Non-Fungible Tokens (NFTs) are a new form of digital asset which possess different characteristics than regular ERC-721 tokens. NFTs can be unique or one of many similar items in a set. They can represent ownership over digital or physical assets, or represent exclusive access to digital goods for crypto promotion.
1. Invested in non-fungible token
Non-fungible tokens (NFT) represent ownership of unique digital/physical assets, such as artworks and collectibles.
Most investors buy NFTs expecting that the value of their investment will increase over time due to price appreciation. NFTs are usually bought and sold on exchanges, with each transaction representing the transfer of ownership between two parties. The price appreciation expectation is present because both buyers and sellers expect that the supply of unique, rare digital/physical assets will be finite (limited).
There are also a few developers who have created games that use NFTs as digital assets to represent virtual characters and game items.
2. Non-fungible tokens are highly volatile
Non-fungible tokens are highly volatile, with the price of one token often increasing or decreasing in value significantly from minute to minute. The reason for this volatility is that there is no standard specification for NFTs, and therefore no standard ways to describe the characteristics of each individual token within a set.
Another reason for the high volatility of NFTs is that they are not legally recognized as a financial instrument in most countries. This means that they cannot be used as collateral to secure loans, because NFTs do not provide any ownership information about their owner or collateral. Website list is here.
3. Non-fungible tokens are financially unstable because of the lack of legal recognition
Given the volatile price fluctuations, the lack of legal recognition, and the expectation that there will be limited supply, it is evident that non-fungible tokens are not a reliable or stable form of digital asset. This is further reinforced by their high susceptibility to cyber attacks and potential fraud. In fact, it has been proven that non-fungible tokens have fallen victim to scams such as phishing and crypto-specific Ponzi schemes.
4. Fungible tokens represent a safer market that NFTs
Fungible tokens have a standard specification and are therefore more reliable and stable than non-fungible tokens. Because of this, fungible tokens are preferred by financial institutions, who will often use them as legal collateral to secure loans and make purchases.
While there may still be some volatility in the price of fungible tokens, because there is guaranteed ownership, their value is less affected by fluctuations in supply and demand.
5. Cryptographically securing NFTs is pointless [but developers claim it’s important]
Cryptographic encryption techniques can be used to protect digital assets (such as cryptocurrency) from theft or fraudulent transactions for link building. It is widely accepted that cryptographic encryption best secures online transactions, with the expectation that developers implementing cryptographic security for digital assets is a highly important development in the cryptocurrency and blockchain ecosystem (even though it may not be as safe as advertised).
When the underlying currency (digital assets) of a NFT are already on the blockchain, cryptography can be used to further secure them by holding the encrypted key in escrow while they are stored on a computer or phone. For example, only someone possessing the encrypted key can sign or transfer a NFT.
Therefore, under normal circumstances it is unnecessary to secure non-fungible tokens by using cryptography. In fact, it can lead to vulnerabilities if used incorrectly. If a non-fungible token is transferred to the wrong address – for example, by accident – and you don’t have the key to the encrypted token, it is lost forever.
6. Blockchains are not suitable for non-fungible tokens
Blockchain technology was designed with fungible tokens in mind because all keys (outputs) from a transaction can be traced back to their origin to prove that they have been transferred successfully. This transparency makes blockchain technology an ideal candidate for implementing cryptography for secure online transactions and digital assets on the blockchain.
Non-fungible tokens cannot trace their history (ownership) back to their origin because there is no standard way of describing each individual token within a set. Using cryptography to secure non-fungible tokens means that they often cannot be used in transactions to prove ownership.
7. It’s time to open up about NFT promotion and development
It is beneficial for both investors and developers if the public hears about NFTs and Bitcoin before they have been implemented in the market, even if this information is shrouded in mystery. Once non-fungible tokens are released, it will be impossible to reverse engineer them or determine their true characteristics and security of each token within a set (i.e., forget the volatile price and cyber attacks).
This is one of the reasons why cryptographers have been cracking NFTs with ease and high success rates – they have been able to understand their code and have identified many vulnerabilities.
Cryptographers have reviewed the source code of non-fungible token projects, as well as their roadmap to determine that they do not offer the same benefits as fungible tokens. Furthermore, all of these projects are using outdated cryptography, which makes them highly insecure against cyber attacks.