The popularity of NFTs keeps growing. However, this also brings along plenty of concerns. Environmental issues play up, but also concerns about a bubble are real. Furthermore, topics like regulation and tax are in the spotlight.
The NFT growth in Asia has been on the upswing since 2021. The Forkast report states there are 440 million people online in this part of the world. Forkast is a leading news media platform, based in Hong Kong. They specialize in news about digital assets and wrote a detailed report on NFTs.
There are other challenges that need to be overcome. Handling them will make sure that NFTs have a healthy and successful future ahead of them. A future where NFTs are part of our daily life. Right now and right here, we can put the foundation in place, to make this happen. We will discuss the future of NFTs and some NFT challenges.
Source: BAYC
What Does the Future Hold for NFTs?
Looking at today’s popularity of NFTs, the future should look bright. Despite all concerns, which we will address soon. So, before we talk about challenges that NFTs face, we also need to check the future of NFTs.
Currently, NFTs have already many use cases, with more to come. It looks like we don’t even know some future applications of NFTs. Furthermore, we see more brand names entering the NFT realm. Brands include Nike, Formula 1, Warner Music, and even the UK government.
Let’s have a look at the future NFT potential. For instance, there are many areas in which NFTs can make a serious difference.
- Paperless transactions—These are not only transactions. However, NFTs can replace paper transactions. In turn, you have a digital version. How about a virtual land deed? They can be helpful in many other areas. For example, a digital ID.
- Politics—The recent South Korean presidential elections are a sample. Both major candidates used NFTs in their campaigns. In the US, Front Row is opening an NFT marketplace. This is exclusive for party campaigns and the like for Democrats. Furthermore, voting is another area where NFTs can play an important role.
- Music and entertainment industry—They just seem to be waking up to the potential of NFTs. In April 2022, we saw the release of the first movie on a Secret NFT. Quentin Tarantino already played around with his idea.
- Fractionalizing—Currently popular for art NFTs. However, the idea is promising and there may be more uses cases for this.
These are just some samples. There are more options and ideas floating around. So, will NFTs be big? Likely, but before we can answer that question, let’s look at some challenges for NFTs.
What Are NFT Challenges?
There are various NFT challenges currently. These range from fear of just being a bubble to eco issues. And everything in-between. Here are a few samples of NFT challenges.
Are NFTs a Trend?
Many people think or are afraid that NFTs are nothing more but a bubble. It is possible that many current NFT art collections will not make it. They either lose value or there are too many scams. However, in the future, the uses cases and versatility of NFTs in general will by far outweigh art NFTs. It is likely that NFTs become an integrated part of our lives. So, yes, the art NFTs may be a bubble, but they will also have a place in the future of NFTs. It’s like the internet bubble. In the early 2000s, this bubble burst. However, the internet is still here and moving to a new and exciting phase, Web 3.0.
Source: Pixabay
Environmental Concerns
This is a serious and legit concern. Minting NFTs in the Ethereum ecosystem has an environmental impact. Whether we like it or not. It involves some 20 kg of carbon dioxide. That is a serious carbon footprint. However, there is light at the end of this tunnel.
Ethereum is replacing the current PoW consensus mechanism to a PoS version. In the same vein, other blockchains like Solana are already much more eco-friendly. It’s something that needs attention, for real.
Copyright and Other Legal Issues
The current legal framework for NFTs is, well, not really existing. This can cause many issues. For example, buying from a fake seller. You just buy a JPEG, most certainly not the intellectual property rights. Maybe NFT marketplaces should scrutinize sellers better. There is no universal consensus, yet, how to classify NFTs. Likewise, there is also no uniformity in how to regulate them. Various countries all have different ideas about how to handle this. Another issue is taxation of NFTs. The IRS started to take an interest recently. Worst-case scenarios mention a 37% tax on NFTs. For instance, India has a 1% tax law. On top of a 30% capital gains tax. In a recent article, we wrote about NFT regulations.
Accessibility
For a person who is new to NFTs, it looks complicated to get involved. Long and complex addresses to copy. Private and public keys. What are they and how to use them? Various wallets. This may be scaring people away rather than achieving mass adoption. Users need to be able to work with NFTs without having to know about the complex technology behind it. In an ideal world, people will work with NFTs in the future without realizing it.
Generating Revenue
Despite the current boom in NFTs, are there enough avenues to generate more income? On one side, we have the gaming industry with the P2E option. On the other hand, we have the metaverse. Gaming is just a smaller part of the metaverse. Will VR and AR take off? Or even better, will people remember Meta, the former Facebook, in 10 years time?
It is of importance for big brands that they can generate income with NFTs. Traditional firms will need potential streams of income. Otherwise, they will stay clear of NFTs. As a result, mass adoption will take longer.
Source: Adam Bomb Squad
Conclusion
As we showed, there are quite a few challenges to overcome for NFTs. For example, scams, bubbles, or fakes are a potential issue. Legal issues require addressing, as do eco issues. Nonetheless, the future looks bright. A variety of use cases for NFTs and proof of digital ownership are two strong foundations NFTs can build on.
Currently, collectibles and NFT art are thriving. However, there is so much more to discover. Calling this the tip of the iceberg is an understatement. NFTs are about to blow up big time.
We have a few more articles written about the Forkast NFT report.
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