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Many years after the release of CryptoKitties to the public, the field of non-fungible tokens (NFT) has finally begun to develop.
The coveted collections are sold for millions of dollars in some of the best auction houses in the world. Top football and basketball teams are unleashing the once-in-a-lifetime moments cherished by fans. Film studios have also begun to distribute NFTs as souvenirs, releasing new sources of income when they are most needed.
No wonder NFT-focused companies are attracting dizzying valuations.Look at Sorare, it promises to ensure safety The list price is at least US$3.8 billion Through its latest round of financing. Although there is constant news that a bubble is forming in this emerging field, big brands firmly believe that these assets have staying power. Let us not forget that there are countless undiscovered NFT use cases.
Unfortunately, a dark cloud is hovering on the horizon-it may hinder the development of the NFT industry. Currently, blockchain technology does not provide enough value proposition to incentivize users to own these encrypted collectibles. If the market is to surge and attract everyday users, the industry needs to solve three key design issues.
Tricky ownership issues
Suppose you own an NFT that represents a beautiful artwork by a famous painter. Chances are, you will pay a considerable price for this.
But the problem is: if the underlying asset it represents does not exist, then crypto collectibles are completely worthless. Currently, permanent storage of high-resolution image data that gives such NFT value requires huge costs. When you take the video into account, the problem is further exacerbated.
related: NFT makes it possible for gamers to own digital property rights
Without the right incentives, the blockchain nodes responsible for protecting these files may not function properly, which may lead to irreversible loss of NFT data. It is one thing to pay $1 million for a rare and irreplaceable token-it is another thing to lose the investment due to circumstances beyond your control.
The best way to solve this problem is to ensure that economic incentives are distributed more widely when selling NFTs—beyond the original creator of the token, the seller, or the market that facilitates the transaction. Nodes should also get a share.
Protect content
Even if this design flaw is resolved quickly, there will be other flaws that may undermine the value of rare NFTs. Currently, most content protection mechanisms for digital assets either do not exist or are weak. The data supporting digital collectibles is usually stored on centralized file servers, which increases the possibility of hackers or illegal sharing of exclusive data.
related: To change the art industry, NFT must be safer
For NFT to be truly valuable, only its owner can view and enjoy the data contained in it. Implementing digital rights management or DRM will help protect investment and help alleviate some concerns surrounding the actual sales of content in the market. This method is not much different from the method adopted by Apple when it launched the iTunes Store, adding DRM to the music to ensure that it is the owner’s track and not someone else’s track.
Ownership tied to identity
Last but not least, we need to reflect on the fact that NFTs cannot be exchanged-this means that once they are lost or stolen, the damage will be permanent.
If irreplaceable tokens are to become the dominant force in the next few decades, we need to create a mechanism that can inherit NFTs-allowing coveted digital assets to be passed down from generation to generation. We should not tie the ownership of the NFT to the private key-on the contrary, the blockchain should directly link these rights to someone’s identity. This will help the asset class face the future and ensure that control will never be lost.
related: Will regulation adapt to encryption, or will encryption adapt to regulation?Expert answers
We are already living in a world where information is lost at an alarming rate. Millions of web pages — full of vivid stories, photos and videos — have been deleted and lost forever. It would be ironic to make the same thing happen to NFT.
Now is the time to take action. The NFT industry is still in its early stages and can be completely improved before we enter mass adoption. If these design flaws are not resolved, it may eventually hinder the scale of the industry and cause considerable trouble for those who invest in tokens that are more valuable than houses.
This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.
The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Phantom Stone Jiuyun Is the CEO and Chief Scientist of SWN Global. He has more than 25 years of experience in cryptography, algorithms and security architecture. Phantom has provided security solutions for multinational companies such as Davos and G20 Summit, LG, Samsung and Yahoo. He currently leads the MetaMUI CBDC and NFTs platform, which is the first identity-based blockchain.
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