NFTs, or non-fungible tokens, have become a controversial topic in recent years. While some see them as the future of digital ownership and collectibles, others view them more negatively and frown upon the NFT space. Here we’ll look at some of the main criticisms of NFTs and reasons why they are viewed in such a negative light by many.
One of the most common criticisms of NFTs is their significant environmental impact. Most NFTs are minted on the Ethereum blockchain, which relies on a proof-of-work consensus mechanism that is extremely energy intensive. It’s estimated that a single Ethereum transaction uses as much electricity as an average US household does in over a week. With the huge amount of NFTs being minted and sold, this adds up to massive energy consumption and carbon emissions.
Here are some statistics on the energy use of NFTs:
|NFTs are responsible for carbon emissions equivalent to:
|Over half a million transatlantic flights
|Ethereum’s annual energy consumption is comparable to:
|The carbon footprint of New Zealand
|Minting an average NFT has a carbon footprint of:
|34kg of CO2 – equivalent to driving 100 miles
For a technology that provides no apparent environmental benefits, many see this level of energy usage as reckless and unnecessary. There are growing calls for NFTs to shift to a more sustainable and eco-friendly platform.
Speculation and Volatility
Another major criticism is that NFTs are primarily used for financial speculation rather than providing real utility. Their value is extremely volatile and based on hype rather than any tangible value. Many people buy NFTs hoping to flip them for a quick profit as prices fluctuate wildly. This had led to accusations that the NFT market is a bubble driven by speculation.
The average sale price for NFTs on OpenSea dropped over 50% between January and June 2022. This volatility makes many skeptical of NFTs as stable investments or assets. They are instead seen as more akin to gambling than providing real value.
Lack of Regulation
The NFT space is largely unregulated currently, leading to many fears over fraud, scams, and other criminal activity. There are constant reports of ‘rug pulls’ where NFT projects vanish after taking investors money. The anonymity of crypto wallets enables fraudsters to more easily get away with these kinds of scams.
Weak regulation also leads to problems like plagiarized or stolen art being minted and sold as NFTs without the original creators permission. The lack of oversight endangers consumers and enables misconduct in the NFT market according to critics.
Skepticism of Future Potential
While some believe NFTs are the future of ownership, many other see little meaningful utility in them and are highly skeptical of their future potential. Outside of their use for speculation, the application of NFTs in areas like gaming, metaverse virtual worlds, and online identity/assets remains abstract. There is reasonable skepticism over whether these hypothetical use cases will ever develop in a substantial way.
Currently NFTs are associated more with cartoon apes than providing any meaningful innovation. Unless the technology evolves beyond its current uses many see it as destined to fade away as a fad rather than revolutionize ownership models as proponents claim.
Copyright and Ownership Issues
Another legal criticism is that it’s often unclear what rights and ownership an NFT actually confers. Just because you purchase an NFT of a digital artwork does not necessarily mean you own the copyright or have rights to commercially reproduce and use that artwork. This complicates the proposition that NFTs represent true ownership of digital assets.
There are also frequent incidents of people stealing and minting others’ art as NFTs without permission. Ownership claims over NFTs are therefore dubious to many when original rights holders are often excluded.
Perception of Greed and Harm
Some cultural critics and commentators are strongly opposed to NFTs on the grounds that they represent greed, speculation, and exploitative practices harmful to society and culture. Figures like Charles Hoskinson have lambasted the crypto community for prioritizing money over ethics and enabling the exploitation of ordinary people’s dreams.
While cryptocurrency founders themselves frequently criticize the NFT space on these grounds, there is also wider perception that NFTs represent the worst excesses of opportunism and capitalism. This breeds distrust and disapproval of the NFT concept among the general public.
Limited Utility and Purpose
A more practical objection is that NFTs in their current form have limited real world utility and purpose. Basic ownership of media like images, videos, and text does not require blockchain technology. For physical products, proof of ownership already exists in established legal contracts and documentation. The benefits are therefore not clear to many people outside of the crypto community.
Items such as event tickets that could benefit from having a unique ID still do not need to be on the blockchain. Centralized databases can achieve the same purpose more efficiently. Some conclude that NFT technology is therefore an overly complicated solution in search of a real problem that it can effectively solve.
Perception as a Pyramid Scheme
Some of the backlash against NFTs is fueled by the perception that they resemble pyramid schemes where money flows from later investors to earlier adopters. Projects encourage the community to hype up their NFTs and ‘hodl’ them to increase prices so that early investors can eventually cash out at a higher valuation.
New investors are needed constantly to prop up valuations. Otherwise if too many existing owners try to sell, prices crash. Many therefore see buying NFTs as akin to buying into a pyramid scheme rather than making a smart investment.
User Experience Issues
The user experience of purchasing, owning, and using NFTs is still highly technical and complex compared to traditional digital media and content. You need to install crypto wallets, purchase cryptocurrency, connect your wallet to markets, and understand blockchain transactions. This creates a barrier to entry and also risks such as losing access to your wallet or having funds stolen.
Until NFT ownership becomes simpler and more user-friendly for mainstream audiences, that will limit growth and leave many with negative impressions due to poor usability.
Comparison to Historic Bubbles
Looking at past speculative frenzies helps explain some of the dislike towards NFTs. The pattern of quickly rising prices, mainstream media hype, and trading based on future imagined value is consistent with historic bubbles that eventually collapsed such as the Dutch Tulip mania of the 17th century and the Dot Com bubble in the late 1990s.
Many believe the NFT craze is another example of a transient bubble driven by hype and irrational exuberance rather than fundamentals. Under this view the eventual bursting of the NFT bubble will leave losses and resentment among investors who bought at the top.
Various controversies and scandals have damaged the reputation of NFTs. For example Beeple, who sold an NFT for a record $69 million, was found to have produced works depicting violence and abuse against women. Many saw this as hypocrisy from a space claiming to represent the future.
Other celebrity NFT launches like those from Logan Paul were perceived as crass cash grabs that added no value. These associations with controversy and scandals turn people off from the space.
Lack of Inherent Value
Sceptics argue that NFTs themselves do not inherently hold or produce any value. Purchasing them does not provide any rights to the underlying digital work and there is no guarantee of scarcity. The NFT itself is just a record on a blockchain ledger. Therefore, any value rests entirely on convincing others to buy the NFT from you for more later on.
Without any underlying productive value or tangible utility, NFTs are easy to dismiss as merely speculative and akin to gambling on future demand rather than assets with inherent worth like property, commodities, or income from business ownership.
Perceived Damage to Art and Culture
Some creative industry figures argue that NFTs and the commodification of digital art through NFT marketplaces will actually damage art and culture in the longer term. They suggest that monetizing digital art through NFT speculation distracts from producing cultural work with purpose beyond profit.
Musician David Byrne argued NFTs can drain the “life and joy” out of creativity. Author Johanna Drucker believes the combination of art and speculative gambling damages cultural values around art. Actor Elizabeth Hurley advised aspiring artists that NFT success could lead to complacency rather than developing their craft.
Limited Mainstream Understanding
Despite dominating tech headlines, knowledge and understanding of what NFTs actually are remains very low among the general public. In a recent poll just 27% of Americans could explain what an NFT is. This lack of understanding makes the concept seem esoteric and mysterious rather than relatable.
Until NFTs and their potential use cases become demystified and accessible to ordinary people, most will continue viewing them negatively as an oddity they cannot comprehend rather than an innovation to embrace.
Associations with Cryptocurrency Controversies
As NFTs are inextricably linked with cryptocurrency, they inherit many of that industry’s existing reputational issues. These include associations with money laundering, cybercrime, and illegal activity due to the privacy and anonymity of crypto transactions.
While NFT technology itself is not responsible for this, it suffers from guilt by association. Many pre-judge NFTs negatively because broader crypto and blockchain ecosystems have failed to entirely shake these unsavory connections.
Lack of Accountability
Systems of accountability around NFT projects are frequently inadequate. Cryptocurrency promoters are notorious for overhyping projects with unrealistic promises that ultimately fail to eventuate.
Yet they are able to walk away unscathed in many cases while ordinary investors lose money. Because the space lacks regulation and oversight there is often no recourse against bad actors. This lack of accountability understandably breeds resentment.
Concerns Over Intellectual Property Infringement
A common early use case for NFTs was minting and selling digital artworks and media. However, in many cases the creators actually selling them did not hold the underlying intellectual property rights.
This infringement reduces trust in the legitimacy and credibility of NFTs. It creates an association between them and stealing/reselling others’ creative work without authorization. Until this stops, NFTs will turn off many people in creative industries.
In summary, NFTs confront a variety of scepticism and distrust about aspects ranging from their environmental impact, real world value and utility, promotion of greed, links to fraud and scams, market volatility, and associations with cryptocurrency controversies. This wide array of criticisms explains why many frown on NFTs or view them negatively.
For their reputation to improve, advocates will need to address these concerns by reducing their carbon footprint, showing real benefits beyond speculation, improving usability, and building an ethical NFT ecosystem centered around transparency and accountability. With improvements in these areas, public perception may warm up to NFTs over time as some of the critique is addressed.