# Non-fungible Tokens: Promise or Peril? Content type: Research Paper Summary: 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 transparenc Key concepts: Arsalan Parham, Corinna Breitinger, nft, digital ownership, security, regulation, intellectual property, blockchain policy
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Non-fungible Tokens: Promise or Peril?

Arsalan Parham, Corinna Breitinger

arXiv preprintJanuary 2022

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.

Key Findings

  • 1NFTs provide a novel mechanism for provable ownership but face significant challenges regarding metadata permanence.
  • 2Legal and regulatory frameworks are currently insufficient to handle the complexities of fractionalized and multi-owner digital assets.
  • 3Market speculation significantly outweighs utility-based adoption in the early stages of NFT evolution.
  • 4The technical bridge between off-chain media and on-chain tokens remains a primary vulnerability for authenticity.

Topics

nftdigital ownershipsecurityregulationintellectual propertyblockchain policy
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Citation

Arsalan Parham, Corinna Breitinger (2022). Non-fungible Tokens: Promise or Peril?. arXiv preprint. https://arxiv.org/pdf/2202.06354

BibTeX

@misc{nonfungible2022,
  title = {Non-fungible Tokens: Promise or Peril?},
  author = {Arsalan Parham and Corinna Breitinger},
  year = {2022},
  howpublished = {\url{https://arxiv.org/pdf/2202.06354}},
}

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