The NFT Boom: Scam Or Real Deal?

If you follow the crypto news, you may have heard of these crazy NFT projects. Digital assets are rising in value to the point where people will pay almost anything.

art nft
Beeple sold an NFT for $69 million

Some buy it for the art, others for collecting, and many as a way to make quick cash. Every day, people earning thousands flipping these assets, but do they hold any value?

NFTs: Scam Or Real Deal?

NFTs Scam or Real Deal

When you first hear about NFTs, it’s normal to think of them as non-sense. There are so many objections:

  • Anybody can create a digital asset and put a price label
  • Anybody can get the same asset for free on the Internet
  • If the creator makes a duplicate, the original NFT drops in price
  • Most people buy it for the resale value, not the intrinsic value
  • NFTs are worth money only mostly people believe so

Digital money has never been that different from real money. You can take advantage, or you can ignore it. But NFTs are here to stay.

So what are they exactly, and why does it make sense to pay for them?

What Are NFTs?

Also called non-fungible tokens, NFTs are digital collectibles. A person creates some content (can be art, videos, text) and releases a limited number, if not only one.

While the content represents the NFT, you’re buying a certificate only. It declares you as the owner of the original piece.

If you want to check your NFT portfolio, you can find it on the platform where you bought it (Opensea generally). In your account, you can see what you own, what others have paid for it before, and what offers you’ve received.

And while anyone can enjoy the same content for free, you own the original. It’s not the same to own the original Mona Lisa as printing a poster, although it serves the same function.

So, what are these assets exactly? It’s only a certificate to identify you as the owner.

  • As the creator, you do get paid a part when someone resells your original NFT
  • As the NFT owner, you don’t get any rights to decide who can or cannot sell it. This isn’t intellectual property.

However, NFTs are ‘valuable’ for one reason: It’s unattached from fiat money.

If you saved a lot of money, NFTs can protect it from inflation and monetary regulations. Assuming you minimize risk, you also buy the chance of multiplying your money (3x and beyond).

NFTs VS Collectibles

While fiat currencies tend to devalue over time, collectibles use to appreciate. It’s why the rich show interest in these assets, despite the lack of liquidity.

If you’re instead looking to make more money, then it may not make sense to pay $10K for a watch. But when you want to protect wealth, it can be useful.

But that doesn’t make collectibles risk-free either:

  • Preservation: While old items are worth more, age correlates with worse item condition, which lowers its price
  • Authenticity: When something is worth millions, scammers are willing to spend thousands to create fakes. And because it’s not always possible to differentiate them, you risk buying a worthless copy
  • Thievery: Expensive collectibles motivate more thieves to steal, whether it’s museums or homes. Compare that to cash: while there are hundreds of places to hide money, it’s not that simple with collectibles
  • Lack of liquidity: You can justify almost any sale price if you find the right buyer. The problem is, there’s no much market for ultra-rare collectibles. Unless it has recognition, it can take months of advertising to find collectors
  • Complexity: You can’t just buy a collectible and have it delivered to your door (unless you don’t care about fraud). It’s common to meet in person or verify the authenticity with a specialist. Or you can buy it at a markup on antique stores

So how do NFTs solve these problems?

  • As digital goods, NFTs don’t have preservation issues
  • They are impossible to fake because they’re verified by smart contracts. These rely on the Ethereum decentralized network
  • You can’t steal them unless you break into their account with phishing tactics
  • Liquidity isn’t that problematic, because you can trade with anyone around the world within minutes. As long as you sell at the bottom market price, you’ll find buyers fast
  • NFTs have more resale potential. Buyers don’t need to worry about being unable to sell their NFTs. Others are more likely to buy because of how easy it is to trade

Imagine this

You get into NFTs fairly early (like the time we’re writing this) and buy at the floor. You get a collection of NFTs you acquired for <$100 each.

Because you bought low, it’s unlikely that they depreciate much. Also consider that most NFTs trade with Ethereum, which is a coin with expected long-term growth.

As NFTs become exclusive and cryptocurrencies appreciate, it lowers the chance of losing that money (That’s partially why the rich buy collectibles).

In the worst-case scenario, you lose money temporarily. But you don’t lose until you sell: you can wait to break even on the next bull market.

In the best case, people are willing to pay more than what you paid for the NFT. And if cryptos have appreciated, that improves your ROI too.

Now, suppose you bought an NFT for 0.1ETH but sell it for the same price, whatever the reason is. If the dollar gets weaker, does that lower your ROI? It doesn’t, because you’re selling for Ethereum, not USD.

You buy NFTs for ETH, which you can get with USD. And the sale is the opposite.

Why Ethereum?

You may ask: why can’t I buy NFTs directly like any collectible?

Because smart contracts run on the Ethereum network. NFTs use contracts to prove authenticity, which makes it impossible to counterfeit.

Any smart-contract platform can implement NFTs, including the Binance Smart chain or the upcoming Cardano Blockchain.

Without these digital contracts, anyone can fake the NFT authenticity.

Why Are NFTs Valuable?

Why are NFTs Valuable

NFTs make us question what it means to add value. And when people are paying thousands for these, we can guarantee you that intrinsic value has very little to do with it.

You can sell anything as an NFT:

You can make NFTs from videos, audio, images. We could even turn this article into an NFT and sell it at Opensea.io.

As for why people buy them, NFTs have different meanings for different people.

NFTs For Creators

Here’s the value that NFTs offer to creators:

  • Upload your digital content to NFT platforms, where thousands of potential buyers can see it
  • Even though many can create copies, nobody can fake your NFT’s authenticity. Smart contracts don’t allow any manipulation once set
  • Release as many NFTs as you want. Earn money every time your NFT changes hands
  • Sell your NFT for whatever others are willing to pay. Nobody needs to know if it took you two years to create it or half an hour
  • If someone is using your content and you own the rights, it’s easier to report when you own the original NFT

Also, some creators use subscription tiers on sites like Patreon and Kickstarter. For a few bucks a month, followers can access exclusive content. Get a higher tier, and you get more bonuses.

Patreon

Not only you can do the same, but NFTs also have the resale factor. For example, you could launch your new book/art/song along with “5 Gold NFTs, 25 Silver NFTs, and 100 Bronze NFTs.” Over time, they might resell for far more.

Anyway, NFTs will boost your sales. Some people may not care about your content and will still buy only for the NFT and its potential value.

NFTs For Buyers

  • Buy NFTs from your favorite content creators. As they grow and become more successful, your NFT will appreciate too!
  • Get exclusive bonuses for owning NFTs (similar to donation platforms)
  • Support creators with an NFT, plus the chance of selling it for higher. Whether you buy to keep or to sell, you’re still supporting

Other than that, NFTs currently don’t have much application for non-rich buyers. It works like a luxury item to protect wealth from currency price changes.

Assuming they will gain intrinsic value over time, it may make sense to buy today, before the masses rush in.

NFTs For Collectors

  • Get free NFTs by following creators and their giveaway events
  • Get unreal resale value if your NFT demand grows
  • Protect your money from the inflation of fiat money and the volatility of crypto
  • Expand your portfolio of collectibles without the problems of traditional collecting (item condition, authenticity)
  • Trade fast and easy

In traditional collecting, you’d need to advertise your item and hope that the right buyer can see it. This buyer might want to meet to check the authenticity and product condition. You then negotiate and close the deal.

With NFTs, however, you don’t need so many steps. The ETH smart contract guarantees authenticity. You just need to find the NFT on the platform, make an offer, and it’s yours.

Because it’s easier to resell, NFT collectors are more open to buying anything.

NFT Scams

For the same reason, it’s harder than ever to recognize NFT scams. Whenever there are easy-money opportunities, it won’t be long before scammers capitalize on them.

Recognizing scammers used to be easy, because they’d always promise high returns. But NFTs make those gains possible (and fast). So how do you know which one is the scam?

A good start is learning the tricks they like to use:

#1 Advance Fee Fraud

You’ll see this type everywhere. Because when investing, people understand that you have to pay before getting paid. They expect to deposit an amount and get passive ROI over time.

It’s not as easy as it sounds. All investors risk losing money when making a decision. And while your investments do well today, tomorrow may be the contrary.

Scammers instead promote an idealistic scenario: “get a guaranteed +30% ROI every month.”

Should you trust it?

Here’s how to spot the advance fee scam:

  • There is a guaranteed cash price for a lower cost
  • You can never withdraw the reward. There’s always an issue
  • There’s a high minimum deposit requirement

For example, someone may organize an NFT airdrop/giveaway. It’s free to participate, but you pay the transaction fees. Or the site could be fake, so you’re buying nothing.

#2 Pumped NFT Scams

You’ll see many people buying NFTs. Not because they see any value in them, but because they believe that someone else will buy it for higher.

The question is: How far can this go?

What we do know is that money-chasers are always trying to catch the parabolic patterns. They want to buy crypto & NFTs before they explode, which is why pump-and-dumps are dangerous.

You will see many NFTs skyrocketing in price consistently. But for every home-run investment, there are thousands of NFTs with no future whatsoever.

What if a scammer wants to convince you to buy a worthless asset? What if they pose as your favorite crypto-guru and use some FOMO tactics?

Sometimes, hackers can breach into celebrity accounts and make them say anything.

Both in crypto & NFTs, you may find two cases:

  • Founder pump and dumps: A project launches where the founders keep most of the tokens. When the currency appreciates enough, they sell and cause and flash crash.
  • Pump-and-dump groups: A coordinator has been buying a secret project for weeks. On the event day, they reveal the name, and everyone rushes to buy. The price explodes seconds before the admins dump it.

The scammer is selling you an NFT with questionable value. And when the next crash happens, it may be worth nothing.

Unlike cryptocurrencies, NFTs are illiquid. You have to sell at the average price (or below), or nobody will buy it. If your asset is unsellable, it’s worth $0.

#3 Marketplace Copies

While NFTs are impossible to fake, scammers can still sell them as if they were original.

For example, you open a link that sends you to a marketplace copy. In a scam website, they could even manipulate smart contracts to make them look real.

All this is to gain your trust. You will want to buy anything because you can’t find such good prices in any other marketplace.

The trap? There are no NFTs. All the platform is a giant scammer wallet:

  • When you buy an asset, you pay the scammer
  • When you sell the asset, the buyer pays the scammer
  • When you try to remove your balance from your platform, you can’t

In order to prevent this trick, you should:

a. Check for potential phishing and DNS poisoning red flags

b. Test small withdrawals before depositing more

NFTs: To Buy Or Not To Buy?

NFTs To Buy Or Not To Buy

Whether you think NFTs are revolutionary or non-sense, it’s safe to say they’re here to stay. In the next years, you will see more and more artists, collectors, and businesses using them (scammers too).

You can join the trend or you can ignore it. But before you make that decision, you should understand how to use them:

  • If you want to flip NFTs, consider the risk of buying for $100+. Stick to the market floor
  • As a professional, you can create NFTs to attract potential clients
  • Learn the NFT scams and share them so that fewer people lose money

FAQ

What makes an NFT worth more than another?

Just because they barely have intrinsic value, that doesn’t mean they’re all the same. Anybody can create NFTs, just like anybody can create any content.

How many creators are there? How many dead Youtube channels, abandoned websites, storefronts, artist portfolios? As an investment, you can’t expect to make money from the first NFT you see.

Intrinsic value certainly improves the odds. But when selling abstractions (art, music), “value” has a different meaning. Either:

a. The brand/story behind it or

b. The unique selling proposition (USP)

In the first case, people would buy because they trust a person or company.

Maybe you’re like GaryVee. As a creator, you post free valuable content for years. And when you sell anything, people want to buy it because of reciprocity. When you care about your audience, that’s the least they can do to give back.

GaryVee Example

In the second case, NFTs can appreciate because of a USP:

NFTs do have intrinsic value, even if it’s minimal. This, however, lowers the entry barrier, so anyone can release an NFT that took <30 minutes to create.

How do you differentiate when there are so many NFTs? If branding isn’t your strength, the USP is the solution:

If your NFT offers the most intrinsic value, you’re going to get most of the sales. Your content can be 10 times better or 1% better. If it’s the best, people will buy it, because people want to buy the best.

At least that’s how you do it in business. You can charge premium prices when you’re the no.1.

While NFTs are different (there’s no such thing as the “best” when comparing two pieces of art), the “Winner takes all” principle still applies.

What about the NFT copies?

NFTs makes no practical sense. If you want the content without paying, you can download it from the Internet. Even though it’s fake, people still recognize it as the real one.

As a buyer, you only pay if you want the original, either to flex or support the artist. As the creator, you’ll always get paid when someone trades the original, regardless of the fakes.

As for collectors, it’s different. Sure, you can buy the original, but do you control their value? You don’t. The creator does.

You may buy NFTs expecting a high resale value. What if the creator decides to create more copies? Suddenly, yours isn’t that exclusive (unless it’s the very first copy).

Value can change based on:

  • How many NFTs the creator releases
  • The average that people are willing to pay
  • How the company/personal brand develops

It’s a risk:

a. You can buy from a new creator. But there’s a chance that they never become popular (or worse: quit)

b. Or you can buy from creators with bigger audiences. But if they’ve released hundreds of NFTs already, the new ones may not appreciate as much

Even if you bought early, these factors will still affect your NFT value.

Are NFTs similar to content rights?

Owning content rights means that you get paid when someone uses your content. Otherwise, you can take legal action to prevent them from using it (or get compensated).

Issuing NFTs means that you get paid when someone sells your content collectible. The buyer can sell it at any price and make copies of it. But you always get paid because you appear as the only owner on the smart contract. They can’t fake it.

So NFTs don’t stop other people from using your content or selling it. The good news is, buyers can check whether it’s fake or not. And if they sell the original, you always get paid a commission.

Most NFT content has questionable intrinsic value (songs, art, tweets), so scammers don’t have any chance to profit from fakes.

How can I resell my NFT for 10X or more?

If you bought hundreds of NFTs, some of them may blow up in price within weeks. The problem is, most NFTs aren’t worth a dollar. Especially at the beginning, it’s easy to overestimate how much these assets are worth.

The easy path is to follow a famous creator, wait for a giveaway or first NFT release, and get in early. Given the audience size, there’s a high chance that you’ll profit. People can bid on your NFT, and you have about two weeks to review the offer. If you accept, it’s an immediate sale.

However, the challenge is not to waste your money on worthless NFTs. With so many of them, your first buy may not grow 10X. Given how speculative the market is, you either need to time the trends or hope for long-term growth.

About The Author

Max Khalus is an inbound marketing copywriter and content strategist. He delivers professional content for productivity coaches, financial media outlets, and even crypto entrepreneurs. He is certified in Marketing and Publicity.

Max ranked as Top 10 Rated on iWriter, scripted productivity videos, and researched over 300+ financial guides for Bust a Thief. Besides business writing, he specialices in inbound copywriting, being the focus on productivity, psychology, and high performance.

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