The fanfare surrounding non-fungible tokens (NFTs) emerged after a digital artist, known as Beeple, sold a piece of digital art for a record $69 million earlier this year.
The sale of these valuable digital assets generated a staggering $2.5 billion in the first half of 2021 alone. And the trend is no longer limited to artwork alone, with domain name NFTs also being incorporated .
With the increasing value attached to website domain names, threats such as URL hijacking and other related cyberattacks are becoming more common. This leaves experts wondering if the NFT craze is nothing more than a bubble waiting to burst.
With an understanding of NFTs seemingly limited across the board, Mark Franks, UI and Experience Manager at names.co.uk, explores the complex subject of NFTs and what it could mean for names. business domain.
What are NFTs?
A non-fungible token – or NFT as it is more commonly known – is a means of tracking and attaching value to a single piece of digital media. It is essentially a digital version of a tangible collectible usually stored in a digital wallet or blockchain.
In the same way you would collect physical art, a buyer could collect the required digital files of online content.
Non-fungible simply means one-of-a-kind. For example, money is inherently fungible. You can exchange money in different forms and it retains the same value. One-of-a-kind or limited-number products, such as circulating works of art and collectibles, are by definition non-fungible.
Although a booming market, the volatile nature of NFT valuation lends itself to increased risk for content creators and sellers.
The wave of NFT domain names
The concept of NFT trading on the blockchain to transfer ownership of digital art is beginning to gain a foothold in other areas of digital life.
Domain names are increasingly seen as high value and are quickly becoming staples found in the NFT marketplace.
For example, the “win.crypto” domain recently broke the blockchain domain sales record – sold for $100,000.
Because domain names are the digital foundation of a business – and a clean, professional, recognizable domain inherently builds reputation from the start – they can sell for significant sums.
Websites are the gateway to content that billions of internet users can access with the click of a button, so memorable and relevant domain names in the NFT market will undoubtedly boost long-term business growth. .
The rise of blockchain domains
The sudden growth in the value of assets hosted on the blockchain raises new issues for websites and may even fundamentally change our approach to website building.
There are growing concerns that blockchain domains and decentralized website development threaten personal and professional security.
Due to their growing popularity, these channels are used for malicious purposes, namely the development and distribution of malware. Additionally, blockchain domains inherently lend themselves to anonymity and censorship by design, which means they are the perfect breeding ground for malicious acts.
However, since NFTs and blockchain domains and their URLs all operate through the blockchain, this could mean that NFTs become the de facto means of engaging in domain-related transactions, increasing the risk for online operators.
The risks that the NFT culture poses to domain names
As domain names – and blockchain domain names – are proven to have long-standing value, there are always opportunistic cybercriminals out there looking to get their hands on the most popular assets.
Domain names are often victims of a phenomenon known as “drop catch”. This is where people (manually or with software) track their desired domains and buy them at the exact moment the registration period ends – thus preventing the company from accessing its own material.
Nicolas Kurona, who accidentally owned the rights to “google.com.ar” – or Google Argentina – temporarily in April of this year, is a famous example of gout capture.
While not technically a crime under certain circumstances, drop wrestling or squatting typos has the potential to financially ruin businesses. For small businesses that don’t have the cash to buy out a domain or the legal means to thwart a URL hijack, the results can be devastating.
Businesses should be vigilant in keeping an eye on their domain’s expiration dates. Most domain providers monitor the status of your domain and automatically remind and renew it. Be sure to check with your domain provider so you don’t run the risk of having your business domain name stolen.
Are NFTs the future?
The debate around NFTs is ongoing. Proponents of the emerging trend suggest it has scope for broader purposes, like turning financial documents into NFTs for example. On the other hand, critics criticize it as nothing more than a fad – and that the NFT bubble will inevitably burst.
The data suggests that the bubble is already collapsing. Activity in the NFT sphere has suffered a sharp decline in recent months. Trading volume on NFT markets has fallen by 95% since early May – from a staggering $170 million to a relatively paltry $19.4 million.
One of the emerging questions regarding NFTs and their survival is whether they can retain their value over the long term.
Restricted to artistic and creative spheres, NFTs only seem to retain their value if the buzz around the NFT remains high – as their value is driven by speculation and the perception of low supply.
This is no more evident than in the price of the “CryptoKitty #18” NFT, whose value jumped drastically in just three days in 2017, showing that creating buzz around any digital asset can cause an increase in value.
However, industry skeptics argue that dictating the price of an NFT based on speculation undermines market traditions and that you essentially own an asset over which you have no control.
While they have the potential to radically change the way we transact digitally, the recent rocky performance of NFTs in the investment market means it may be more of a bubble than a a concrete investment strategy.