I’m already starting to count down the time until the next big and worldwide cry of people who will lose their money and fortune on some „NFT tokenization”. For, contrary to what the touts say about tokenization:
NFTs do not give any permanent or secure ownership.
Of course, tokenization, also with the use of NFT, is not a scam in itself, but provided that investors are not fooled by fairy tales, they explicitly warn against serious threats ending with the loss of „ownership” and the value of the token.
And I am not talking about intentional fraud here, but about what the NFT simply cannot provide due to their imperfections, even if they are technical.
First, the NFT can be „burned”. Just like that. Snap and… it’s gone. Because contrary to what many believe – nobody has their tokens in their „wallets”.
Secondly, an NFT is worth as much as believing in the entity that controls the URI (address of online resources) from which its metadata is retrieved. So you just need to take control of the server from which this data is retrieved and … pufff … You still have the same NFT, but the data it shows is different. They do not indicate your ownership to [insert any tokenized thing here] but whatever the controlling server wants at the moment, eg to nothing.
Well, unless someone creates their own blockchain with their own NFT standard that records metadata in that blockchain. Then the durability and security of the „property rights” of investors would depend on the resistance of this blockchain to attacks and the ability to maintain (finance) this base over time, etc. etc.
In sum:
Faith in ownership expressed in an NFT token is belief in an entity that controls the location of the metadata pointed to by the URI (that is, in practice, some server).
If you are aware of this as an investor, if the person offering you tokenization by the NFT explicitly informs potential investors about it, it’s okay. Then everyone knows what the investment risk is.
But if someone does not warn potential investors about such threats, it looks bad (lack of competence) or even a deliberate scam.
Unfortunately, I am watching a few people and a few companies that encourage people to participate in tokenizations and do not even mention the risks associated with it. 🙁
Please take this post as a warning.
