There is no denying that nonfungible tokens (NFTs) have taken a hit in recent months. Market conditions have plunged, scams and hacks are frequent, and there is an increasing number of low-quality projects, pushing many to question the value of NFTs and their place in Web3 altogether.
Over the last crypto cycle, NFT market conditions have been largely correlated to and reliant upon the general crypto market. As technology and digital assets soared in valuation, it became easier for individuals and investors to justify speculating on the nascent NFT asset class — often paying exorbitant premiums with the conviction that some tangible utility and value might be derived at a point in the future. Combined with the fact that NFTs, by nature, are relatively scarce and illiquid, it set up the perfect storm for dramatic price appreciation that fell even more dramatically back to earth.
Market conditions are also tied to developments in the ecosystem, which include rampant fraud and oversaturation in content, causing increased concern for parties already involved within the space, and hesitation for consumers and businesses that were looking to enter the space.
What is important for us to realize is that this is a natural part of the NFT space’s evolution. Over-speculation followed by reality-striking struggle is not only to be expected, but necessary for us to take action and remedy the current issues to ensure these digital assets can continue to grow and flourish.
Related: Anonymous hacker served with restraining order via NFT
Scams and hacks are, of course, harmful to projects and users participating in the NFT space. No creator should have their work duplicated and sold under someone else’s name, just as no buyer should unwittingly fall prey to a scam or theft. Projects should not need to worry that a hacker can take advantage of infrastructure vulnerabilities and steal massive sums of money. Moreover, early supporters do not need to fear that project leaders will either run out of working capital or simply abandon the product in early stages of the roadmap.
But what these security breaches do reveal is where the points of failure are in the system, allowing us to work harder towards fixing them and preventing them from happening in the future. They also prove an important point to blockchain projects: that they need to prioritize infrastructure and security partners in order to be successful in the long term and prevent future financial losses….
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