Million-dollar memes and Johnny Depp impersonators: what are NFTs and why should you care?
‘What is an NFT?’ – a google search which has recently hit an all-time high, up by 2500% since January alone according to BitcoinKE. After trawling through pages upon pages of results, most of which were clearly aimed at those with a pre-existent knowledge of cryptocurrency, it’s questionable just how many of these users came away from this search with any clear idea of an answer.
In a nutshell, an NFT is a Non-Fungible Token. A ‘token’ is a secure version of a piece of information, used widely in modern computing and digital security, and ‘non-fungible’ means that the token is unique and cannot be interchanged with another object of the same kind.
Mike Darlington at @s3.crypto (Instagram) described this to me in comparison with purchasing conventional, physical art. ‘A piece of physical art is non-fungible because it’s individualized… If I put a Monet into a pool with three other fake Monets, I’d like the real one back, because the others don’t have the same value’.
Whilst NFTs can be anything digital – for example, a social media post, like the first ever tweet turned viral meme which was sold for just under $3 million – they are currently being most popularly used for collecting and trading digital art.
For example, the above image, Beeple’s Everydays: The First 5000 Days, was sold as an NFT worth $70 million dollars – the third most expensive artwork ever sold by a living artist.
It is also available on Google to be downloaded for free.
‘The NFT isn’t the [visual art] itself, which is a common misconception, but a secure tokenised version of all the information inside it. The value of the token comes from being able to authenticate who “minted” (made) the piece, and everyone on the network being able to see this information’ explains Darlington. ‘I think people (for whatever reason) like collecting and owning things. It gives them a sense of power and control. Is collecting NFTs really any weirder than collecting stamps, coins, records, matchboxes?’
Although the first NFT was released 7 years ago, they recently gained popularity this past year, partly because of the pandemic. Artnome, a technology and art focused blog, argues that NFTs have allowed artists to continue to profit from their work during one of the most challenging periods of history for creatives. However, whilst they have done wonderful things for the struggling art world, they don’t come without a plethora of problems.
What are the issues?
Well, in a short space of time there have transpired to be several.
Firstly – anything digital and internet-based comes with massive risks. This was discovered by NFT company ViciNFT when a worldwide press release began to advertise the auction of Johnny Depp’s never-before-seen poetry, in NFT form of course. Just one day before the auction, it was suddenly called off as a hoax. Somehow, someone somewhere had managed to successfully impersonate the famous actor, falling only at the very last hurdle. Although thankfully the hoax was uncovered in time, I can’t help but wonder what would have happened had this not been the case and had someone paid almost definitely millions of dollars for the work of a fraudster. How would ViciNFT have dealt with that?
Additionally, it’s worth noting that this is not the only questionable aspect of the company which I discovered during my research. ViciNFT brand themselves as producers of ‘NFTs for the common good’, with a non-specified ‘portion’ of their auction proceeds going to charity, and another non-specified ‘donation’ being given to a climate conservation fund. However, when recent research has demonstrated the colossal impact of NFTs on global warming, how ethical can they be? Research from digital artist Memo Akten suggests that the average NFT carries a carbon footprint the same size as an EU resident’s average monthly footprint. This is because Ethereum, the cryptocurrency which is used to trade NFTs, holds such a high carbon impact that the environmental damage begins before we even consider the electricity needed for artwork to be digitally displayed, and the amount of Ethereum used with every following trade.
Fortunately, there are alternatives to these environmentally costly NFTs, such as marketplaces which use less energy-consuming cryptocurrencies like Tezos. The catch is that they are less secure, and less developed, so we’re not yet using them. However, perhaps with more demand for NFTs will follow a higher demand for an eco-friendly solution. Darlington suggests that ‘crypto currencies incentivize the development of renewable technologies. Therefore, tragically, the only way for us to co-operate as a species to solve this mortal threat could be through exploiting the human race’s natural greed and psychological desire for more’.
Admittedly, by having any environmental consciousness at all, ViciNFT are doing more than many other NFT creators and traders – but surely ‘a donation’ to an environmental charity should be the bare minimum? Although they clearly put some thought into appearing as eco-friendly, ViciNFT have ignored the fact that to limit global warming requires above all a decrease in our carbon emissions, not money.
Similar issues arise with the leading agency NAFT, who made history recently through their partnership with David Hoffman, an entrepreneur within the food and travel industry. Collaboratively, they are releasing 21 unique animated NFTs, each representing a city in India, with all proceeds being donated to India relief. Whilst this donation will be hugely beneficial, it still seems to me that using NFTs as charity fundraisers is simply helping one of the world’s problems by worsening another. This is likely a paradox that we will have to learn to navigate, as NAFT’s history making move demonstrates that this digital craze is here to stay.
What’s next for NFTs?
After NAFT’s extension into the food and travel industry, it seems logical to predict that NFTs will soon begin to sweep across multiple more sectors. Already, NBA Topshot have merged NFTs with the sports world by selling official video clips of iconic NBA moments and effectively allowing fans to buy that moment in history.
‘It’s impossible for me to predict the future of where it’s heading.’ states Darlington. ‘Similar to the dot com bubble or the early 2000s, there will be a large amount of projects as everyone scrambles for a piece of the pie but eventually the market will decide what is valuable or innovative and what is a waste of time.’
‘The biggest players I would love to see jump into the space right now would be Disney and Pokémon. Both are massive global brands, highly sought after by collectors for years, which also mean a lot to a lot of people… Fake fashion and jewellery are also massive businesses [and] being able to prevent fraud would be invaluable to these industries.’
Should you be investing and trading in NFTs?
That’s not for me to say.
Even after all my research, although I can logically understand the appeal, I cannot personally see myself wanting to purchase or trade an NFT. Although it seems hopeful that the environmental implications of NFTs will be resolved, that is not yet the case, and therefore this is not something that I can personally get behind.
However, ultimately, everyone has a right to their own hobbies. As Darlington summarises, ‘Anything which has value only has value because people believe it has value, and something can only have value to you if you believe it has value.’ If you see the value in NFTs, then now is probably a decent time to invest – but as it stands, this is not something you can do without first asking yourself: ‘which has more value to me – a trading card, or our environment?’.