5 Reasons Why NFTs Are Bad for Artists

In an industry that has exploded over the past few years, you would expect every artist to want a piece of the pie. But you would be wrong. Millions of dollars have been stolen from artists and the space is plagued with hacks.

This reputation has proved problematic to say the least. That is why in this article I will be highlighting 5 reasons NFTs are bad for artists. So without further ado, let’s jump right in.

What are NFTs?

Before we start, let’s define NFTs. Put simply NFTs are proof of ownership. It is a record on the blockchain which cannot be falsified or duplicated. Think of them as digital receipts which are recorded on a public ledger. Every transaction on the ledger is open to the public making it completely transparent.

Each NFT is a unique asset with specific metadata. The most common form is art. With the basics out the way, let’s look at the 5 reasons that NFTs are bad for artists.

5 reasons NFTs are bad for artists

Theft – as there is no contract involved, the stealing of artwork is rampant in the space. NFTs can be minted in a few minutes often using encrypted technology. Open Sea even stated in a recent Twitter thread that over 80% of NFTs created were either fake or plagiarized. As these criminals are anonymous it makes it hard to crack down on. Not to mention, there is not a legitimate art certification process, most of the time it goes unnoticed.

Royalties are not guaranteed – as outlined in my previous article, royalties cannot be enforced. Users can still transfer them peer to peer and pay using a different medium. As the sale is not done through the same smart contract royalties are avoided. Not only that but wrapped tokens can also be issued. Essentially the NFT is locked and a token is issued in return. This token can then be traded on the open market without the royalty mechanism being triggered. Once you have traded the tokens, you can redeem them for the original NFT. Ultimately, if royalties are avoided it removes a vital income source for artists.

Hacks & bugs – You guessed it, Hacks. You cannot talk about NFTs without talking about the countless number of hacks. This industry has exploded in the past few years which has attracted some unwanted attention. From phishing attacks to discord scams, hacks are rampant. Not only that, but smart contracts can fail due to bugs in the code. That is why it is imperative that you use a hardware wallet to protect against hacks. The hardware wallet I recommend is the ledger nano X. You can check out my review by clicking here.

Rug Pulls – this is a common scam whereby a project stops all development while taking the user’s funds. This is especially relevant with NFTs as there is no third party to moderate the situation. NFTs are often hyped by content creators and then they are ultimately dumped on their community leaving a ton of bag holders with worthless NFTs. Want to learn more about crypto scams, click here.

Price volatility – NFTs are extremely illiquid which leads to huge price swings. This can prove problematic as it does not provide the artist with a steady income. Although this can prove beneficial for the risk-tolerant, it ultimately discourages the risk-averse.

So what does the future hold?

In order for this space to be more welcoming to artists, it needs some radical changes. Firstly, there needs to be more regulation from marketplaces to crack down on fake or plagiarized NFTs.

Secondly, security needs to be drastically improved. Social media platforms like Twitter and discord need to create a more secure platform with drastically fewer scammers, whether that be through a verification process or an algorithm update things need to change. With that being said, as the space continues to develop and mature, security will ultimately improve.

Not only that, but the increase in liquidity and more knowledgeable investors will ultimately lead to fewer pumps and dumps. At the end of the day, this space is only a couple years old so these issues are to be expected.

Final Thoughts

As you can see there are major issues in the space. From plagiarism to hacks. Millions of dollars have ultimately been stolen from artists, either directly or indirectly. Not only that, but this dissuades artists to promote and sell NFTs at risk of damaging their reputations. I mean why would they promote their NFTs to fans if they are at such a high risk of being scammed?

Overall, there needs to be a radical change for this industry to attract artists. But it’s young so I have hope that things will change. Thanks for reading.

Curious where NFTs are stored? Click here to read my previous article