What are NFT’s?
“Where Bitcoin was hailed as the digital answer to currency, NFTs are now being touted as the digital answer to collectables.” – BBC News
What are NFTs? It’s not as complicated as I’d initially thought! An NFT is basically where the digital and trade worlds meet – such as digital art galleries. Oh wait, Four You Gallery has online exhibitions!
Simply put, an NFT is a “non-fungible token”; it’s unique and cannot be replaced with anything else. For example, money is “fungible”; you can trade a $10 bill for two $5 bills and still have the same thing – ten dollars. An NFT is a one-of-a-kind digital asset that can be bought and sold like any other piece of property without a physical form of its own. A tangible example of a non-fungible token is the Mona Lisa – completely irreplaceable; you can take a photo or purchase a print of it, but there will still only be one original painting. NFTs can be anything digital, but most of the attention revolves around the evolution of a fine art collection. Digital art is artwork that is either made with or presented on digital technology, including images created entirely on a computer or hand-drawn images which are scanned into a computer and then finalized using software programs like Adobe Illustrator. NFTs can be thought of as certificates of ownership assigned to virtual assets and are recorded in a digital ledger (similar to cryptocurrency) known as “the blockchain” – a digital record to keep track of who owns each unique token. NFTs are spread out across different platforms and cannot be directly exchanged with one another. Most platforms require buyers to have a digital wallet and use cryptocurrencies platforms like Ethereum, Nifty Gateway, World Asset eXchange (WAX) or Flow; allowing creators to collect a royalty. Some of these platforms are exclusive while others allow anyone to create and sell art, potentially making traditional art markets obsolete. Artists can get continuous royalties if an NFT is resold through smart contracts that are written into the NFT’s code. The only issue is that these automated resale royalty payments might not occur unless the NFT is resold through the exact same platform it was originally sold through. Though designed to give you something that can’t be reproduced (ownership of the work), the digital file can be copied and endlessly duplicated by online users. Also, the copyright/license of an NFT is not usually sold along with it, meaning the artist can continue to produce and sell copies. Essentially, there’s nothing really stopping people from copying the digital art. It’s like uploading a song to the internet and then having people download and share it all over the web – you own the original but countless copies can be made. What’s even more fascinating is the amount of money that people are willing to pay for them. The artist Beeple sold his piece “Everydays: The First 5000 Days” at a Christie’s auction for $69.3 million (I’d be good with 1% of that!).
Before buying an NFT, there are a few things to consider: which marketplace you plan on buying the NFT from, what digital wallet you need to download to connect to the platform the NFT is on, which cryptocurrency you need to fund that wallet with (since some platforms only support the original token of the blockchain they were built on), and whether the NFT you want is being sold at a specific time. Another dilemma is that certain NFTs are only available on specific platforms, limiting the buyer’s flexibility and freedom when it comes to cryptocurrency. If a buyer wants to resell their NFT, they’re bound to the platform and cryptocurrency they used when they originally bought it. What about security concerns? Well, there actually have been numerous reports of people’s accounts being hacked and their digital assets stolen and then resold. This is due to the blockchain’s security system being designed to prevent forgery and not theft – so if someone were to steal and sell your NFT, the blockchain would consider this a sound and irreversible sale. An additional problem is artists discovering weeks or even years later, that their original artwork had been digitally copied and sold as the thief’s original work.
The ecological impact of NFTs is the biggest concern because as it turns out, they have an environmental footprint “as mind-boggling as the gold-rush frenzy they’ve whipped up”. Blockchain technology, the digital ledger mentioned earlier, comes with colossal greenhouse gas emissions. The process of creating an average NFT and adding it to the blockchain is so energy intensive that its environmental footprint’s equivalent to driving 500 miles in a gasoline-powered car. Ethereum, the blockchain technology used for NFT’s, has a rising power consumption, comparable to the amount of energy used by Libya (an entire country!). Imagine that energy multiplied by the number of NFTs actually created or being created. As if our planet isn’t already worn-out by climate change and its related disasters. While NFT’s open “new ways for the collectors and artists to explore their relationship with the artwork itself” they’re quite controversial in nature. Which begs the question: are the risks worth the rewards?