Nonfungible token (NFT) markets have already surpassed a number of significant milestones in 2021, including a 2,100% increase in value from Q4 2020, when consumers spent more than $2 billion. Even though sales have broken records, the press hasn’t paid much attention to the growing interest from new investors. NonFungible, which keeps track of NFT transactions, found that in Q1, 73,000 people bought NFTs, and 33,000 sold them. The worldwide art market, on the other hand, was estimated to be worth $64.7 billion in 2018, with the United States, China, and the United Kingdom accounting for 84% of the total.
In a world that is becoming more digital and more connected around the world, where demand for this good is expected to grow in developing countries, the traditional art market infrastructure, which is mostly made up of galleries and auction houses, seems to be out of date. People will remember the COVID-19 outbreak as the event that eventually changed the way the art market worked. The NFT market, on the other hand, shows how smart contracts can be used to replace traditional middlemen. But the current infrastructure has too many holes and chances for human error to be a good replacement for the normal ways of verifying, distributing, auctioning, and proving ownership.
At the moment, there is no way to look into an NFT and clearly figure out who made it. Because of this, the number of times a con artist made a fake NFT and tried to pass it off as the work of a famous artist has gone up. A simple Google search will demonstrate that NFT forgeries are becoming more common. Scammers may steal a picture of a real piece of art and use it to make a non-fungible token (NFT) that they then sell under their own name.
When an NFT has important extra information or data, like a photo, that information is not stored in a blockchain either. Instead, the NFT will give data access, often via the internet. If the data (e.g., picture) at the end of the hyperlink changes or disappears, there is no way to establish or prove from blockchain data what the real image was that was associated with and purchased with the NFT.
So, the NFT data can’t be protected in a way that makes sure it will last. Incredible, but true. This means that the value of the NFT could be hurt if the image or data it is based on is changed or taken away. Millions of dollars could be sent to the wrong address or permanently stolen if someone made a mistake, like misspelling a long, hard-to-type address or falling victim to a “man-in-the-middle” attack.
Physical works of art can be verified by the artist’s signature, and their owners can make sure they last by storing them carefully. For NFTs to be successful in the long run, blockchain technology must let them do the same thing in a decentralized, self-governing way.
At this time, we don’t know what the current COVID-19 outbreak will do to the art world in the future. In retrospect, it could have been seen as what finally broke up what was basically a cartel of high-end auction houses and dealerships of varying renown. With the help of smart contract technology, NFTs can get rid of these middlemen, but the current exchange model is too risky due to operational risks and the possibility of fraud, even though there is a clear demand.
For art buyers and sellers to have a more fair, open, and equal system, it is important that NFTs are hard to fake and last a long time. All the pieces of the art ecosystem of the future are in place; now is the time to put them in place.