NFTs: Digital Ownership or Digital Bag-Holding?

In 2021, someone paid $69 million for a digital image by Beeple.

In 2022, the NFT market did $25 billion in volume.

In 2023, that same market did $8 billion. Down 70%.

Some people made generational wealth. Most people bought expensive JPEGs that are now worthless.

Let's understand what actually happened.

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What is an NFT?

NFT = Non-Fungible Token.

Unlike ERC-20s where each token is identical, each NFT is unique. Token #1 is different from token #2.

This enables digital scarcity. For the first time, you can own a specific digital item that nobody else owns.

The most common standard is ERC-721. It tracks who owns which token ID.

That's the technical part. The rest is... complicated.

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What do you actually own?

This is where things get uncomfortable.

When you buy an NFT, you own:

• A token ID on a blockchain
• Usually a link to some metadata
• Whatever rights the creator decided to grant

You typically do NOT own:

• The actual image/video/file
• Copyright to the artwork
• Exclusive commercial rights
• Anything physical

The image itself is almost never stored on-chain (too expensive). It's usually on IPFS or, worse, someone's AWS server.

If that server goes down? Your NFT points to nothing.

"But I own the blockchain record!"

Yes. A blockchain record pointing to a 404 page.

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The 2021 mania

What happened in 2021 was insane.

Bored Apes went from mint price (0.08 ETH, ~$200) to floor prices of 150 ETH ($500,000+).

CryptoPunks traded for millions.

Every celebrity launched an NFT collection. Every brand launched an NFT collection.

People were taking out loans against their houses to buy monkey pictures.

The thesis: "Digital art is the future. These are the Picassos of our generation."

The reality: Most collections went to zero.

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What went wrong

Infinite supply. Anyone can launch an NFT collection. There's no scarcity when there are millions of collections.

No intrinsic value. Most NFT art has no use case beyond speculation. You're buying because you think someone else will pay more.

Liquidity collapse. NFTs are illiquid. When sentiment turns, there's nobody to sell to. Floor prices don't represent what you can actually sell for.

Wash trading. Huge portions of NFT volume was fake. People trading with themselves to inflate prices and fool buyers.

Celebrity dumps. Famous people launched collections, collected millions, and never delivered on roadmaps.

It was a perfect storm of speculation meeting reality.

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The infrastructure problem

Even for legitimate use cases, NFT infrastructure is sketchy.

Metadata storage. Most NFTs store metadata off-chain. The blockchain token is just a pointer.

Common storage:

• IPFS (decentralized but files can disappear if nobody pins them)
• Arweave (permanent but the company could fail)
• AWS/centralized servers (lol)

Royalties. Creators were promised royalties on secondary sales. Then marketplaces made them optional. Now many creators get nothing.

Interoperability. Your NFT on OpenSea might not show up on Rarible. Different marketplaces, different rules.

Scams everywhere. Fake collections, phishing links, malicious contracts. The NFT space is a minefield.

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Legitimate use cases

NFTs aren't all scams. There are real applications:

Digital identity. ENS domains are NFTs. Useful.

Tickets and access. NFT tickets can prevent scalping and enable secondary markets.

Gaming items. If you could actually move items between games. (Mostly vaporware still.)

Certifications. Proof of attendance, credentials, diplomas.

Music royalties. Artists selling shares of their songs' future earnings.

These use cases don't need floor prices of $50,000. They just need the technology to work.

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The art question

Can digital art have value?

Of course. Art has been valued throughout human history. Digital is just a new medium.

But value requires:

• Cultural significance (most NFT art has none)
• Artist reputation (most NFT artists are anonymous)
• Scarcity that matters (PNG scarcity is artificial)
• Actual ownership rights (usually not granted)

The Mona Lisa is valuable because of its history, the artist, and cultural weight across centuries.

A generated ape is valuable because... you believe someone else will pay more?

That's not art collecting. That's speculation.

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The honest reality

If you're buying NFTs today:

As collectibles/art - Only if you genuinely like the piece and would be happy owning it at $0 resale value.

For utility - Only if the utility currently exists (not promised in a roadmap).

For speculation - You're gambling. The house won 95% of the time in 2022-2023.

For community - The communities around NFTs can have value. But you don't need an expensive NFT to be part of most.

The technology enables digital ownership. That's real.

But digital ownership of a link to a JPEG with no rights attached? That's not the revolution people thought it was.

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What survives

Some things will persist:

CryptoPunks and historical NFTs - The first major NFTs. Historical significance like Bitcoin's genesis block.

Utility NFTs - ENS, gaming items, tickets. Things that do something.

High-quality art - From artists who build real careers, not pump-and-dump collections.

Brand experiments - Nike, Starbucks, others using NFTs for loyalty. Corporate but functional.

The speculation era is over. What remains is the technology looking for real use cases.

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The bottom line

NFTs proved that digital scarcity is possible. That's genuinely important.

NFTs also proved that:

• Digital scarcity doesn't mean digital value
• Most people were speculating, not collecting
• Infrastructure is still immature
• Rugpulls are trivially easy

If you lost money on NFTs, you learned an expensive lesson about speculation.

If you made money, you either got lucky or were the one selling to retail.

The tech will evolve. The speculation won't return to 2021 levels. Probably.

Own NFTs if you want to. Just understand what you're actually buying.

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Next: IPFS - the decentralized storage that could save (or lose) your NFTs.