As non-fungible tokens skyrocket in popularity, companies should help people invest safely
By Matthew Gould, Founder and CEO of Unstoppable Domains
The term “NFT” went from crypto jargon to a mainstream buzzword seemingly overnight. NFT transactions tripled in 2020 alone, paving the way for massive adoption in 2021. The global impact of digital collectibles was truly revealed in March when Christie’s auctioned off Beeple’s NFT “Everydays: The First 5,000 Days” for a whopping $69 million. Today, we’re seeing some of the world’s top artists, musicians, and athletes join the NFT revolution.
This explosive growth is reminiscent of the last crypto boom in 2017, when people were making millions investing in crypto assets and token sales. When I launched my company in 2018, we were at the very peak of this bubble. Shortly after, the market declined by 90 percent and $700 billion was wiped from cryptocurrencies’ global market cap. Many people left the blockchain sector altogether, and those who stayed had faith in the industry’s long-term vision.
Investors learned some tough lessons at the time, lessons that remain valuable to this day. With so much justifiable excitement surrounding NFTs, it’s important to remember this is still a speculative and potentially volatile asset class. There’s a fine line between extreme enthusiasm and excessively risky behavior. I’m calling on companies in the NFT sector to help people invest responsibly, by educating consumers and putting measures in place to protect them.
To gamble is “to take a risky action in the hope of a desired result,” which unfortunately sums up a lot of consumer behavior within crypto and NFTs. As we know, gambling can stimulate the brain’s reward system, leading to addiction. About 1 percent of American adults have a gambling disorder, which may lead them to continually chase bets that lead to losses, deplete their savings, accumulate debt, or even resort to theft or fraud.
Companies that make it easy to bet, trade crypto, and buy NFTs are undoubtedly providing an in-demand service, but this can come at the expense of consumer’s financial health. Companies should be willing to trade short-term revenue for the overall reputation of the NFT sector and the well-being of its participants. This starts and ends with education—helping people understand that volatility and market corrections are normal—but responsible companies should also put some tactical measures in place that can help.
Proactively Protecting the NFT Community
First, platforms selling NFTs should take active steps to protect against the reckless accumulation of NFTs. For example, we’re implementing automated outreach to users who exhibit risky behavior. If someone is buying digital collectibles too quickly, they will receive an email to remind them of the risks and provide them resources. As with problem gambling, algorithms can recognize this behavior, offer targeted support and even restrict access to these sites.
Second, we should work to curb speculation in the sector. For example, my company sells domain name NFTs, and we’ve implemented strict APIs that block the registration of names tied to famous trademarks, brands, and people. This prevents squatters from later selling these domain names to their rightful owners for a profit. And rather than release all domain names at once so people can voraciously accumulate them, we’ve decided to release limited numbers at a time with capped costs. We hope this will foster healthy behavior when it comes to purchasing domain name NFTs.
Third, companies should offer refunds whenever possible. Everyone experiences “buyer’s remorse” from time to time. Due to the nature of blockchain technology, this does take effort on the part of companies, but platforms can design more user-friendly systems that require people to claim their NFTs or otherwise create reasonable delays in the transaction process to allow for returns. After a domain name is sold through our service, each person has time to claim their name and mint it on the blockchain. If they want to return their purchase before it’s minted, we give them a 100% refund within 14 days. Think of this as similar to Amazon: you can cancel or make changes to your order after placing it, but before it ships.
All of these tactical measures are part of a larger strategy that is crucial to the long-term health of the growing NFT sector. We don’t want to become an industry that causes people financial ruin or compromises their ability to make smart investments. With an approach that educates consumers and enacts safeguards to help them along the way, we can ensure that NFTs can be collected and treasured for months, years and decades to come.
About the Author
Matthew Gould is the Founder and CEO of Unstoppable Domains, which provides blockchain domain names as NFTs. Unstoppable Domains allows users to create decentralized websites and replace cryptocurrency addresses with simple usernames, making it easier to send crypto and interact with the decentralized web. Matthew’s background is in entrepreneurship, product and analytics leadership.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.