the ability to access even the most critically acclaimed artwork in the world. 

The Place Of NFTs Today

endless expanse nft collection gallery, centered on purple background
Image: KnowTechie

A series of projects are working with the aim to decentralize and onboard on-chain real-world objects and documents like contracts, ownership confirmations, and even legal documents of governmental recognition. 

Speaking of physical objects on-chain, nearly everything we can see and touch can be put on the blockchain either for resale value or simply immediate and trustless verification – the list of such items would be of incredible length. 

Collectors, artists, software developers, and gamers, have all been welcomed to this rapidly changing digital global ecosystem in order to push new narratives of decentralization forward. 

However, although the NFT space is very vibrant and innovative, there are a set of risks and challenges enthusiasts tend to encounter whilst participating in the free decentralized market of digital goods, but not to worry – the NFT opportunities are clearly far greater than the challenges.

Challenges

Understandably, everything that lives on the internet or within the realms of a computer, is vulnerable to digital fraud and online attacks. 

One might wonder – “I have read that blockchains are very secure, even unbreakable, so how could I be vulnerable?” 

Cyber Crime

bitcoin crypto theft how to protect yourself
Image: KnowTechie

Blockchains are, indeed, very secure, but that does not mean that a highly skilled malicious security expert cannot research them and later impact their workings on a large scale.

Although the task of breaking such systems for the average IT professional is from incredibly difficult to nearly impossible.

As one can guess, accessing someone else’s funds – achieving a task very attractive to malicious actors – does not have to be about breaking into the blockchain itself. 

Through social engineering and phishing attacks, stealing NFTs and cryptocurrencies becomes very easy.

A phishing email from someone posing to be a legitimate or familiar party can trick one into giving up their wallet’s seed phrase or login information, and that someone now owns the victim’s decentralised life. 

Some of the largest crypto and NFT companies reportedly get hacked very often, so one can imagine that targeting individual market participants must be relatively simple. 

NOTE: Always beware of suspicious websites, NFT projects with little-to-no details online, emails from new sources, and even new messages on platforms like Discord. For malicious actors, accessing one’s wallet can be as simple as crafting an email.

Regulatory Challenges 

Because the world has not yet legally defined what an NFT is, although it is indeed a product on the market, the laws around it are just not there. 

As a result, an NFT project can be as malicious as digital wallet thieves – without disclosing the necessary information and oftentimes being run by anonymous individuals, such projects pose even unknown risks to the enthusiast who has just stumbled upon one. 

Individual NFT Valuation

In addition to phishing scams and suspicious projects, NFT valuation is another challenge for every enthusiast to be aware of.

One might read the news of some animated digital monkey pictures selling for millions of dollars, but that does not mean that any NFT can be of great value that comes relatively out of nowhere. 

If one manages to find meaningful and sophisticated projects that push real refined art on-chain, such as Particle Collection which fractionalize the finest art and distributes it to everyone, any worries can disappear very quickly. 

Note that otherwise, people simply cannot determine the value of NFTs because there is no basis of valuation in existence at a real scale, at least yet.

Mind that many people coming to NFTs and cryptocurrencies with the knowledge acquired from the mainstream media often misrepresent the perks and downsides of Web3. 

High-brow media figures are starting to launch their own NFT collections filled with fascinating digital items.

But what often happens instead of celebration from the audience, is partial outrages from fans with environmental concerns associated with NFTs. 

Although it is the right thing to be concerned about the environmental impact of NFTs, there are large projects like Avalanche that have already built suitable ecosystems that consume very little energy and are very cheap to use in terms of gas fees.

And they are being used at a massive scale already. On Avalanche, projects are creating even more immersive ecosystems with NFT marketplaces and inventing concepts such as Fair Prediction Launches.

Opportunities

gameverse nft marketplace screenshot on a purple background
Image: KnowTechie

Digital art has always been celebrated as one of the most beautiful things created by man.

However, throughout the internet history, there has not been a chance for the creators to get properly rewarded and for the collectors to have valid verification of art ownership. 

NFTs have broken this system by enabling trustlessness and allowing a public ledger on the blockchain to take care of verification issues. 

Bringing The Culture On Chain

Classic physical art is on the same value basis – trust in our culture and history – therefore it has value both in the real world and on the public ledger stating that a piece is one of a kind.

With this in mind, both physical and digital art can be created and later sold on a large NFT marketplace like OpenSea, Rarible, SuperRare, and others. 

Anyone can participate, but one should note that many of these large NFT marketplaces are built on networks such as Ethereum which are known to have very high gas fees, this means expensive minting and expensive transactions.

This is why chains like Polygon and Avalanche are recreating the user experience and making the process of participating in the market very friendly. 

As mentioned in the introduction, NFTs don’t have to be limited to digitally created art, although many 3D objects on-chain are incredibly impressive. 

Whether it’s trading cards, tickets to a concert or a conference, or domain names, there are portions of them living on the blockchain ledger.

What’s more, is that the gaming industry is experiencing a large shift to the blockchain as both games themselves and in-game metaverse objects are being put on sale for anyone to reach. 

NFT Gaming

axie infinity

Entire ecosystems are being built where instead of virtual coins that power certain game features, either cryptocurrencies or NFTs are being implemented to transact within a game with seamless confirmation processes.

This means, that no one has to be constantly clicking the Confirm Transaction button on a Metamask pop-up window when every mechanism is running in the background, with an automatic process. 

Speaking of NFT gaming, to really understand how far the space has come, one must acknowledge the fact that some Filipinos are earning more than a minimum wage only from NFT games like Axie Infinity that both excite and reward players for their efforts on the blockchain. 

What’s more, in the world of NFTs, collectors and artists do not have to worry about the largely bureaucratic intellectual property system as the blockchain offers a decentralized alternative to verifying one’s mint or sale of non-fungible tokens.

No expiration dates on “blockchain IPs” are enforced because of the ecosystem’s node-based existence. 

Moreover, digital items and cryptocurrencies can exist as long as the underlying blockchain network is in operation – it is suspected that the timeline in such mechanisms might be around forever. 

What additional benefits or downsides of NFTs do you see in 2022 and beyond? How will NFTs affect highly centralized systems which are used to control?

What happens when an NFT-powered DAO becomes large enough to beat even the mightiest giants like Google, Meta, and JP Morgan? 

Let us know your thoughts on the current state of NFTs and make sure to follow SparkWorld on social media – many exciting updates are awaiting.

Have any thoughts on this? Let us know down below in the comments or carry the discussion over to our Twitter or Facebook.

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Chris has been blogging since the early days of the internet. He primarily focuses on topics related to tech, business, marketing, and pretty much anything else that revolves around tech. When he's not writing, you can find him noodling around on a guitar or cooking up a mean storm for friends and family.

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