In a few months, NFTs have invaded the digital space and the media, generating numerous controversies. Should we bet on this certification technology accused of promoting scams and money laundering?
NFT. In the sometimes highly coded digital world, it’s the latest trendy acronym. An acronym that makes you dream or fantasize. A new digital El Dorado for some, a spectacular gogo-catcher for others: what is the technological promise of NFTs? Will NFTs invade our daily life (real and / or virtual)? What is the reality of the NFT market today? Explanations.
What is an NFT?
NFT stands for Non-fungible token in English or “non-fungible token” in French. o Nifties for intimates (not to be confused with NFC, a wireless proximity communication standard used in particular on bank cards) is a technology that allows (in theory) to assign a cash value to an asset (physical or digital) by attaching a certificate of similar authenticity based primarily on the Ethereum blockchain, which operates on the Ether cryptocurrency. NFT tokens associated with a physical asset or digital work are considered non-fungible, i.e. non-interchangeable, secure, tamper-proof and easily transferable to third parties. Their value – and by extension that of the property they are associated with – is fluctuating (sometimes), volatile (often). It is mostly based on rarity in part.
In a digital world where nothing looks more like a creation of its copy, the possession of NFT tokens is illegally brandished by the person who acquires them as the ultimate title of ownership of the property to which they refer. Illegally, because as we will see, the fact of acquiring the NFT of a work does not in any way mean that you are the owner of this work, but only the right to assign, to assign, that is, to sell to third parties (collecting at best a nice added value) an NFT, a token, a token and then a simple piece of code stored in a blockchain.
What are NFT’s sales records?
For several months we have been witnessing the emergence of new practices and a craze that it is difficult not to qualify as speculative around NFTs. A dangerous phenomenon that attracts novice investors to a nascent and unregulated market that sees in it the promise, most of the times perfectly illusory, to earn very easily very easily. Problem, the vast majority of people who invest in NFT today do so without really knowing what it is and without being aware of the risks they are running.
In their defense, it must be acknowledged that some NFT transactions can only arouse envy and make you dizzy. The “first tweet in history” sold for $ 2.9 million, the “first SMS in history” sold for € 107,000, Gustav Klimt’s kiss scattered like a puzzle and marketed in the form of 10,000 NFT tokens by the Belvedere Museum of Vienna (Austria) for the modest sum of 1850 euros each, several hundred virtual sneakers sold in a few minutes for 3.1 million dollars, by RTFKT, (a company recently acquired by Nike), the Visa group, which pays 150,000 dollars to buy a CryptoPunk considered the project that inspired the CryptoArt movement, of (very) famous footballers (such as Neymar Jr, Presnel Kimpembe, Marco Verratti or Leandro Paredes) who spend several hundred thousand dollars on NFT … of monkeys, the trendy Bored Ape YC (Bored Ape Yacht Club). The list is long, very long and does not stop. With its share of illusions and disillusions …
What are NFTs for?
Where do NFTs come from? It all officially begins in 2017 with the appearance of CryptoKitties, an online game that allows players to buy, sell, collect and raise virtual kittens. This game then uses the Ethereum blockchain and virtual kittens are traded in exchange for Ether, the native cryptocurrency of the Ethereum blockchain. Success is not long in coming, but this digital soufflé does not take long to deflate. Now, NFTs are on the rise and seem to have new uses every day. In the physical world, and more precisely in the luxury industry, this technology is starting to be used to combat counterfeiting. This is the approach followed by a brand like Breitling. In the automotive sector, the Alfa Romeo manufacturer recently announced that its vehicles will soon integrate NFTs to certify maintenance monitoring.
But it is obviously in the digital sector that the enthusiasm around NFT is most echoed. Beyond a speculative aspect – and therefore devoid of any long-term vision – which consists in buying and reselling NFTs acquired on specialized marketplaces such as OpenSea, the tech giants are now looking very seriously at the issue. Like YouTube, which sees NFTs as a medium, according to its CEO Susan Wojcicki, “strengthen and enhance the experiences between creators and fans”that is, to develop communities and monetize content.
Ultimately, one of the main outlets for NFTs is, undoubtedly, in the metaverses, these shared and persistent virtual universes that Mark Zuckerberg and his Meta group (ex-Facebook) seem so eager to lead us into. . How come ? Because in the land of virtual goods, NFTs seem to be THE dream authentication solution, the one that will allow us to determine with certainty (or so we believe) who owns what (from virtual clothing, but branded to the ground equally virtual and real property) . If, despite the specular investments announced at the end of 2021, “Worlds horizon “from Meta is still struggling to convince, there are already several metaverses such as Decentraland, Fortnite, Minecraft but above all The Sandbox that are attracting more and more brands and where real estate speculation is rampant.
At The Sandbox, we invest in “Pierre”buying virtual plots to resell them better later in Ethereum, because this type of transaction is now reserved for owners of a “wallet”, a cryptocurrency wallet. Speculation is once again fueled here by rarity. Of the 166,000 “lands” originally composing this virtual universe, there would remain only a few tens of thousands available for purchase, to be acquired in the form of NFT. A good deal for The Sandbox which takes 5% on every transaction. Among the brands that have recently surrendered to the sirens of The Sandbox, we can mention Adidas, Gucci, but also Warner Music, which aims to create a musical theme park there, Ubisoft and its “Delusional rabbits”, Axa or retail groups such as Casino or Carrefour. In February 2022, Carrefour acquired virtual land on The Sandbox for the equivalent of € 300,000. For the group, the NFTs “they are not a topic reserved for luxury (but) they could reinvent the relationship between brands and distributors”.
What is the value of NFTs?
However, it is difficult to say at this stage what the real return on investment will be from NFT transactions on metaverses that are still emerging and still far from reaching the general public. Because, as pointed out in Forbes, Sébastien Borget, co-founder of The SandBox, “Not all NFTs are worth it. If there is no audience, there is no value and the hype around the metaverse has led some communities to build on more solid foundations than others. An NFT remains digital content and has no more value in itself than the community has granted it “. Clearly, an NFT largely depends on the way it is used and the resulting experience. The rarity is not here therefore not the only value.
Words that lead to a central issue when addressing the issue of NFTs: trust. Can NFTs Be Trusted? Can you invest with confidence in NFT? Can we trust the value associated with NFTs available for purchase on specialized markets? Are NFTs synonymous with authenticity? To these questions, the answer here is much more nuanced. Because if NFTs are regularly advertised as such “inviolable and immutable digital property deeds”it is necessary to question their origin, who produces them, who resells them, who speculates on their value, if the NFT offered for sale is really worth something, beyond the collective belief that it is attached to it.
How are NFTs controlled?
But this is where the shoe pinches. Because the NFT sector is still an extremely poorly regulated market, where all deviations are in order. Thus, one of the leading NFT marketplaces, OpenSea, recently revealed that 80% of the NFTs created for free on its platform were fake, i.e. NFTs from intellectual property theft, copyright infringement. This scam consists of stealing digital content that we, by nature, did not create, to associate an NFT with it that will be resold and on which in the best case the scammers will receive juicy commissions for each transaction.
NFTs, like what the world of cryptocurrencies used to be and still is, even today constitute an ideal playground for unscrupulous users or mafia organizations that in the past are masters of money laundering, a practice that in the world of NFTs finds the his incarnation in “washing trading” a technique that consists in artificially inflating the price of an NFT, to attract the attention of the goos who will not fail to buy it back only to realize, in short, that their luck, albeit virtual, is actually based only on sand.