Artificial Intelligence, Blockchain, cryptocurrency, and now NFTS. The next big thing ready to shake up the arts industry seems to be Non-fungible tokens. In simple terms, these are ‘digital collectibles’ which are stored on blockchain. Ethereum blockchain generally holds NFTs but other blockchains support them as well. As to the ‘fungible’ and ‘non-fungible’ is concerned, here is an explanation:
A fungible asset is something with units that can be interchanged; the most obvious example is money as you can pay someone $5 or 5 units of $1 and both have same value.
However, if something is non-fungible, it means it has unique properties and it cannot be interchanged. For example, you can not replace a 2200 sq yard house with two 1100 Sq yard houses. So, non-fungible item can be a painting by Picasso or Van Gogh or any other item which can not be interchanged.
In essence, NFTs are the digital tokens, one of their kind which are certificates of ownership for any virtual or even physical asset.
If we draw an analogy we can say that cryptocurrency is to currency what NFTs are to collectibles. In any case, the environmentalists are deeply cautious about digital tokens.
Are NFTs beneficial? Certainly Yes, financially
NFTs now provide the opportunity to artists to make millions for their work, besides providing a broader global audience; this happens as NFTs link a digital file to a creator, ensuring authenticity. Consequently, the issue of copyright infringement can be reduced. Not to forget that a digital certificate of ownership can be created with NFTs as the buyers of NFT own a ‘token’ which confirms that they ‘own’ the original work.
Who can Avail the benefit?
Literally anyone can ‘tokenise’ his/her work to sell as an NFT. By ‘tokenise’, we mean that you can convert any physical or even virtual asset into digital unit which can be bought or sold off.
Consider you own a piece of land in Manhattan or Brooklyn which is worth $10 million. You can split this land (not physically) and can invite investors to share the asset, however, land’s ownership shares can be divided in a non-traditional way. You can create a digital tokens worth $1 million each and can sell them to investors.
This seems unreal but wait. Asset management firm, Elevated Returns has closed a deal for Aspen Digital, a tokenized real estate, confirming that even the physical assets would be tokenized in future and sold off with authenticity and transparency.
What’s the worth?
NFTs are shocking the digital world with the mind boggling sales. For instance, Twitter’s co-founder offered his first-ever tweet for auction and it was finally sold to Bridge Oracle CEO Sina Estavi for whopping over $2.9 million. Not to forget that Jack Dorsey himself wrote the tweet which is available publicly. Estavi would own the NFT which would be signed and verified by the creator like a virtual autograph. This was the tweet which was offered on valuables:
And this is not limited to tweets only as an animated Gif of Nyan Cat was sold for more than $500,000. Moreover, a British auction house Christie sold NFT by digital artist Beeple for $69 million; Beeple’s original name is Mike Winkelmann.
What’s the concern?
The biggest concern at the moment about NFTs is environmental concern. For instance, the cryptocurrencies rely on energy-sucking proof of work (PoW) consensus mechanisms to validate transactions and mint new coins. PoW sometimes contains thousands of computers working in unison to solve puzzles and mine new coins.
Digiconomist owned by Alex de Vries details that Bitcoin’s carbon footprint is 54 million metric tonnes of carbon dioxide. Such is the footprint of Singapore. In short, single Bitcoin transaction footprints equals 1147.66 kWh per year.
The NFT-bitcion connection is here:
NFTs are majorly stored on Ethereum whose carbon footprint is about 22 million metric tonnes. The Ethereum network plans to switch over from PoW to a more efficient proof-of-stake system later in 2021. And by the way, Elon Musk’s ”favourite” Dogecoin consumes 7.8 TWh.
According to Cambridge Bitcoin Electricity Consumption Index, the amount of electricity used annually by the Bitcoin network could satisfy the energy needs of the University of Cambridge for 760 years.
Who is advocating NFTs?
Many entrepreneurs are now backing NFTs. Elon Musk putting up his tweet for auction, Jack Dorsey actually selling off his tweet as NFT are all pieces of evidence that the transaction method is gaining ground.
Most recently, entrepreneur, Gary Vaynerchuk has been advocating NFTS. In one of his videos, the cool-headed Garyvee expressed that NFTs are long-term as they create a transparent ledger. The ambitious Garyvee said this is about identity and social currency.
‘The real reason I believe that most people should buy my NFTs is my obsession with making it a valuable outcome for them,’ Garyvee said but warned that NFTS are high risk.
“I believe 98 percent of NFT projects right now are not good investments,” Garyvee said and added that he was treating it as a 45-year project instead of 45-days project.
Agree or not, NFTs would be the next big thing hitting the digital landscape. As to the question of energy consumption is concerned, it would be green soon because NFTs are in essence beneficial for creative minds. These creative minds would carve out a way to make that sustainable and green.