Below I will explain how the NFTs on altcoin platforms work on a technical level and I will explain why they probably wont even exist in 10 years. I will also explain why some of these NFTs are selling for such high prices.
Many of those NFTs that were sold for crazy high prices were not actually sold to other people. The person who bought those expensive NFTs is often the same person who minted the NFT in the first place. I will explain how whales can easily own very expensive rare NFTs for very little cost. They can just mint an NFT and sell it to them self for $500,000 worth of etһ. They will only lose the small percentage that the NFT marketplace takes and now they own a super rare NFT worth $500k and they will still have most of their etһ because they sold the NFT to them self. And there is a small chance that they might be able to to sell that worthless NFT to some fool who believes that it is actually valuable. Doing this also entices more newbies to mint NFTs in the hopes of getting rich.
Some people are now using flash loans to borrow large amounts of etһ so that they can purchase their own NFTs for extremely high prices and then they pay back the flash loan all in the same block. https://www.theblockcrypto.com/post/122516/how-a-cunning-trick-made-it-look-like-a-cryptopunk-sold-for-532-million
Here is another example that can be done. You can mint an NFT and sell it to yourself for $1000, then put it up for sale and buy it from yourself again for $1500, and sell it to yourself another time for $2200. Now you can put this appreciating NFT up for sale and try to sell it to some fool who sees it keeps getting sold for more and thinks that it must be valuable.
Have you seen celebrities buying NFTs like jpegs of bored apes for hundreds of thousands of dollars? Platforms like MoonPay are paying those celebrities to claim that they bought those NFTs. Those celebrities didn’t really pay anything for those NFTs. Those celebrities actually got paid for receiving those NFTs. You can often look at the blockchain and see that the etһ that was used to buy the NFT came directly from a platform like MoonPay, as is the case with the bored ape NFTs that Post Malone recently “bought for $700k+”
The current NFTs are useful for something. These NFTs are a useful tool for laundering illegally acquired cryptocurrency. Criminals can shift around their ill gotten crypto between different tokens, mint an NFT, and purchase their own NFT with their dirty crypto. Now they’ve cleaned their dirty crypto and they also own a rare NFT that’s supposedly worth a lot of money. I mean just look at how much it sold for!
It costs anywhere from $100-$600+ to mint an NFT on etһereum depending on the current gas fees and where you mint it. So they’re hyping shitcoiners/artists/anyone up and luring them into minting crap in the hopes of getting rich and NFTs are doing a great job of that at the moment. People are spending millions of dollars worth of etһereum minting NFTs hoping to hit the NFT lottery and get rich.
All these NFT tokens being sold on etһereum right now either point to a URL on the internet, or an IPFS hash. In most circumstances they reference an IPFS gateway on the internet run by the same startup that sold the NFT. That URL also isn’t the media. That URL is a JSON metadata file. The owners of the servers have no obligation to continue storing the media. Now let’s take a look at a couple of real NFTs and see how they work on a technical level.
This NFT token is for this JSON file hosted directly on Nifty’s servers as shown below: https://api.niftygateway.com/beeple/100010001/
That file refers to the actual media that was “bought.” Which in this case is hosted by Cloudinary CDN, which is served by Nifty’s servers again. So if Nifty goes bust, this token is now worthless. It refers to nothing and this can’t be changed.
Now we’ll take a look at the $69,346,250 Beeple, sold by Christies. It’s so expensive. Surely it isn’t centralized, right? Wrong, it’s pointless: https://onlineonly.christies.com/s/beeple-first-5000-days/beeple-b-1981-1/112924
That NFT token refers directly to an IPFS hash. We can take that IPFS hash and fetch the JSON metadata using a public gateway: https://ipfs.io/ipfs/QmPAg1mjxcEQPPtqsLoEcauVedaeMH81WXDPvPx3VC5zUz
So well done for referring to IPFS, it references the specific file rather than a URL that might break! But the metadata links to: https://ipfsgateway.makersplace.com/ipfs/QmXkxpwAHCtDXbbZHUwqtFucG1RMS6T87vi1CdvadfL7qA
This is an IPFS gateway run by http://makersplace.com , the same NFT minting startup which will go bust one day.
You might say “just refer to the IPFS hash in both places!” But IPFS only serves files as long as a node in the IPFS network intentionally keeps hosting it. Which means when the startup who sold you the NFT goes bust, the files will probably vanish from IPFS too. This is already happening.
There are already NFTs with IPFS resources that are no longer hosted anywhere.
And just pinning the file on your own IPFS node also wont work because the metadata file generally points to a specific HTTP IPFS gateway URL and not the IPFS hash. This means that when the gateway operator goes bust, I can buy the domain and start serving dick pics lol
Right now NFT’s are built on an absolute house of cards constructed by the people selling them, and it is likely that every NFT sold on etһereum so far will be broken within a decade. This creates a pretty solid exit plan for makersplace if they run into financial problems. The people who own these useless NFTs “worth” millions of dollars are going to be pretty motivated to buy the site or fund it. Or someone can buy the bankrupt startup domains and start charging NFT owners to serve their files.