NFT Industry Challenges

Paycer Protocol
5 min readJun 14, 2022


No one can deny that there is a hype cycle around the NFT market. Collectibles are getting bought and sold at unrealistic prices and people are trying to make an NFT of literally anything; which seems unnecessary and absurd. However, it will not decrease the value of the underlying technology. A cycle comes with every new technology and paradigm shift. Once we get to a balance, the focus will turn to the practical use cases of NFTs.

Usability Challenges

NFT systems are intricately connected with the ecosystems which are on the same underlying blockchain. Most of the NFTs are running on Ethereum which means they can easily interact. But we need to create a situation in which we can have fast confirmations even if the NFTs are running on different blockchains. Unfortunately, the existing blockchains cannot fulfil this need.

Another issue in NFT markets are the high gas fees. Complexity of the operations and the high gas fees slows the adoption process of the NFT industry.

Security and Privacy issues

In NFT projects, a cryptographic hash will be tagged to the token instead of a copy of the file and then it will be recorded on the blockchain. This can be considered a security issue since the user does not know if the original file is lost, damaged or safe.

IPFS or Interplanetary File system is used by many NFT projects as a storage solution. It is for storing and sharing data in a distributed file system.

IPFS addresses make it possible for the users to find pieces of content if someone else on the IPFS network is hosting it. When the data is uploaded to IPFS nodes, chances are that they will not be replicated among the nodes. If the nodes get disconnected from the network, it will become unavailable. This issue has been reported by and Moreover, an NFT might point to a malicious file address and the user cannot prove that he owns the NFT. Relying on an external storage system as the core component is considered vulnerable.

Another security-related problem would be anonymity issues. As mentioned before, most NFTs are running on Ethereum blockchain. Users cannot hide their identity completely. And if someone knows about the connection between a user and a wallet address, all the activities of that user would be available to the public. Recommended solutions would be zero-knowledge proof, multi-party computation and homomorphic encryption.

Governance challenges

Just like all the other crypto-related technologies, NFTs are facing strict regulations from governments. The biggest problem is that it is still not possible to regulate everything in the NFT market since the rules are vague and sometimes contradictory. Some countries such as China and India have a negative tendency towards the whole crypto community and some others like Malta and France are trying to implement proper laws to regulate things better. The problematic areas would be the commodities, the KYC data (know your customer) and the cross-border transactions.

Taxation regulations are vague as well. Intellectual property products such as domains, books or artworks are considered taxable; but NFTs are somehow out of this scope. The rules are different in each country. For example, in the USA, cryptocurrencies will be taxed as properties. The main issue is that financial criminals can cover their crimes using NFTs.

Extensibility challenges

Unfortunately, the existing NFT ecosystems are isolated. When you choose one type of product, you can trade them within the same network. The problem lies in the underlying blockchain. The more blockchains get connected, the easier it will get to deal with NFT challenges. But as mentioned before, since most NFTs are based on Ethereum Blockchain, these can interact with each other.

When it comes to updatable NFTs, the focus will be on the blockchains again. Whatever issues we have in updating blockchains would be considered for the NFT updates as well. Minor modifications which are compatible forwards happen with soft forks; while significant modifications which might conflict with the former protocols take place via hard forks. One issue would be tolerating specific adversarial behaviours and another one would be staying online as the update process is taking place.


There are endless opportunities in the NFT industry. However, the full potential of this technology has not been used yet. To accelerate the growth of the NFT development, these barriers should be removed, and more academic studies and research should be done in this area.

About Paycer
Paycer’s goal is to aggregate DeFi investments multi-chain and make them available to users without the need for their own wallet nor the expertise. This should allow anyone to generate a passive income in a world where banks no longer pay interest. Hence the Paycer team is developing a bridge protocol for DeFi and TradFi to combine the best of both worlds and make it available for retail clients #CeDeFi. Apart from the technical matters and the creation of a super easy to use final product. The goal is also to create a regulatory framework that allows the legal operation of a DeFi platform within the EU first and subsequently in other regions.

Currently, a DeFi platform is already available on on which Paycer tokens PCR can be claimed and staked. More features will go live soon. At the moment on Polygon but other blockchains will be integrated in the near future. Paycer is also working on a banking partnership to be able to combine DeFi with a traditional bank account. In addition to the development of the DeFi platform, the development of the final consumer product is also in progress.

Be sure to follow Paycer on social media for all the latest updates on product development. We have further exciting announcements to share very soon.

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Source: Source: Wang, Qin, and Rujia Li. “Non-Fungible Token (NFT): Overview, Evaluation, Opportunities and Challenges.” arXiv, 16 May 2021, Accessed 11 June 2022.



Paycer Protocol

Paycer is a bridge protocol that aggregates DeFi services cross-chain and combines them with traditional banking services.