WTF R NFTS?
That’s a good question. Even after doing some research and hearing about them, I still am not sure what NFTs actually are. Yes, the acronym stands for non-fungible token, but what does that mean? Let’s see if we can demystify at least the basics of the NFT world. And before you ask: no, it does not have anything to do with mushrooms.
Non-fungible tokens essentially refer to digital files – an image, a video, an audio file, a GIF – that are unique, meaning that they cannot be traded for the same thing. The term “token” is used because NFTs transform these unique digital files into valuable pieces; in other words, they tokenize them; they make them desirable. NFTs live on the blockchain – the system that supports cryptocurrencies such as Ethereum and Bitcoin. (Think of how you would sketch a molecule with circles and lines connecting those circles; the circles are the cryptocurrencies, the molecule itself is the blockchain). The blockchain ensures that only one person can own an NFT at a time, cementing its “one-of-a-kind” value.
NFTs can be any type of digital file, but their most popular use is in the art world. Indeed, NFTs have become a way for artists – of any and all kinds – to earn money from their work in an easier and more accessible way. Let’s say I am an architect and I draw a floorplan using software like AutoCAD. I download my final floor plan as a JPEG and decide to sell it as an NFT (this process is called minting). When I sell it, I have the option to enable a function that will give me a percentage of the sale, anytime my NFT is traded. It isn’t quite a direct line from artist to consumer – more like a very squiggly one – but it is a way for artists to reach more people more easily, and not have to deal with the bureaucracy of the art world – the one that makes it hard for artists to make a living in the first place.
You might be wondering, but I can just copy-paste or download and save the image on my computer without needing to pay millions of dollars! And you are absolutely correct. You can do that. The appeal of NFTs lies in what you can do once you own one: brag. While NFTs refer to the actual file that contains the artwork, they are most interesting because of the bragging rights that come with them.
As an artist, I can understand the benefits of NFTs: they are a source of revenue, a way to show off your work, a way to generate engagement, and encourage discourse around your art. The official website for Ethereum even states that NFTs are “a way to give more power to content creators.” You could also argue for the accessibility of NFTs: pretty much anyone can make an NFT, as long as you own the intellectual property rights of the item you want to sell. Talk about inclusivity.
In my opinion, however, they have been taken too far. NFTs are not just limited to artworks. As I said before, any digital file can be an NFT. Jack Dorsey, the founder of Twitter, sold his first NFT for $2.9 million dollars. I am not joking. The only thing that the person who bought it has, that you and I don’t, is the ability to say “I own Jack Dorsey’s first tweet”. Need I remind you that this tweet has been available on his page for the last 15 years. Anyone can view it. So why do we need to own it?
As cool and appealing as NFTs may be, they come at a cost, mainly an environmental one. NFTs rely on the blockchain, a decentralized system that records transactions made in cryptocurrency, and which is shared across a network. Blockchains are in and of themselves extremely energy intensive: the point of a blockchain is that it is very secure, but to achieve this it needs to consistently be creating new blocks on the chain (to make it harder to hack or steal from). This means that computers are always running, consuming energy along the way. In other words, to keep itself alive and secure, the system needs to keep consuming, much like us humans. That’s a lot of computing power.
The process of turning something into an NFT – called minting – runs by a similar process: it involves a series of steps designed to confirm the existence and value of the NFT and to ensure it is protected. But again, this uses up a lot of energy. So as much as we’d like to think that NFTs are revolutionizing the economy–and believe that they are harmless because they are digital, think again. Digitization does not mean “eco friendly”.
To summarize, NFTs are digital files of any origin, whose exclusivity rights can be sold on the blockchain. They are interesting in that they are highly accessible, and provide new ways for artists and independents to earn revenue, but they have faults. It seems the NFT market is essentially an auction house, where people can bid on anything, but, in the end, are only really buying an opportunity to brag instead of an actual piece of work. The things we do to play the game of capitalism.
References:
Clark, Mitchell. “NFTs, Explained.” The Verge, The Verge, 3 Mar. 2021, https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq.
Hayes, Adam. “Blockchain Explained.” Investopedia, Investopedia, 16 Feb. 2022, https://www.investopedia.com/terms/b/blockchain.asp.
Kastrenakes, Jacob. “Beeple Sold an NFT for $69 Million.” The Verge, The Verge, 11 Mar. 2021, https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million.
“Non-Fungible Tokens (NFT).” Ethereum.org, https://ethereum.org/en/nft/#environmental-impact-nfts.
“Non-Fungible Tokens (NFT).” Ethereum.org, https://ethereum.org/en/nft/.