Companies including Anheuser Busch (parent company of Budweiser) and Adidas have leaped headlong into the world of NFTs, with seemingly enormous success. Within 19 hours of launching in January, Budweiser\u2019s 11,000-strong NFT collection sold out, netting the company $4.8 million.\n\nOne analysis of the NFT market, which doesn\u2019t track all sales, still indicates how huge the business opportunity is: More than $77 million of NFT sales are brokered every 24 hours\u2014making it an obvious opportunity for businesses to dabble in.\n\nThe lure of big money and media attention can attract organizations to the concept of NFTs. But before going full bore into developing your own collection it\u2019s important to understand the risks and rewards.\n\n1. What are NFTs, anyway?\n\nIt always helps to understand what you\u2019re potentially investing in before diving headlong into it. \u201cWhat most people see as an NFT is art,\u201d says Nick Donarski, founder of Madison, WI-based ORE System, which operates an NFT marketplace. But an NFT is actually something behind the scenes. The three letters stand for non-fungible token, \u201cand all that means is that it represents an instance on whatever blockchain that\u2019s been created,\u201d says Donarski.\n\nThe blockchain is the underlying technology that powers large parts of what\u2019s termed Web 3.0 by its proponents\u2014a decentralized future vision of the internet that would wrest power from some of the big brand names that have dominated it for the last two decades and put it in the hands of ordinary people. \u201cThe best way to think about the blockchain is that it\u2019s a distributed database,\u201d says Donarski. \u201cNFTs are just markers inside the database, associated to whatever the data is.\u201d\n\nIn other words, an NFT is basically a picture, in a specific place, on the blockchain database.\n\n2. NFTs can be an IT risk\n\nFor CIOs, one of the risks of NFTs is central to infrastructure design. \u201cWhere do we hold the crypto that we get when that NFT is sold?\u201d asks Donarski. \u201cHow do we convert that crypto to a fiat currency? That's a risk matrix that you build for the business.\u201d\n\nThen, if you choose to use NFTs as a record of documents within your business, you have to add another risk matrix: understanding and building a blockchain architecture to manage that.\n\nIn addition, NFTs are linked to private keys, which are a single point of failure as well as a potential entry point for cyber thieves. This all-or-nothing scenario makes them a rather risky proposition. \u201cManagement of the private keys is going to be one of the biggest hurdles that the CIO has to manage,\u201d says Donarski. \u201cThere\u2019s a risk that if they are disclosed or hacked, they are the keys to everything in that crypto world.\u201d\n\nTo mitigate that risk, Donarski believes CIOs should carefully think about how many keys would be used. For example, they could be held in cold storage with an API that interacts with them but never trades or transmits them through a public connection. The level of security depends on the criticality of the applications, budget, regulations, tolerance for risk, and the amount the organization has invested in NFTs.\n\n3. The underlying infrastructure behind NFTs could disappear\n\nOne of the main concerns of every CIO is protecting against the possibility that a key software supplier or infrastructure provider disappears or becomes outmoded, potentially stranding them. NFTs are no different, says Dipan Roy, deputy chief information officer of UK wealth management firm London & Capital.\n\n\u201cMost NFTs are encrypted and stored using Ethereum,\u201d says Roy, referencing a popular blockchain technology. \u201cThere\u2019s a question of what happens to those NFTs if, at some time in the future, Ethereum ceases to exist.\u201d\n\nDonarski pushes back on that point. \u201cThe NFT world appears scarier than it actually is,\u201d he says. \u201cThe only reason that it's scary is because people don't understand.\u201d As more companies enter the space and begin adopting the technology, blockchain will become just another part of the computing fabric. \u201cOnce people realize it's just another computer on the network, it's much easier to digest,\u201d he said.\n\n4. You may not own the NFT you make\n\nWhen it comes to legal issues, the NFT waters are particularly murky. \u201cSure, you have a non-fungible token, which gives you the right to a certain piece of artwork, a video, or a tweet on the Ethereum blockchain,\u201d says Roy. \u201cBut what does it translate to in the real world?\u201d\n\nThe answer, at present, isn\u2019t wholly clear. You can\u2019t technically stop anyone from copying a particular piece of artwork, video, or tweet to which you own the NFT\u2014a potential reputational risk. And while there is the possibility of legal recourse, the process is costly and takes time\u2014and the opaque, anonymous nature of the blockchain means it can be difficult to pinpoint who to take action against.\n\n\u201cThe digital ownership of that asset doesn't confer physical ownership or any legal rights to you outside of that Ethereum blockchain,\u201d says Roy. It\u2019s something a small group of investors came to recognize when they bought a copy of Frank Herbert\u2019s book Dune. The investors planned to burn the physical book after turning it into NFTs and create an animated series to profit off its rights. The problem? They didn\u2019t own the rights to the work. Just the book. \u201cThat\u2019s not how NFTs work,\u201d says Donarski. \u201cBuyer beware; understand what you\u2019re buying.\u201d\n\nFor CIOs, clearly expressing what is and isn\u2019t conferred around the ownership and possession of an NFT can help curb the enthusiasm of overeager executive colleagues.\n\n5. Likewise, there\u2019s risk in not acting now\n\nOne of the risks of not entering the NFT space for intellectual property (IP) holders is that someone else will do it for them, lifting their IP in the process and capitalizing on their brand equity. NFT theft is a growing problem, and the lack of case law makes it difficult for creators of digital content to seek recourse. Owners of legitimate marketplaces like OpenSea and ORE System say they prohibit stolen content from being listed but admit that enforcement is mostly manual.\n\nThe world of NFTs is still young and societal and business norms have yet to be fully established. \u201cJust because something is claimed to be non-fungible does not mean that someone cannot create another token of that same piece of art on, say, another blockchain\u2014or even on the same blockchain,\u201d says Roy.\n\n6. We could be in a big bubble\n\nThe big numbers being bandied about would appear to make NFTs a business proposition that\u2019s at least worth exploring, but they\u2019re also a good reason not to move too quickly.\n\nWe\u2019ve seen bubbles before in the tech space, and those who are skeptical of the big plans for the future of NFTs are sounding a word of caution about creating or investing in them.\n\n\u201cPeople are paying amounts in excess of a million dollars for a picture of a chimpanzee,\u201d says Roy. \u201cThat, to me is an obvious sign that value is quite detached from reality in the NFT space.\u201d\n\nCaveat emptor.