Are There Any Serious People Who Believe In NFTs? The frothy, high-octane NFT market has generated many headlines over the last year or so. But do any serious people think it’s anything more than a speculative fad at best or a scam at worst? Or is it like modern art – the Emperor’s New Clothes with beauty in the eye of the beholder?

1. Are There Any
Serious People
Who Believe
in NFTs?
Alpesh Patel OBE

2. The frothy, high-octane NFT market
has generated a ton of headlines over
the last year or so. But do any serious
people think it's anything more than a
speculative fad at best or a scam at
worst? Or is it like modern art - the
Emperor's New Clothes with beauty
in the eye of the beholder?

3. NFTs
NFTs were one of the biggest success stories of 2021. By some estimates, the
industry is worth around $41 billion.
A big part of NFT's ubiquity and success is that they are easy to "mint" or create.
The barrier to entry is low, and anyone can create one quickly with minimal effort.

4. Celebrity promoters
and participants
Then there are the celebrity promoters.
Paris Hilton, Ellen, Snoop Dogg, and Jack
Dorsey are just some of the names who
have purchased digital art via NFTs. Stories
of massive sales and profits are lapped up
and amplified by a media obsessed with
content that captures modern readers'
imaginations, like get rich quick schemes.
The NFT gold rush has attracted many
participants. Some of them are relatively
surprising, like Melania Trump monetising
her husband Donald's most "iconic"
moments as president. Others are more
predictable, such as the Brit Awards NFT
collection for category winners.

5. Lack of Fundamentals
However, like thousands of
cryptocurrency projects before
them, NFT's lack of fundamentals
makes them a precarious
investment choice. Peak behind
the bluster and buzzwords and
their value and utility is a textbook
example of the Greater Fool
Theory.

6. NFT marketplace
NFT use cases are a mixed bag. Just like the blockchain hype of a few years ago,
they seem like a solution in search of a problem. But similarly, the occasional
exciting use case emerges, such as using NFTs to preserve the ephemeral and
creative world of street art.
It's easy to look at all of this cynically. NFTs are speculative assets with zero
fundamentals that thrive on hype and FOMO (fear of missing out). However,
there are plenty of sincere advocates in Silicon Valley, and some of them seem
to be "in it for the art" as much as the possible eye-watering potential returns.
Additionally, it's worth remembering that the size of the scene is actually
relatively small. While the NFT market is valued at around $20 to $40 billion,
depending on who you ask, the number of active traders on OpenSea (an NFT
marketplace) is about 500,000.
Indeed, NFTs only make up about 1% of the cryptocurrency market. It can feel
like a lot more because of how many headlines they generate and the never-
ending list of global celebrities who promote NFTs.

7. Onus on
Artists
Much of the media coverage around NFTs reads like a hastily
copied press release. Cryptocurrencies and their offshoots are
somewhat complex technologies. Only a tiny portion of the
journalists who cover them seem equipped to analyse or
critique these tools on a technological or economic level.
The result is that we hear plenty about what NFTs can do, as
told to us from their breathless yet financially incentivised
founders. Many publications are more in thrall to the vast
sums of monies they generate rather than a healthy
scepticism about what they are.
So while NFT advocates tell us about how the tech will
democratise the art world, the reality is quite different. Many
artists have complained that their art has been stolen and sold
on the NFT marketplaces.
The mechanisms to halt these practices seem to fall upon the
artists themselves. People are making vast sums on
marketplaces like OpenSea, but often it's not the people who
created the art or who own the copyright.

8. Main problems
Three of the main problems with NFTs as an investment vehicle
are:
a) most projects don't sell much and fail quickly
b) with any fundamentals, insider knowledge is the most reliable
way to predict success
c) the unregulated space is full of scams and "rug pulls"
Added with the fact most blockchain-based investments have a
pyramid-style structure. Early adopters tend to make money,
while those late to the game struggle to make gains or lose
money. Again, the Greater Fool Theory comes to mind.

9. Conclusion
Some commentators trace the rise of NFTs back to the
financial market collapse of 2008. While Bitcoin did
emerge from that as a reaction to the bank industries
recklessness and excess, this is not the only
comparison. In short, as private citizens' homes were
lost to foreclosure, banks were bailed out. The fallout
is that citizens believed they were on their own.
For some, these conditions have created libertarian
style greed among the public that sees the world of
investment as a zero-sum game. The video essay,
Line Goes Up, suggests a thesis that NFTs are about
finding suckers to exploit. Rampant hype, thin utility,
speculation, insider knowledge, and endless scams
indicate there is some truth in this take.
However, among the wreckage, there are some
decent projects. Picking them, however, isn't always
easy, especially for the ordinary investor. Proceed
with caution.

10. References:
• www.wsj.com/articles/nfts-cryptocurrencies-and-web3-are-multilevel-marketing-schemes-for-a-new-generation-
11645246824
• fortune.com/2022/02/18/how-to-make-money-flipping-nfts-on-open-sea/
• www.dailymail.co.uk/news/article-10525051/Melania-Trump-launch-NEW-collection-NFTs-husbands-iconic-moments-
office.html
• www.ft.com/content/36ffa5a2-eef4-4cba-a4cd-9faea179b610
• www.ft.com/content/e5298295-8e79-411c-a054-a58f639ea8fa
• www.theguardian.com/global/2022/jan/29/huge-mess-of-theft-artists-sound-alarm-theft-nfts-proliferates
• www.cityam.com/brit-awards-nfts-just-released-and-adele-sells-out-in-minutes/
• www.bloomberg.com/news/articles/2022-02-10/seemingly-ubiquitous-nfts-make-up-only-1-of-crypto-universe
• www.wired.com/story/nft-street-art/
• venturebeat.com/2022/01/25/this-should-be-the-death-of-nfts/

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