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NFTs, or non-fungible tokens, are a critical component in the Web3 revolution. They're adored by celebrities and speculators alike, who buy and sell them for exorbitant sums of money. They've exploded into the mainstream, supported by prominent names, and marketed as a viable choice for consumers looking to invest money and earn huge returns.
Nonetheless, despite the fact that their broad use is still in its early stages, they suffer a grave reputational danger. When most people are asked about their perception, it is overwhelmingly negative. According to a recent study of 40,000 people conducted in the United States and the United Kingdom, 48 percent of Americans and only 22 percent of Britons thought NFTs were a "good and safe investment."
What is the source of people's skepticism? The massive quantity of clandestine wash washing going on in the NFT market — and the dangers of rug pulls.
A vast deception plan
According to Chainalysis, a blockchain monitoring service, $44.2 billion in cryptocurrency was transmitted to NFT-related smart contracts last year, up from $106 million in 2020. However, such money is frequently regarded as contentious and dubious.
According to Chainalysis, about $2.5 million in cryptocurrencies thought to be linked to money laundering was used to buy NFTs in the second half of 2021, with more than a quarter of a million dollars coming from wallets associated with people subject to international sanctions.
Regulators are taking note. The FBI has formed a cryptocurrency investigation squad that will also be in charge of NFTs. "The bad actors are looking for ways to avoid being caught laundering money, and while that's not to suggest that it's NFTs, if they find an avenue that they can abuse, they will," Jesse Spiro of Chainalysis told Fortune Magazine. "They are constantly probing the fence and hunting for holes."
Legitimacy concerns
That's before we get into projects that promise the moon to potential investors yet deliver nothing. A variety of NFT projects have been plagued by severe challenges, including charges that they are not authentic or are racist, homophobic, or disparaging.
Everything adds up to give the appearance of a wild west bazaar. People on Twitter, such as NFT thefts, are chronicling the huge level of plagiarism and fraud in the market.
Nearly $2 million was stolen from users' wallets in the latest example of the massive phishing effort conducted against NFT marketplace OpenSea. It's a high-profile illustration of why many people are concerned that NFTs can't be trusted at this point of development.
How to Restore NFTs' Reputation
The underlying technology of NFTs, as well as the concept that drives their deployment, has the potential to be very valuable. A permanent record of an item on the blockchain, which is theoretically irreversible and trackable, can be used for a variety of methods and purposes. However, in order for the technology to reach that level of legitimacy, user buy-in is required.
And, for the time being, negative headlines dominate the discourse surrounding NFTs – and are certain to do so for as long as the community turns its back on those attempting to defraud others for a fast cash.
It will take a lot of effort to reclaim NFTs' reputation and convert it into something positive. However, it is also critical for the technology's future success if it is to survive in the long run. At the moment, NFTs will be remembered as a weird aberration; a curious footnote about a technology that had huge potential but didn't realize it due to scams.
It is up to the community and their willingness to speak out against the scams whether this changes.
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