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Non-fungible Tokens: Promise or Peril?

This preprint provides a balanced exploration of the utility and risks associated with non-fungible tokens. It examines the technical architecture of NFTs, focu

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Abstract

This preprint provides a balanced exploration of the utility and risks associated with non-fungible tokens. It examines the technical architecture of NFTs, focusing on their role in representing digital ownership, and contrasts this with the emerging risks of fraud, intellectual property disputes, and environmental concerns. The authors categorize the diverse use cases of NFTs, ranging from digital art and collectibles to potential applications in identity management and supply chain transparency. Through a critical lens, the paper assesses the current limitations of NFT protocols, such as metadata storage issues and the dependency on centralized off-chain servers for asset hosting. The work concludes by evaluating the tension between the promise of decentralized autonomy and the realities of market speculation and legal uncertainty, providing a roadmap for future research into sustainable and secure digital property systems. Authors: Arsalan Parham, Corinna Breitinger Publication: arXiv preprint Publication date: 2022-01-01

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Key findings

  • NFTs provide a novel mechanism for provable ownership but face significant challenges regarding metadata permanence.
  • Legal and regulatory frameworks are currently insufficient to handle the complexities of fractionalized and multi-owner digital assets.
  • Market speculation significantly outweighs utility-based adoption in the early stages of NFT evolution.
  • The technical bridge between off-chain media and on-chain tokens remains a primary vulnerability for authenticity.

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Citation

Arsalan Parham, Corinna Breitinger (2022). Non-fungible Tokens: Promise or Peril?. arXiv preprint. https://arxiv.org/pdf/2202.06354
Canonical knowledge ID: research:non-fungible-tokens-promise-or-peril