NFT or Nonfungible tokens are booming. It has become a multi-billion dollar business in less than two years, which is incredible for most people who don’t understand yet. If you want to understand more, we wrote an article about NFT that you can read here.

With all of these from Kitties, Punks, Dogs, Abstract and sports cards selling for millions now, the market is as hot as it can be, a lot of the fundamentals of the blockchain and crypto world which NFT’s are part of are missing among a long of the whole universe of digital art. For now, it’s not a concern since there is so much money going around, but it could come to clash with things that people are not noticing now that are the following.

Decentralization.

Many of these Nft offers, especially in the sports version, such as Sorare and NBA top shot, lack a sense of decentralization since these are private companies and everything is on their ecosystem. Decentralized applications can’t be built on their platform, and you cannot move your collection to an offline wallet or cold storage. This vows another question about ownership which we will get to later. But for now, as more companies like Topps and Panini get into the space, you can see that none of these companies are trying to control the whole process. This also applies to Full NFT projects such as WAX that everything is on a cloud server and a private blockchain.

Overvaluation

The fluctuation of the prices in NFT is insane. You have seen Cryptopunks s and CryptoKitties sell from just a few dollars to not thousands and millions, and let’s not even talk about the Bepple 69 million dollars that is the most expensive purchase to this day. In the world of expensive art pieces is normal. Still, specific factors like history and time when the work was done are part of the value. A Picasso, DaVinci, Salvador Dali represent a moment that appreciates the longevity of the physical work. In the NFT world, we don’t know if these pieces will pass the test of time since it’s too early to tell, and there is no such thing as scarcity in digital art since it can be replicated.

All of these things come to a factor of what exactly are you paying for? And why are you paying for it? Is this a bubble? All valid questions that only time will be able to tell if people just overpaid for a lot of NFT that may or may not be worth anything in the future.

Ownership

With blockchain technology, we can find out where something came from because of its leger. These are why NFT are so popular: something can be replicated a million times, but we can trace the original one because of the blockchain. But right now all of the projects are not integrated. So how do we know that we own the original? What makes it the original? And do we know if it is ours?

In the case of NBA Top shot, you can own moments of players. But really, you don’t know since all the footage is just a license by the NBA. So if they ever decide to shut it down, you can’t transfer it or save it since it lives only on their network. So if we put this in a different scenario that I purchase a pack of physical NBA trading cards, and they decide not to make them anymore, I still own my group of cards, and nobody can take it away from me.

For now its to early to tell maybe all of these concerns will be address in the future, NFT’s are here, and we can all enjoy them. As far as an investment method, its a big risk to take even in the crypto world, which is full of volalititly and speculation so be carefull out there.