- NFTs are possibly the most divisive aspect of the cryptocurrency ecosystem ever created
- Arguments typically fall on common ground, with the qualification for a critic often not being subject knowledge
- Here are some of the most common NFT criticisms and why they’re nonsense
“You ain’t gotta hate NFTs, luv.” — William Butcher (The Boys)
Disclaimer: William Butcher never made the quote mentioned at the beginning of the article. But fans of superhero show The Boys will agree that an image of Butcher delivering the line with his signature Cockney accent and an annoying smirk is hilarious.
Today, I’ll be addressing a hot-button topic: criticism of NFTs. I say “hot-button” because rarely any topic provokes intense reactions like NFTs. A popular Reddit thread on the topic had over 2,000 responses, with no shortage of people in the comments trying to malign, or defend NFTs.
Many people don’t like (read: hate) NFTs—browsing through the above Reddit thread would have shown that. A famous YouTuber even went as far as making a 2.5-hour documentary just to criticize expensive JPEGs.
If you want more proof of general hatred for NFTs, here’s an image of Twitter users directing Holocaust-level at hate at people simply because they have an NFT profile picture:
So far, we’ve established that NFTs are hated. The question is why—what makes people so angry about monkey JPEGs?
Before addressing common criticisms of NFTs, let’s first unpack the meaning and significance of an NFT.
Introduction to NFTs 101
An NFT (non-fungible token) is a blockchain-based token used to represent specific assets. This could be digital items (songs, videos, or artwork), or real-world items like concert tickets or ownership certificates.
An NFT relies on a smart contract that defines rules of ownership and exchange. The smart contract also describes the unique ID and metadata for each NFT, which is where the “non-fungible” description comes from.
“Fungible” items, like a one-dollar note, can be swapped with other items (another one-dollar note) of the same quality. NFTs have different qualities, which makes them non-fungible. This is also why some NFT collections, like the Bored Ape Yacht Club, are more popular than others.
NFTs are considered revolutionary because they replicate qualities of physical items, such as verifiable ownership, rarity, and uniqueness. Not only do they transform ownership of digital assets, but they also promise amazing benefits—particularly for content creators.
Understanding Common Criticisms of NFTs
Despite their advantages, NFTs get criticized a lot. The criticisms leveled against NFTs range from perceived environmental impact to criminal activity involving NFTs.
In this section, I’ll look at common arguments against NFTs and address them properly.
1. NFTs damage the environment
The major argument against NFTs stems from the power consumption of blockchains used to mint tokens. The debate over the power consumption of Ethereum, Bitcoin, et al., is not new—NFTs are just the latest lightning rod for environmental activists opposed to crypto.
However, saying NFTs are bad because blockchains use considerable amounts of energy is not the gotcha critics think it is.
For starters, most estimates about the environmental impact of blockchains rely on questionable research and exaggerated claims. It’s also erroneous to draw conclusions about the carbon footprints of blockchains, without knowing the precise mix of energy sources used by miners.
Even if blockchains—and, by extension, NFTs—use a lot of electricity, that doesn’t make them evil. Christmas lights have high energy consumption levels, but we don’t see anyone campaigning to outlaw them.
It’s also important to note that Bitcoin, which uses an energy-intensive proof-of-work (PoW) consensus algorithm. Ethereum, which supports NFTs, is planning to switch to proof-of-stake (PoS) consensus—which is more energy-efficient than PoW.
Similarly, other new-generation blockchains like Cardano and Solana also use some variation of PoS. As such, the claim that NFTs will ruin the environment doesn’t really hold up.
2. NFTs are used for scams
Another claim often leveled against NFTs is that they are used to perpetrate fraudulent activities. Critics point to rug pulls, thefts, wash trading, and other dishonest activity rampant in the NFT space as proof that NFTs are bad.
No one can deny that the NFT industry is a Wild West, owing to the lack of regulation. However, blaming scams and frauds on NFTs is like blaming the tool instead of its master.
NFTs didn’t introduce fraud or scams; they’re merely new tools for thieves to exploit unsuspecting individuals. Bad guys using art for scams and money laundering schemes way before anyone heard about crypto.
This is hardly surprising since criminals are usually the first to adopt new technology, whether that’s cell phones, cars, or pagers. Does that justify NFT scams? No. But it helps to understand that NFTs aren’t solely responsible for fraud and scams.
Just like buying regular art, buying an NFT requires doing due diligence. Rules like verifying ownership (which is easy to do—thanks to blockchain technology) and watching out for scammy offers apply here.
3. NFTs are bad for the art industry
Many claim NFTs are bad for the industry. Typically, such claims use the same set of arguments:
- Artists can have their works minted as NFTs without their permission, which amounts to theft.
- NFT art is not “real art”.
- NFTs create speculative bubbles around art.
Now, let’s address each line of argument:
1. Yes, many artists have complained about people stealing their art and using them as NFTs. As a preemptive action, DeviantArt was forced to create a tool for detecting authorized minting of artworks as NFTs.
However, art theft did not start with NFTs. People have been pirating art, especially digital art, for years. This explains why digital art is often unprofitable—anyone can copy the file and use it without permission.
2. NFTs are not a new art form—they just make it easier to sell artworks by creating rarity. As I noted earlier, an NFT doesn’t have to be a JPEG. NFTs are used to tokenize everything from virtual land to in-game items.
We should also mention that “art” is a concept that’s hard to define. Art is subjective and can mean different things to different people. So, if people believe a cartoon ape is art, image of an, then it is art.
3. Commodity bubbles are created through a mix of unrealistic expectations and classic human greed. But the commodity itself isn’t to blame for the bubble. We don’t blame Dutch tulips for Tulipmania, so why blame NFTs for speculative trading?
More to the point, it’s hard to tell if the NFT boom is a market bubble or not. Sure, you’ll see a dozen different headlines screaming “NFT Bubble Set To Burst”—but it’s hard to trust a mainstream media known for playing up negative news to attract audiences.
It’s also worth noting that the media predicted Bitcoin’s crash as early as 2011. More than 11 years later, Bitcoin hasn’t gone up in flames as doomsday pundits predicted.
For what it’s worth, NFTs are a boon to the art industry. By establishing provenance for digital art, digital art can acquire scarcity and command higher prices. Besides, artists can sell works directly to buyers without relying on rent-seeking galleries and greedy dealers.
For the average artist, the benefits of NFTs far outweigh the disadvantages. People saying otherwise either cannot grasp the revolutionary potential of tokenized art or love inefficient markets.
4. NFTs ruin gaming
Gamers are one group who have made no secret of their dislike for NFTs. Ubisoft’s announcement of in-game NFTs attracted such heavy criticism that the company deleted the announcement video and retracted earlier comments about using NFTs in games.
Typically, gaming NFTs mostly cover in-game items like skins, weapons, points, or special characters. Such assets can be sold on a secondary market and exchanged for fiat, like any other good.
While this model triggered the explosion in ‘play-to-earn’ gaming, it attracted criticism from old-school gamers. The argument goes like this:
1. Gaming NFTs take the joy of gaming and turn it into a capitalist venture.
2. Anyone can buy special in-game items (like special characters), making it easy for anyone to climb leaderboards without committing effort.
3. NFTs are merely tools for game studios to add microtransactions to games and make money off gamers.
While these are somewhat sensible arguments, they cannot stand up to rigorous examination:
The multi-billion dollar gaming industry is anything but “fun” as it stands. Not only are gamers spending heavily on in-game items, but they are losing money by spending productive hours on binge-gaming.
As it were, gaming studios are already making money off gamers under the status quo. Gamers rarely earn rewards for committing time and money into playing these games (except bragging rights).
NFTs provide a better deal for gamers since they can sell items acquired during gameplay. That way, they get some tangible benefits for using their time.
Besides, not everyone wants to grind away at Call of Duty to reach the top spot. The number of casual gamers (as opposed to hardcore gamers) is increasing, and I bet these people won’t mind paying for a special character if it means advancing a little quickly.
5. NFTs are worthless investments
Another strand of the “NFTs are bad” argument has to do with NFT-related investing in NFTs. Like cryptocurrencies, NFTs are often described as worthless items only suckers buy—think Beanie Babies or Dutch tulips.
But the idea of cryptocurrencies as worthless items has been debunked ad nauseam. Things have value because people agree that they have value. This is why classic baseball cards and first-edition novels sell for millions of dollars.
Whether NFTs are good investments depends on who you ask.
Many people invest in illiquid items like rare art or old wine because they have scarcity, cachet, and verifiable authenticity. Blue-chip NFT collections like CryptoPunks or Bored Apes have the same qualities, so they definitely qualify as investments in the sense of the word.
Does that mean you should sell your house to buy an NFT? Maybe not. Almost everyone in crypto will tell you to only invest what you can afford to lose in NFTs.
Besides, people choosing to buy NFTs in hopes of profits is no reason to trash NFTs. People have been buying all sorts of items (Ferraris, autographed novels, gloves) as “investments”, so why shouldn’t they buy ownable JPEGs if they want?
6. NFTs have no utility
Another oft-repeated argument against NFTs is that they have no use, except as obnoxiously expensive digital files.
Again, this is a line repeated by people with little understanding of how non-fungible tokens work.
I’ve written previously on how businesses can use NFTs. And even today, other industries, from music to healthcare to higher education, are all exploring unique use-cases for NFTs.
From all indications, the claim that NFTs have no tangible use except as pictures is spurious. Not only does it demonstrate a lack of imagination, but it shows that people rarely do the work required to hold opinions.
A Love Letter To NFT Critics
As humans, it’s normal to fear and reject what we don’t understand. It’s a defense mechanism encoded into our brains from the time we roamed the earth as an endangered species.
But, as modern-day humans, we can choose knowledge over fear. NFTs can potentially transform how we think of scarcity and ownership of digital and real-world assets, a development with significant implications.
But it’s impossible to grasp the benefits of tokenizing items if we lack an open mind and a commitment to diligent research. Which is why these quote from scientist Marie Curie is perfect to conclude this article:
“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.”
Source: https://fullycrypto.com/why-all-the-hate-for-nfts