Beeple, an American digital artist, became one of the top three most valuable living artists by selling one of his artworks for 69 million dollars as an NFT.
But what exactly are NFTs?
Non-Fungible Tokens, or NFTs, are unique digital assets stored on public blockchains like Ethereum. NFTs are also traded using cryptocurrencies like ETH, but it is also possible to buy them using traditional payment methods.
All NFT transactions take place on a public blockchain that verifies the underlying asset’s ownership. Today, NFTs have created a booming market for a wide range of tokenised digital assets; heck, even dinosaurs (in the context of tech) like Gucci are in on it.
What Can Be An NFT?
E v e r y t h i n g.
Anything from digital art to an autographed tweet from Jack Dorsey.
But let’s talk specifics.
Digital Art
Artists who grew tired of lugging their work to art galleries and fighting against social media algorithms to only have their art undervalued are now turning to NFTs.
According to Time, 200 million dollars worth of NFTs were purchased by buyers in 2020, but the industry crossed that benchmark soon as 250 million dollars were spent on NFTs in a single month quarter-way through 2021. One blockchain company burned an artwork worth 95 thousand dollars to ensure it would only exist as an NFT with no corresponding physical copy.
Even smaller artists who were once struggling are now getting paid thousands of dollars for their work. They can even get a percentage of the money every time the NFT is resold. So if a piece is sold for only a few hundred dollars but shoots up in popularity and value, the artist will get paid for it creating a passive revenue stream for them.
Memes and Games
Remember that flying rainbow Nyan Cat? It recently sold for 300 ETH, which translates to over six hundred thousand dollars, a pretty hefty price to pay for a cute cat meme.
Speaking of cats, CryptoKitties is a blockchain-based game where players can trade, sell and breed NFT cats. One of them sold for double the price of the Nyan Cat, its name is Dragon, and this kitty has cotton candy coloured fur. In-game items as NFTs is a concept that’s being actively explored by massive mainstream industry giants like UBISOFT.
Cinema and Sound
“Claude Lanzmann: Spectres of the Shoah” became the Cinema Oscar nominee to be auctioned as an NFT token. Three years before that, Marvel had already understood the potential of this medium and had released limited-edition Deadpool 2 posters to be bought as NFTs.
The music industry wasn’t too far behind; they wanted their share of the loot from this cornucopia. Steve Aoki, Mike Shinoda, Post Malone and many other artists made bank in a year where the music industry is suffering due to the global lockdown and loss of live music revenues.
And Much More…
Last year, two Nobel Prize-winning medical patent disclosures were auctioned and sold as NFTs. People are even buying video clips were are available to watch for free online. NBA Top Shot sells game highlights as digital assets, LeBron James’ slam dunk clip was sold for over two hundred thousand dollars. Another NBA star, Spencer Dinwiddie, has tokenised his contract, hoping other athletes will follow suit.
Nike is also in the market to sell their patent for CryptoKicks; it pairs tangible physical shoes with an NFT that acts as a unique identifier. Like CryptoKitties, these NFTs can breed together to create a brand-new shoe.
The recent hype around the concept of “metaverse” has its origins in the crypto industry with platforms like Decentraland and The Sandbox, where users can buy virtual real estate as NFTs. However, these platforms have also seen a huge commercial interest recently, especially as Facebook rebranded to Meta.
Environmental Concerns for Crypto and NFTs
The Artists were quick to point out that the blockchain-based NFTs are an “Ecological Nightmare Pyramid Scheme,” That cute little Nyan Cat’s carbon footprint is on par with the electricity usage of an EU resident for two months.
Blockchains function without the involvement of any bank. Instead, the network’s security relies on a process called “Proof of Work” running on many computers in a global decentralised network. This process, known as mining, is energy-hungry and requires massive energy, and emits greenhouse gases. Between 2016 and 2018, four cryptocurrencies were responsible for 3 to 15 million tonnes of CO2 emissions.
With a surge in the popularity of NFT in the past year, this number is only growing. The carbon footprint annualised estimation of NFTs is equivalent to the carbon footprint of Mongolia, and the electrical energy consumed by them can run Romania for a year according to the Ethereum Energy Consumption Index.
But NFTs don’t have to be an environmental nightmare. NBA Top Shot works on a blockchain with a ‘Proof of Stake’ protocol in place that does not require any complex mining system using energy-guzzling puzzles. Instead, proof of Stake requires ‘locking in’ one’s cryptocurrencies as a stake in the NFT; this can drop the electricity consumption to zero.
The Future for NFTs
NFTs have been great for artists. There is more money to be made here than by traditional means. The royalties that come from resales are unprecedented.
Even buyers love the platform–some are passionate about supporting art, others see a good investment opportunity. NFTs are also more commonly accepted in the mainstream media than cryptocurrencies like Bitcoin that are subject to an economic and political debate. While NFTs require a blockchain to work, they can be transferred for fiat currency and on centralised platforms like NBA Top Shot, making it more accessible to general audiences.
Cryptocurrency has already removed the need for centralized payment systems, NFTs have the potential to decentralize the media world and empower the everyday creator while also providing an in for legacy and mainstream media. And we think they’re here to stay.
Written by Osheen Jain
Edited by Suranjan Das