Why are NFTs Failing?

NFTs have peaked from selling for millions to losing 97% of their trading volume. Why do we see such a dramatic fall?

The short answer is that NFTs are failing because they are lies.

The longer answer is that NFTs are much more like digital autographs than what they have been advertised as.

But first, what are NTFs supposed to be? NFTs are supposed to be non fungible tokens representing some thing that have one and only one verifiable owner, and in some technical sense, NFTs do do that, but in a much more real sense, NFTs do nothing of the sorts. NFTs usually represent some sort of multimedia such as images or videos. Technically, they achieve that by embedding a hyperlink to the file the token is supposed to represent, so really any linkable digital object can be a NFT. However, owning an NFT is often advertised as synonymous with owning the media it links to.

But how are they more like a digital autograph?

They are not unique in a way that matters: Just like autographs. While every autograph is unique, they represent the same thing, and are fungible in the representation: one autograph is as good and worth as much as another.

Fungible simply means that you can't distinguish between two different tokens whereas non-fungible means two different token are unique, and can be distinguished.

While the tokens themselves have a unique IDs, the contents of the tokens can be replicated among multiple different tokens, and can be created at will by anyone even people who are not the author of the original work. Therefore, you can have multiple tokens representing the same thing making them in reality fungible. Moreover, since anyone can create NFTs pointing towards any work, since it’s just a hyperlink, there is not even a guarantee that it’s the original artist who created the NFT.

They are representative: Just like autographs only refer to the person they are not the actual person. Likewise, NFTs only refer to the multimedia, they are not the media itself. Moreover, no rights are actually transferred when buying or selling a NFT. A fact not properly advertised leading to people believing that they own the copyright after buying a NFT of a book.

Copying: Autographs can be copied both by the real person, and also easily faked. It requires external investigation to tell if an autograph is faked. NFTs differ slightly in this regard in that you can trivially make a perfect copy, so it makes copying easier.

Access Control: NFTs are also worse in another way in that they offer no access control. One autograph can usually only be seen by the one person who owns it.

Given that NFTs don’t offer any value, and don’t live up to their own promises, it’s not surprising that the market is tanking, and will likely never recover unless these problems are corrected. Because in their current state, NFTs are nothing more than digital autographs, and we should expect them to be valued as such.