What are the Risks of Trading/Investing In Non-Fungible Tokens (NFT)?


Non-Fungible Tokens (NFT) are digital assets that are non-interchangeable and non-transferable between owners. NFTs use high-level technology to store rare material such as pictures, sounds, videos, and GIFs on a blockchain. The most commonly used blockchain by NFTs is Ethereum. Simply put, NFTs are coded with software that some cryptocurrencies use.

The NFT is an interesting item for people who are into buying creative things, or who think creatively. Many people are making use of this platform as an additional source of income, you can also.This is what the likes of NFT Loophole are into – they make you understand the new digital art craze of Non-fungible token (NFT).

Despite NFTs being in existence since 2014, they only recently gained worldwide recognition among investors, collectors and traders who started to notice the benefit of unique digital assets that could not be replicated for another of its kind.

Several investments and platforms are being launched daily, however, only a few of them are successful. NFT, a relatively new concept that was created on May 3rd 2014 by the renowned digital artist Kevin McCoy, is yet to be demystified. This means there are some unknown risks that you could encounter when trading or investing in Non-fungible tokens (NFT).

This article is going to point out why it is risky to just delve into the art of minting, investing, or trading NFTs without good knowledge of how the system works.

The Many Risks of Investing/Trading in NFTs

NFTs Degrade the Environment

The level of degradation caused by the mining of precious stones like gold and platinum is actually child’s play when compared to the mining of cryptocurrencies. The amount of carbon monoxide emissions released into the atmosphere by just mining crypto and NFTs is insane. Between 2016 and 2018 alone, over 15 million tons of Co2 was deposited into an already troubled atmosphere.

Blockchain technology consumes a lot of energy, and it is not suitable for the environment. This platform has several risks, but this one is the major one because it is simply wrong to harm your environment to make profits. Going by this, the entire NFT and crypto market is not actually sustainable.

You Never Really “Own” an NFT

The greatest selling point of the NFT market is ownership of the item. The “non-fungibility” nature of an NFT item makes it non-transferrable and unable for any two persons to own the same item – that’s the idea.

When you buy a NFT item from the original creator, the ownership is ceded to you as the new holder of the property. But a NFT holder cannot use the NFT item for any other thing, other than just own it. Here’s why. The copyright law does not automatically give you, the new owner, any rights to display the NFT in public. You can’t even sue anyone if they reproduce the item without your authorization. Remember that there’s no clear cut law that guides ownership of NFTs anywhere in the world. Thus, your “rights to ownership” are in a balance.

Besides, art, images, and music can’t really be “used up”. A painting of Monalisa is viewed by a million people on a Monday, will Tuesday visitors be seeing a diminished version of it? That’s an obvious No.

We all understand that it’s used to store value though.

Cyber Insecurity

As the popularity of the idea rises, so are the attacks from the dark web too.The cases of cyber attacks on NFT have since skyrocketed. Unsuspecting investors have lost a lot of money just trying to position themselves for the near future.

We have seen instances of fake replicas, copyright thefts, and so on.  

The bottom line…

There are several benefits of NFT, despite the risks. NFT Benefits like transparency, originality, and open many economic possibilities are on the table for anyone who owns/holds an item. I’d say anyone who wants to venture into NFTs should first get all the necessary knowledge required to own and trade an item.

However, you can’t push the obvious degradation of our environment, security, and the ownership issues aside. These are the major risks of NFT. These are very important things one needs to consider as well.

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