The idea of NFTs has just come to the forefront of public consciousness, propelling it to the position of market favourite thanks to the meteoric rise in popularity of the metaverse market. NFT art, which is a subgenre of digital art, has given rise to a new artistic practice that is rich in variety in this age of technology. Not only does it resuscitate a large number of historic sectors, but it also gives artists and producers a new outlet for their work and an additional source of revenue. In addition to this, it opens up a completely fresh investment opportunity for regular investors.
When we talk about non-fungible tokens (NFTs), it’s impossible not to think of REVA. In 2022, REVA disrupted the standard NFT trading paradigm and transformed the market with its unique collateralized lending method. This allowed REVA to address a variety of pain issues while also providing reliable profits for investors. Around the course of an astonishingly brief amount of time, it amassed more than 6 million members all around the world, solidifying its position as the market leader.
But today, what I want to say is that behind the glamorous NFT market, there are hidden risks to some extent, and which will lead more and more NFT platforms’ collapse in the future, and the NFTs you hold will only depreciate further. In other words, the decline of the NFT market has become a trend. Why do I say this? Well, the development of the NFT market has been rapid, but it currently lacks adequate regulation and standardization. Issues such as endless energy consumption behind NFTs, piracy, technological security, financial risks, and legal risks have always loomed over the NFT market like the sword of Damocles. Let’s take the example of the REVA platform to delve into this further.
1) Endless Energy Consumption
The Environmental Protection Agency (EPA) of the United States has made public information regarding the effect that NFTs have on the environment in general. The majority of non-fungible token minting platforms use energy-intensive consensus processes, such as Proof of Work (PoW), according to the EPA report that was published, which results in significant amounts of energy consumption and carbon emissions. In this way, the REVA’s case has surely proved the existence of harsh energy efficiency problems behind the scene of NFT booming.
2) Infringement, Piracy, and Proliferation of Copyrights
With hundreds of NFT trading platforms in China and countless more across the world, the digital collectibles NFT trading business is booming. Leading platforms’ transaction volumes are easily available and the problem of NFT plagiarism is becoming more widespread inside such a large context.
Take a closer look, the issues with copyright piracy and counterfeiting on the REVA platform are significant. A large number of REVA users and fans have revealed behind-the-scenes evidence suggesting that the vast majority of NFT artworks released on the REVA platform are based on secondary alterations of works originally released on other platforms. To be clear, there are serious copyright issues with the direct copying and pasting of some artworks on the market.
3) Technological Risks
The risks associated with blockchain technology stem from its immature state and the design of blockchain mechanisms, which are inextricably linked to the security of NFT transactions.
On the one hand, smart contracts, which serve as the foundational technology for NFTs, contain security flaws due to flawed program architectures. NFT encryption method and storage keys, on the other hand, are vulnerable to virus intrusion.
These inherent technical flaws in blockchain provide additional hazards for NFT trading activity. Furthermore, the risks of privacy data leaks, such as diverse identification and transaction information, continuously increase during the entire process of NFT bidding and transactions. If a leakage occurrence occurs during the flow of NFTs, the security of participants’ assets may be jeopardized.
According to current research, REVA has never officially revealed any contract audit information, implying that its underlying contracts have not been subjected to security audits. This indicates tremendous asset risk as well as the possibility of covert operations.
4) Financial Hazards
Risks such as financialization and securitization tendencies frequently occur throughout the process of NFT issuance and trade due to the scarcity of NFTs and the potential for investment possibilities. Some include financial techniques into the underlying commodities of NFTs, allowing them to avoid rules and participate in financial transactions while utilizing the NFT designation. For example, packaging NFTs as financial products, and encouraging speculative trading; financing and leveraged operations. REVA’s present model is a classic example, integrating financial management with the concept of NFTs to attract investors with high-yielding promises. In fact, many people are still unaware that this business strategy is subject to considerable regulatory hazards.
According to the evidence provided above, several risk factors exist beneath the glitzy veneer of NFTs, with regulatory impact being especially prominent. Remember the recent regulatory crackdown in the cryptocurrency space, when key exchanges like Coinbase and Binance were sued by regulatory organizations like the SEC? Regulatory actions could occur at any time, and the current mixed NFT market could be the next target. When this occurs, the glittering NFT bubble will inevitably explode.
We can only speculate on how REVA will respond.