What Is An NFT and Are NFT’s Bad?
Whenever something blockchain-esque happens, it often leaves people with more questions than answers. Yet, we’re now seeing NFT’s everywhere. From poor Chadwick Boseman’s loss being monetised as his likeness became an NFT at the Oscars, through to art being stolen on Twitter by NFT bots. Yet, trying to pin down what this new so-called art form actually is – and what it provides buyers – is a feat unto itself. Here, we try our best to break down exactly what an NFT is and how it’s affecting the online world.
What Is An NFT?
NFT stands for non-fungible token. Now, in economics, something that is fungible means that it can be exchanged. So, the money we keep on hand is fungible – we exchange it for goods and services. It also means we can give someone a tenner, and get 10, £1 coins back in return – and still have the same value. However, if it is non-fungible, it cannot be exchanged like this. Because there are no equivalents to exchange it with.
In artwork, art is often valued based on the price someone deems it to be. So, if you were to create a masterpiece, it could be sold based on whatever the buyer thinks that artwork is worth. Your art has no monetary value before this – it relies solely on someone being interested in owning the original art. That’s where the worth comes from (obviously negating the emotional and intangible aspect of your artwork).
How Much Is An NFT Worth?
NFT’s try to work off of this artistic side of ownership. To the person who bought the NFT, it is worth that much to them. However, unlike traditional artwork, it covers the ownership of a digital piece of artwork. In a digital era, the majority of art done by individuals is created digitally. This where the main difference comes in. With NFT’s, someone else can easily download and distribute something the NFT’s owner has bought. Without the need to pay royalties. So… there’s nothing to stop someone taking what you, technically, own.
If you do decide to purchase an NFT anyway, you get a certificate saying you own it. That certificate is stored on an online ledger, known as the Blockchain. In this manner, it works in the same way as Bitcoin. The ledger cannot be forged, as it is maintained by thousands of servers, across the world. Owners can also sell their NFT’s at a later date. If a ‘smart contract’ has been built into the sale of the NFT, the artist may get a cut of any sale that is made in the future. However, remember that the artwork itself can be duplicated at any point, without the artist being paid royalties.
Why Are NFT’s Bad?
All of this could seem a little bit amusing to the rest of us mere mortals. I mean, if somebody wants to own a certificate that has no use, other than to say they own it? Go ahead. That side of thing wouldn’t affect the majority of us. But there are two ways in which it has a major knock-on effect. One of these is how it is affecting artists, who would normally be perfectly happy sharing their work online.
Usually, when an artist shares their work, it will increase their engagement and online presence. The higher audience numbers mean that the artist is more likely to be able to make a commission on their piece. When the commission is completed, the artist (with permission) will share it online – and so the cycle continues.
However, many artists are reporting that NFT bots are tokenising the work – without it being sold. So, the artist technically no longer owns the rights to their own artwork. But they’ve also made no income from that. They will still get the shares, but there’s a danger that sharing a commission can result in the artwork, which has already been paid for by the person who requested the commission, will also no longer own their own artwork.
That means sharing art becomes a risky business. As such, artists will be less likely to share art that they are particularly proud of – as it will be stolen from them. As well as this affecting them, mentally, it will take a toll on the level of engagement and audiences they can reach. Thus, the artist can’t make money in the same way they used to.
How Do NFT’s Affect The Environment?
The other big factor as to why NFT’s are so damaging to the world is their effect on the environment. Normally, a digital anything would be more environmentally friendly than anything physical. This is not the case with NFT’s. As we mentioned earlier, the ledgers keep the information on file, and the ledgers are stored on thousands of servers.
For those who want to purchase a tokenised NFT, they usually have to go through a system like Nifty Gateway. Or a competitor like SuperRare. Both of these use the cryptocurrency Ethereum. Now, since Ethereum, bitcoin and NFT’s don’t have a bank to oversee large transactions, the ledgers need to be kept secure by other means.
To keep those ledgers secure, the system forces people to spend a LOT of time and energy, in order to crack codes and create tokens to sell. Once these ‘miners’ have created an NFT, they need to transfer it to a decentralised ledger. These tokens then need to be independently verified and recorded in the ledger, which is known as a blockchain. They can then sell the tokens and earn transactions fees by way of a reward.
According to The Verge “The process is incredibly energy inefficient on purpose. The idea is that using up inordinate amounts of electricity — and probably paying a lot for it — makes it less profitable for someone to muck up the ledger”. As a result, the mining process means that roughly as much electricity as the entire country of Libya is being used – just to keep Ethereum running.