Why Do People Hate NFTs? The Financial & Ethical Concerns

Non-fungible tokens, often referred to as NFTs, are unique digital assets recorded on a blockchain, serving as verifiable proof of ownership for digital items such as art, music, or virtual collectibles. These digital identifiers rapidly gained public attention and investment in recent years. While some individuals and communities have embraced NFTs for their potential in digital ownership and creative expression, others hold strong negative sentiments towards them. This polarizing public opinion stems from several financial and ethical concerns that have become prominent as the NFT market developed.

Environmental Concerns

The environmental impact of NFTs is a primary source of public dissatisfaction, largely due to the energy consumption of the underlying blockchain technology. Many NFTs were initially created and traded on proof-of-work (PoW) blockchains, like Ethereum before its significant upgrade. PoW systems require powerful computers to solve complex mathematical problems, consuming substantial electricity to validate transactions and secure the network. This effort results in a considerable carbon footprint associated with minting, bidding on, selling, and transferring NFTs.

Estimates suggest that creating a single NFT could produce around 211 kilograms of carbon dioxide (CO2), equivalent to driving a car for approximately 800 kilometers or the monthly electricity usage of an average European household. The collective energy demand from these activities contributes significantly to greenhouse gas emissions. Critics highlight that this energy intensity makes NFTs environmentally irresponsible, especially when much of the electricity used by miners comes from non-renewable sources. These environmental concerns lead many to question the sustainability and societal value of the NFT market.

Perceived Lack of Intrinsic Value and Speculative Nature

Public animosity towards NFTs stems from the perception that they lack inherent value or utility beyond speculative trading. Many view NFTs as simply “JPEGs” or digital receipts, arguing they possess no tangible backing or real-world application. The idea that a digital image, freely viewable or copyable online, could command millions of dollars often leads to incredulity and frustration.

The NFT market has been characterized by its highly speculative nature, exhibiting rapid price fluctuations reminiscent of historical economic bubbles like the Dot-com bubble or 17th-century tulip mania. This environment fosters “pump-and-dump” schemes, where individuals or groups artificially inflate an NFT’s price through hype and coordinated buying, only to sell their holdings quickly. This causes the value to plummet and leaves later investors with significant losses. These schemes and market volatility have resulted in substantial financial losses for many participants, eroding public trust and reinforcing the view that NFTs are a waste of resources or a scam. The market saw a significant decline in daily sales and active wallets from late 2021 into 2022, with a reported 92% drop in sales, underscoring its speculative and unstable characteristics.

Association with Scams and Fraudulent Activities

The NFT space is prone to various scams and fraudulent activities, contributing significantly to negative public sentiment. “Rug pulls” are a common illicit practice where developers promote a new NFT project, attract substantial investor funding, and then abruptly abandon the project, disappearing with the collected funds. For instance, the Frosties NFT project founders reportedly collected over $1 million before shutting down their website and communication channels, leaving investors with worthless tokens.

Phishing scams are also rampant, where fraudsters create fake websites or send deceptive emails that mimic legitimate NFT marketplaces or artists, aiming to steal users’ wallet credentials or private keys. Users who enter information on these fraudulent sites risk having their digital assets, including NFTs and cryptocurrency, stolen from their linked wallets. Counterfeit NFTs and fake artwork also proliferate, where scammers replicate popular digital art or create new pieces, passing them off as original and valuable. These widespread instances of fraud lead to considerable financial losses and damage the reputation of NFTs, fostering mistrust among the general public.

Intellectual Property and Copyright Issues

Concerns surrounding intellectual property (IP) rights and copyright infringement are a significant ethical issue contributing to public distaste for NFTs. Unauthorized minting and sale of NFTs representing existing artworks or content without the original creator’s permission is a common problem. This practice, often described as “art theft,” allows individuals to profit from others’ creative works by tokenizing them on a blockchain, even if they do not own the underlying copyright. Many artists have reported finding their work for sale as NFTs on marketplaces like OpenSea without their consent, highlighting a lack of effective enforcement.

While purchasing an NFT typically grants ownership of the unique token itself, it generally does not transfer the copyright or intellectual property rights to the underlying digital asset. The creator usually retains these rights, similar to how buying a physical print does not grant ownership of the original artwork’s copyright. This distinction is often misunderstood, leading to disputes and further frustration among creators who see their work exploited. The lack of clarity and the prevalence of unauthorized use contribute to the perception that the NFT space is a haven for copyright infringement, particularly impacting the creative community.