Do you really own your NFTs?

What most people new to NFTs don’t realize, according to Steinwold, is that there’s usually a distinction between the token itself — a record of ownership that lives on a blockchain — and the asset it refers to, which would be a photo, video, or audio file that’s stored separately. If a startup that issued NFTs goes out of business and stops hosting those digital artworks, basketball trading cards, or other media, buyers could be left with tokens pointing to files that no longer exist.

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There are remedies to this problem — like storing files using decentralized services — that both Ivanova and Steinwold think will be the norm soon enough, but for now that risk remains.

To skeptics like Nicholas Weaver, a professor of computer science at UC Berkeley, the hairy nature of NFT ownership proves that the tokens have no intrinsic value and that the frenzy surrounding them is absurd.

“The ownership records themselves are the digital equivalent of Beanie Babies: cute little nothings that have no value beyond what someone else will buy them [for],” Weaver said in an email to Insider.

What the future holds 

Despite the uncertainties, Ivanova sees huge potential in the future of NFTs. A correction is inevitable, she said, but ultimately the market will continue to grow and NFTs may become the underlying asset for the whole virtual economy, expanding far beyond just digital art and collectibles.

Steinwold, though he thinks some people are “getting a little ahead of their skis” in these early days, predicts NFTs will eventually be a trillion-dollar market. And he should hope so — his NFT fund invests in art, collectibles, virtual land, and video game assets.

Weaver, on the other hand, thinks the current NFT fever is “pure speculative mania,” and that it’s nothing but a bubble waiting to pop.

“It is entirely a classic tulip mania but where tulips are recorded in a different media,” Weaver said. “At least with Beanie Babies they look cute.”