Three major challenges the NFT market needs to address

Highlights

• NFTs (non-fungible tokens) are digital assets, which can hold a variety of content ranging from music to art.
• There have been several instances where counterfeit NFTs have been put up for sale on websites.
• The lack of a standard method for evaluating NFTs results in wild fluctuations in their price.

When something ascends as quickly and prominently as NFTs (non-fungible tokens) have this past year, there are bound to be problems that crop up.

NFTs have been all the rage, with celebs like Jimmy Fallon, Steph Curry and Justin Bieber all jumping onto the NFT train, which right now, seems to be getting bigger and faster by the day.

Is it just a fad? Will NFTs be as integral to our way of life as other technologies that have emerged in the past? Will NFTs go the way of the mobile phone? Or will it receive the same fate as that of the laser disk?

To have any long-lasting potential, NFTs will have to inevitably face some challenges, which, despite its current popularity, threaten to completely derail it as a viable and functional form of carrying valuable information, art, video and music, amongst other things.

What are these issues exactly? Well, let’s take a look.

Intellectual Property Rights for NFTs

Ownership is one of the most vital problems facing the NFT space.

NFTs or non-fungible tokens are digital assets which can hold a variety of content ranging from music to art. The most important characteristic of NFTs is that they have unique identities which are verifiable, thanks to the blockchain technology upon which they are built.

Despite their unique identities, there remain challenges pertaining to the intellectual property and copyright laws to which they are subject to. 

A recent case involving a decentralised autonomous organisation (DAO) saw Spice DAO purchase an unpublished manuscript for the film ‘Dune’, based upon the book written by Alejandro Jokorowsky, for US$3 million.

Spice DAO assumed the purchasing of the NFT granted them the IP rights to the Dune story and its characters and consequently put into production an animated series based on the science-fiction cult classic.

Of course, the copyright laws didn’t transfer to Spice DAO with the manuscript. Rather, the story and characters are still intellectual property of Jokorowsky for the extent of his lifetime plus an additional 70 years after he dies, unless he sells them first.

It was an embarrassing blunder for Spice DAO, who were then forced to cancel the production of the animated series. 

It’s a sobering reminder to those who aren’t aware – just because something is bought as an NFT, it doesn’t necessarily imply ownership. 

Image Source: © Murrstock | Megapixl.com

Safety and Security

As the popularity of NFTs has risen, so too have threats to cyber security, including fraud and theft.

There have been several instances where counterfeit NFTs have been put up for sale on websites. 

Adding onto copyright theft which we’ve discussed, are instances of fake airdrops as well as NFT replication. 

The entire value of an NFT lies in its uniqueness. There should be just one copy of this file, just like there’s just one copy of any other art piece. 

Evaluation

Some NFTs sell for millions of dollars, some for even more, like the famous Beeple piece, which last year sold for US$69 million. Many others sell for less. But the challenge lies in properly determining a way to evaluate NFTs.  

As there are no standard methods for evaluating NFTs, prices of these digital assets fluctuate wildly.

As the market moves forward, one of the biggest challenges it faces is figuring out a way to correctly evaluate each NFT.

Moving Forward

The NFT marketplace is still a relatively new thing. Like any new thing, particularly of such a magnitude and popularity as that of NFTs, there are issues to iron out.

Hopefully these three big challenges can be resolved as the market moves forward.