Non-fungible tokens

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Non-fungible tokens (also referred to as 'NFTs' or simply 'tokens') are a type of media centered around purely digital ownership backed through cryptocurrency infrastructure. Ownership of NFTs are however, reliant on the maintenance of the systems these tokens are designed for, and often due to either the usage of pump and dump schemes or neglect of these systems, ownership of these tokens becomes effectively useless, or worse, ownership of these NFTs are voided. What exactly is owned is also questionable as many users may associate the media itself as the NFT, however due to the large size of many media formats, NFTs are commonly just links to the media, not the media itself.

How it works

Non-fungible tokens are centered around a digital code that proves ownership over a form of media, commonly an image, and often cryptocurrency infrastructure, also referred to as the blockchain, handles the data behind who owns these codes. The most common cryptocurrency NFTs are associated with is Etherium, however later NFT projects would crop up with its own cryptocurrencies to handle the tokens.^{[citation needed]}

Why it is a problem

Fraud

Often, many NFTs are generated with the exclusive intent to generate revenue,^{[citation needed - check comment]} and as there are no regulations established within the NFT market, tokens can be minted fraudulently through various means.

Plagiarism

As there are a lack of measures to verify the authenticity of media ownership when minting NFTs, especially when these tokens are associated with its own custom cryptocurrency, there is a common pattern of these users claiming the content of others for the purposes of minting their own tokens. OpenSea's 'lazy minting' provides an easy model for malicious actors to freely mint these tokens and profit off of the effort of artists with zero financial investment. Alternatively, malicious actors could mint NFTs that are clones of the visual assets of existing tokens.

This lack of authenticity in minting tokens means that users may unwittingly invest in offending NFTs on platforms such as OpenSea and lose the token they paid for due to a DMCA from the author.

Pump-and-dump

Frequently, NFT projects, much like the cryptocurrencies that back them, will face pump-and-dump schemes, wherein the creator of the token, or a group of malicious actors, will attempt to inflate the value of the NFTs they own, and essentially scam users via tactics such as FOMO to have said users invest in tokens from the promoted collection, thus inflating the value of the product, before the actor(s) attempt to quickly dump the tokens they own onto the market, causing the value to quickly tank, harming all unaware parties in the process.

Ownership

NFTs can be associated with content beyond just a link to a JPEG file, such as items and cosmetics for games. However, despite the tokens themselves persisting on exchanges if they are minted with non-custom cryptocurrencies, users can be rugpulled, either intentionally or through neglect, and have the products they paid for as NFTs be rendered effectively useless. Particularly in the NFT gaming space, this introduces concerns with right to own, as companies such as Electronic Arts and Ubisoft attempt to produce NFT games, with some that end with excessively short lifespans and inflame the problems caused by predatory microtransactions.

Examples

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Some predatory examples of NFTs include:

• Frosties - A NFT game project which rug-pulled investors, and incurred $1.3M in fines from the DOJ.