The world of nonfungible tokens offers almost endless investment opportunities. Along with decentralized finance and the Metaverse, NFTs offer practical as well as profitable applications in the world of cryptocurrencies. However, there are NFT investment risks to be aware of. A high-profile crypto start-up, OpenSea, is having to deal with plagiarized and stolen nonfungible tokens and resulting lawsuits as well as accusations of fraud. Even if your NFTs are not stolen or copied you run the risk of the market cooling off.
Beware of Flawed NFT Systems
If you buy a painting by an unknown artist and want to sell it for a profit when the painter becomes famous you work through an art gallery or auction house. You set a price or a minimum price and either get the price you want or keep the painting. In the world of NFT systems transactions can take place without any humans being aware. Such was the case with a customer of OpenSea who received far less than what he asked for when a prized NFT sold on the platform. Apparently, a programming flaw allowed hackers to enter the system and execute a sale for the price they wanted and not the price the seller wanted.
Flipping Plagiarized Art
A complaint about OpenSea and other platforms is that not only do scammers manage to buy NFTs for less than their offered value but they also sell plagiarized or copied NFTs on the same platforms, flipping them for quick profits. Apparently, outfits like OpenSea do not have an adequate system for tracking and preventing this sort of thing. They are facing lawsuits from former customers totaling in the millions of dollars. Meanwhile, the NFT market is entering a cooling off period.
Will the NFT Market Last?
NFT prices are down from a year ago and sales have fallen by as much as 90% across all platforms. The “web3” approach to business in this niche seems attractive. Ordinary people run things instead of big tech companies. Thus, with OpenSea as well as lots of crypto platforms, they do not keep track of the names of customers. While customers may initially like this loosely organized approach, they expect compensation when things go wrong. Although some have counted NFT out due to a slump, Fortune reports that NFTs are not going away but rather seem to be in a market cycle. Companies like OpenSea have taken steps to plug the leaks by adding staff and beefing up programming.
How to Avoid NFT Scams
PC Magazine has several suggestions for avoiding NFT scams. Like with most internet-related scams and thefts you avoid trouble by paying attention and doing the necessary homework regarding items you want to buy and the seller. Making certain that your own NFT is secure don’t open emails from folks you do not know and don’t click links on strange emails. Be suspicious of things that are too good to be true because they likely are too good to be true.
Will the NFT Bubble Pop?
Even if you avoid all of the programming-scammer-lost-key issues, welcome to the world of collectibles. There are times when some items are likely sell and times when they are not. Finding the right buyer in the right mood for your fun, interesting, and unique NFT can be difficult. There is a reason why people who want to sell fine art go through a gallery that handles that artist. Those folks have mailing lists of interested parties and spend all day and night drumming up sales. If you love the NFT you just purchased and want to keep it forever, good for you. If you want to trade the NFT market for profits let the buyer (and seller) beware.
NFT Investment Risks – SlideShare Version