NFTs: The Good, The Bad & The Eco-Friendly
I’m sure that at least once you’ve seen or heard the term NFT being thrown around. Well today’s post is all about defining in layman’s terms exactly what it is and what it all means.
So what exactly is an NFT?
Well, in short, an NFT stands for ‘Non-Fungible Token’ and it is a widely used term within the Web3 world, they allow you to buy and sell the ownership of unique digital items and keep track of who owns them through the blockchain, but I’m certain that it probably hasn’t cleared up much with that definition either.
So imagine a pokemon card, or any other sort of collectible you had as a kid (or still might have), it’s obvious that the rarer the card, the more valuable they were - regardless of whether that was emotional or financial or even for bragging rights. Well, NFTs are no different apart from being made of pixels instead of paper and before any of you start saying “But I can copy and paste an image” of course you can but you can’t copy and paste an NFT and say you own the original.
I’ll break it down some more. Say you have a gorgeous, high-quality print out of Vincent van Gogh’s Sunflowers. It’s framed and on your wall and looks wonderful, but it’s obviously not the real painting, or maybe it is … that is if you bought it from the Van Gogh Museum in Amsterdam for $39.85m. Now replace the real-life van Gogh with the original Nyan Cat GIF and you have yourself an NFT - an original, digital item that can be worth a lot of money and in some cases, depending on the NFT, can be used as a ledger for proof of purchase.
Why are they a thing?
Now that we’ve cleared up, to an extent, we should probably uncover their rise to fame. In 2012, a paper by Meni Rosenfield outlined and introduced the concept for the Bitcoin blockchain as “Colored Coins”, I promise this is relevant just stay with me.
The idea of “Colored Coins” was to describe a method chain that represented and managed real-world assets on the blockchain. These would prove ownership of assets similar to regular Bitcoins, but with an added ‘token’ element that determined their use whilst also making them unique. Yet the limitations of Bitcoin meant that the “Colored Coins” could never be realised, but it did lay the foundation for experiments that led to the invention of NFTs - see, it’s all relevant!
As experiments continued and other elements of Web3 continued to develop and progress, NFTs as an art medium took the world by storm during 2021. This was the year that this novel tech broke into the mainstream.
Two software developers; John Watkinson and Matt Hall created what some consider as the first NFTs. Titled “CryptoPunks”, these pixels were inspired by London punk culture and the cyberpunk movement and were originally offered for free and the project was limited to 10,000 pieces with no two characters being the same.
Then, the “CryptoPunks” started shooting up in value, with some even hitting the $1 million mark. Soon, it was nearly impossible to purchase them for anything less than that million whilst some were even selling for more than $11 million.
Another key event in the NFT world was when Mike Winkelmann (Beeple) sold his “Everydays: The First 5,000 Days” for $69 million at Christie’s. Not only did this astronomical price make him the third-most expensive living artist in the world, this was the first time a prestigious auction house had offered up an NFT for auction which lent prestige and validation to the market.
It’s key to note that at the time, NFTs seemed like they could recede back into being a niche internet preoccupation at any moment but it was this big sale that effectively opened the floodgates.
Now, whilst it’s all well and good if you can actually afford one of these pieces, it can still be confusing as to what they’re for. That’s where the BAYC comes in.
Similar to the original “CryptoPunks”, the “Bored Ape Yacht Club” introduced a new level to NFTs. Initially, the “Bored Apes” were a 10,000 part series that featured an array of apes that sport different hair colours, accessories, and facial expressions and Gordon Goner, Gargamel, No Sass, and Emperor Tomato Ketchup (all pseudonyms FYI) added the revolutionary community element - “Ape” owners are able to join an exclusive Discord channel where collectors can chat and network.
Being a cryptographic concept, NFTs can never be changed, adjusted, or stolen yet despite its advantages, there are some negatives worth discussing:
It's a High-risk Market - The biggest question is whether or not NFTs have any value and if they’re good long-term investments?
It’s only Ownership - As mentioned previously, art can be copied and pasted, GIFs can be shared hundreds of times, and videos can be shared online. You don't have power over the asset, only proof of ownership.
Vulnerability - Whilst blockchains are secure and almost impossible to edit and hack, many of the exchanges and platforms are not. As a result, there have been some stories of NFTs being stolen due to cyber security breaches.
Environmental Damage - Believe it or not, one of the biggest disadvantages is the negative impact it has on the environment; entering this data onto a blockchain demands tons of computing power, and the long-term viability of block chain-based assets is a major concern.
So you might be questioning that last point about how something digital can be damaging to the environment… surprise, it does. NFTs are partially responsible for the millions of tons of planet-heating carbon dioxide emissions that are being generated by the cryptocurrency technology used to buy and sell them.
A lot of greenhouse gas emissions are built, as mentioned, on a blockchain system that uses “proof of work” which is incredibly energy hungry. To keep these records secure, the system forces people to solve complex puzzles using energy-guzzling machines. The process is very energy inefficient. It's also why the use of inordinate amounts of electricity makes it less profitable for someone to screw up the ledger and as a result, they can sometimes use about as much electricity as the entire country of Libya.
The most straightforward solution to the emissions problem of NFTs is clean energy. If more machines run on clean energy, then our emissions go down. This is starting to happen, there’s still not a clear picture of how much mining that takes place uses renewable energy.
Luckily, there’s already an artist-led effort to raise money to reward people who can figure out new ways to make crypto art more sustainable. Anyone who wants to support those artists by buying their work can migrate along with them to less polluting platforms!
Well, there you have it; a neat and simplified (I hope) summary of what on earth NFTs are alongside some of the major ‘historical’ events alongside its environmental impact:
NFTs are digital receipts that show a proof of ownership for anything that exists online
They are part of the ever developing world of Web3 with thousands purchasing their way to be a part of exclusive communities
Whilst they seem awesome technology-wise, it’s vital that we consider its environmental impact too!
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