🔐1) NFT Issues and Current Problems

NFTs (Non-Fungible Tokens) have introduced many innovations, but several technical, legal, economic, and environmental challenges remain. These issues could hinder the continued growth and mainstream adoption of NFTs and may have negative impacts if left unresolved.

1] Legal Issues

NFTs are a new technology, and in many cases, legal regulations and frameworks are not clearly established. This can lead to various legal issues such as ownership disputes, copyright infringement, fraud, and regulatory uncertainty.

- Ownership and Copyright Issues

• Ambiguity of Ownership:NFTs represent ownership of a digital asset, but in reality, the owner does not own the digital file associated with the NFT; rather, they hold a digital certificate of ownership. This can lead to confusion regarding actual ownership.

• Copyright Infringement:Cases have arisen where NFTs are created or sold without the creator’s consent. For instance, someone may issue and sell an NFT of someone else’s creation without permission, leading to copyright issues.

• Current State:In many countries, legal frameworks addressing ownership and copyright issues related to NFTs are insufficient. Some countries are trying to establish the legal status of NFTs, but consistent regulations are lacking on a global scale.

- Regulatory Uncertainty

• Financial Regulation Issues:Since NFTs operate in conjunction with cryptocurrencies, they are subject to financial regulations in many countries. For example, there are concerns that NFT transactions could be used for money laundering or tax evasion, drawing attention from regulatory authorities.

• Taxation Issues:NFTs are considered assets, and NFT transactions can create capital gains tax issues. However, the tax regulations on NFTs vary across countries, creating confusion in tax reporting.

• Current State:Major countries, such as the U.S. and those in Europe, are reviewing regulations on NFTs, but most countries lack clear legal guidelines, which serves as a barrier to the expansion of the NFT market.

2] Technical Issues

NFTs are based on blockchain technology, but this technology is not without flaws and presents several technical challenges.

- Scalability Issues

• Network Congestion:Major blockchain platforms for NFTs, such as Ethereum, face high fees (gas fees) and network congestion. When there is a high volume of NFT transactions or users, network speeds can slow down, and transaction costs can rise sharply.

• High Fees:Gas fees on the Ethereum network can vary greatly depending on network congestion. High gas fees can make low-value NFT transactions economically burdensome.

• Current State:Solutions such as Ethereum 2.0 upgrades aim to address these issues, but they are not fully resolved. Alternative blockchains (e.g., Solana, Polygon) are emerging as potential solutions.

- Permanence on the Blockchain

• Data Storage Issues:While NFTs are recorded on the blockchain, the associated digital content is often stored on separate centralized servers. If these servers go offline or are shut down, NFT owners may lose access to the content linked to their NFTs.

• Current State:Efforts are being made to securely store NFT-related data using decentralized file storage systems, but many NFTs still rely on centralized servers.

3] Fraud and Security Issues

As the NFT market grows rapidly, fraud and security issues have become serious concerns. Due to the nature of digital assets, it can be difficult to recover from fraud or hacking incidents.

- Fraud and Phishing

• Phishing Scams:Phishing attacks targeting NFT buyers and sellers are on the rise. If users lose their private keys or conduct transactions on fraudulent exchanges, they risk losing their assets.

• Fraudulent NFT Projects:Some NFT projects promise high returns initially but result in “rug pull” scams, where the project is abandoned, or developers vanish with the funds.

• Current State:NFT platforms are working to strengthen security and urging users to exercise caution, yet fraud remains a major issue without a comprehensive solution.

- Hacking Risks

• Wallet Hacking:If a digital wallet is hacked, NFTs and cryptocurrencies stored in the wallet may be stolen. This risk is especially high when using less secure hot wallets.

• Current State:Using hardware wallets (cold wallets) is one way to enhance security, but users lacking technical knowledge remain vulnerable to hacking.

4] Economic Issues

The rapid growth of the NFT market has led to economic issues such as price volatility, market bubbles, and overheating.

- Price Volatility and Market Bubble Issues

• Price Volatility:NFTs exhibit high price volatility. NFTs traded for hundreds of thousands of dollars can lose significant value in a short period, leading to market instability.

• Market Bubble:Some experts view the NFT market as a bubble. The actual value of NFTs outside of well-known works or projects can be overestimated, and investors may suffer significant losses if the bubble bursts.

• Current State:In early 2022, the NFT market experienced a decline, causing substantial losses for many investors. Some experts believe the market needs more time to stabilize.

- Market Accessibility

• Entry Barriers:Buying and trading NFTs can still be technically complex. It requires using cryptocurrency, setting up wallets, and calculating transaction fees, which can be challenging for beginners.

• Current State:NFT platforms are gradually introducing more user-friendly interfaces and payment systems, but many potential investors still face difficulties entering the market due to these technical barriers.

5] Environmental Issues

• Energy Consumption:Blockchains like Ethereum, which commonly handle NFT transactions, use a Proof of Work (PoW) consensus algorithm, resulting in high energy consumption that can negatively impact the environment. Like Bitcoin, Ethereum’s energy consumption is substantial, drawing criticism from environmental advocates.

• Current State:To address energy concerns, Ethereum is transitioning to a Proof of Stake (PoS) consensus model with the Ethereum 2.0 upgrade. Additionally, eco-friendly blockchain networks such as Solana and Polygon are emerging as alternatives.

While NFTs are an innovative technology, issues such as regulatory uncertainty, technical limitations, fraud and security risks, price volatility, and environmental impact may hinder the growth of the NFT market if left unresolved. However, many companies and developers are working to address these issues, and there is a strong likelihood that a safer and more efficient NFT ecosystem will be established as legal and technological advancements are made in the future.