NFTs, or “fungible tokens,” are all the rage and are being widely promoted, but generally not well understood. Are they worth the hype? Some see the trend as a bubble that will inevitably pop (like the dot-com craze), while others call it a game changer in investing, and it’s here to stay. Consumer watchdog Truth in Advertising is calling on consumers to exercise caution, especially when considering celebrity-promoted NFTs in this market, which is subject to speculation and fraud.
But first, what is NFT? According to a recent article in Forbes: “NFTs are digital assets that represent real-world objects such as art, music, in-game items, and videos. They are often bought and sold online with cryptocurrency, and they Usually with the same underlying software many are encoded as crypto.
“Although they have been around since 2014, NFTs are now gaining in notoriety as they are becoming an increasingly popular way to buy and sell digital artwork. The market for NFTs in 2021 alone was estimated to be US$41 billion, an amount that exceeds $41 billion across the globe. Fine arts are approaching the net worth of the market.
“NFTs are also typically one of a kind, or at least one of a very limited number of runs, and contain unique identification codes. “Essentially, NFTs create digital scarcity,” says Ari Yu Says, President of the Washington Technology Industry Association Cascadia Blockchain Council and Managing Director of Yellow Umbrella Ventures.
“This is in stark contrast to most digital creations, which are almost always infinite in supply. Hypothetically, cutting supply should increase the value of a given asset, assuming it is in demand.”
For more information on NFT see ‘What is NFT? non-fungible tokens explained on forbes.com.
Now on to the recent consumer alert. Truth in Advertising (TINA) is an independently funded non-profit organization whose mission is to be an online resource dedicated to empowering consumers to protect themselves and each other from false advertising and deceptive marketing.
This month, TINA issued an alert to the public over misleadingly marketed NFTs being promoted by celebrities.
“Celebrities, including popstar Justin Bieber, for example, are misleadingly promoting non-fungible tokens (NFTs) on their social media channels. While these approvals may seem benign, there are a number of misleading marketing issues that consumers should be aware of. Things to be aware of before considering the purchase of digital assets are, generally speaking, unique pieces of digital artwork recorded on a blockchain (i.e., a secure digital ledger) and often purchased with cryptocurrency.
“In some cases, celebrities are failing to disclose their physical connections to the NFT company and publicized assets in violation of FTC law. This means that consumers may be unaware that advertisements are not only biased , but also increase the value of the company and the NFTs that celebrities have (known as the ‘artificial value effect’).
“Furthermore, some celebrities marketing NFTs and/or NFT companies in which they have a personal stake are not disclosing the risks associated with investing in such speculative digital products and the financial losses arising from such investments. The US Government Accountability Office warns, ‘Despite media attention and celebrity endorsements, [NFTs] are poorly understood, and the current market is subject to speculation and fraud. … NFTs come with financial risk and have exhibited volatile pricing.’
“TINA.org has taken steps to eliminate some of the deceptive marketing in this area…
In short, as the US Securities and Exchange Commission has warned investors about celebrity-backed initial coin offerings, or ICOs, consumers presented with celebrity-approved NFTs should view such endorsements with caution. NFT investment decisions should not be based solely on celebrity endorsements. Consumers should always do their own independent research before buying these risky digital assets.
“Consumers are also encouraged to submit any suspected Celebrity NFT promotions to TINA.org”
Image via TINA.org.
Source: www.thedailyherald.sx
