Introduction Not too long ago, crypto and non-fungible tokens (NFTs) were being touted as the next big thing. They had eye-watering price tags that led to an influx of people, including many prominent figures. However, as of today, approximately 95% of all NFTs are worthless. So, why is that? In this blog, we will delve into the world of cryptocurrencies and NFTs, exploring their complexities, flaws, and the questionable motivations of those involved. The Complexity of Cryptocurrencies Many proponents of cryptocurrencies insist that the entire system is highly engineered at every stage, making it appear opaque to the uninitiated. However, this complexity is not due to practical implementation or associated jargon, but rather the inherent difficulty of understanding cryptography, from which cryptocurrency takes its name. Cryptography is complex, not just for laymen, but even for passionate enthusiasts who can spend months trying to comprehend its intricacies. However, this complexity is arguably the least important aspect of cryptocurrencies. While cryptography is essential for the functioning of cryptocurrencies, it is not the sole determinant of their value or purpose. Comparing the complexity of cryptography to the value and impact of cryptocurrencies is like equating the mechanical and engineering complexity of a professional book-making machine to the limited usage and high price of a one-of-a-kind book. The true focus of cryptocurrencies should be on their practical applications and potential to revolutionize the financial industry. The Motivation Behind Cryptocurrency Enthusiasts One observation about cryptocurrency enthusiasts is that their discussions often revolve around making more money rather than the underlying technology or principles. This emphasis on financial gain can overshadow the true potential of cryptocurrencies and NFTs to bring about meaningful change. While cryptography and blockchain technology form the foundation of cryptocurrencies, their ultimate purpose should be to address real-world problems and improve people's lives. Unfortunately, the focus on financial gains often leads to a disregard for the broader impact and potential of cryptocurrencies.
The Flaws of Proof-of-Work and Proof-of-Stake Two common methods used in cryptocurrencies are proof-of-work (PoW) and proof-of-stake (PoS). PoW involves complex mathematical calculations that validate transactions and earn participants money. However, this process consumes vast amounts of energy and often leads to wealth inequality. PoS, on the other hand, requires participants to lock up a significant amount of capital to validate transactions and earn rewards. While PoS addresses some of the energy concerns associated with PoW, it still perpetuates wealth inequality and concentrates resources at the top. The Pseudonymity of Cryptocurrencies Cryptocurrencies offer pseudonymity, meaning that the ownership of currencies is not tied to individuals' identities. While this may seem appealing in theory, many users sacrifice their privacy and link their wallets to various databases, inadvertently revealing more personal information than their bank accounts. Although the concept of pseudonymity is intriguing, it often takes a backseat to convenience and financial gain for many cryptocurrency users. Rather than focusing on the potential for anonymous transactions, users prioritize making money easily and quickly. The Problem with NFT Collections NFT collections, in particular, have faced significant challenges in maintaining their value. Reports indicate that the majority of NFTs have either lost all their value or experienced such a significant decline that they can no longer be considered valuable. While there are exceptions to this trend, with some collections maintaining high average values, the low trade volumes and questionable long-term profitability of these collections raise concerns. Many NFT collections lack a clear use case or tangible product, relying solely on the speculative nature of the market. Furthermore, the promise of profit sharing, staking, or residuals associated with NFTs has largely failed to materialize. Most NFT collections do not offer any real value beyond their initial purchase, making them more akin to speculative investments rather than genuine assets with long-term potential.
The Zero-Sum Nature of NFTs NFT collections operate in a zero-sum market, where the gains of some are offset by the losses of others. This inherent flaw, combined with the lack of unique selling propositions for NFTs, contributes to their eventual failure or stagnation. Even popular NFT collections, such as Axie Infinity, have experienced significant drops in value, indicating the overall fragility of the NFT market. Unlike traditional investments, where value can be generated over time, NFT collections often peak early and struggle to recover. The Future of Cryptocurrencies and NFTs While cryptocurrencies and NFTs continue to attract attention and investment, their long-term viability remains uncertain. The lack of practical applications, the prevalence of scams and fraudulent projects, and the speculative nature of the market all contribute to the skepticism surrounding cryptocurrencies and NFTs. As the industry evolves, it is crucial to separate the hype from the reality and critically evaluate the value and purpose of cryptocurrencies and NFTs. Only by understanding their limitations and potential flaws can investors make informed decisions and avoid falling victim to the pitfalls of the market. Conclusion Cryptocurrencies and NFTs were once hailed as groundbreaking technologies with the potential to revolutionize industries and change lives. However, the reality is far from the hype. The inherent complexities, questionable motivations, and lack of tangible value in many NFT collections have cast doubt on the future of these technologies. While there are exceptions to the rule, the majority of NFTs have lost their value or failed to deliver on their promises. As the market evolves, it is crucial to approach cryptocurrencies and NFTs with caution, conducting thorough research and considering the practical applications and long-term viability of these investments. Ultimately, the future of cryptocurrencies and NFTs will be shaped by their ability to address real-world problems, provide tangible value, and foster genuine innovation. Only time will tell if these technologies can live up to their initial promise and become more than just speculative investments.