Written By Muhd Zahin & Kaylene Lim
How many times have you seen the term ‘NFTs’ in your social media feeds these past few weeks? Or read an article that highlighted how much a celebrity has paid for a Bored Ape Yacht Club NFT?
For many of us, posts, stories and videos about ‘NFTs’ have become inescapable each time we hop onto social media. ‘NFTs’, short for Non-Fungible Tokens, have taken the world by storm in recent months and quickly turned into a hot topic for discussion all over the internet. However, what exactly are NFTs? What do they do? Are they good? Bad? Well, fret not, because this article will answer all of your burning questions about them, so read on!
The basics
Let’s first break down the term NFT- Non-Fungible Token. As the name suggests, NFTs are digital tokens that are non-fungible, or in other words, one-of-a-kind, and cannot be duplicated. As mentioned earlier, these tokens are only available digitally and come in the form of any digital art such as drawings, videos or even audio files.
They are first created by digital artists and then listed on the Ethereum blockchain, where the public can bid and purchase the artworks. The Ethereum blockchain is essentially a platform that allows the secure and direct exchange of cryptocurrency between two different parties. After the NFT is purchased, the buyer becomes the official and unique owner of the piece and can choose to either keep it in their collection or sell it to other interested buyers.
Now that you understand more about what NFTs are, let’s take a closer look, and dive into some of their pros and cons.
Pros of NFTS
Economic opportunities
The economic opportunities that come with NFTs goes both ways- for the artist as well as for the buyers. For digital artists, NFTs provide them with a way to earn revenue directly from the sale of their art pieces as opposed to how it was before. In the past, artists would have to sell their artwork through a third party entity such as an agent or a manager, and more often than not, had to pay costly platform fees to promote their works.
With the use of a blockchain such as Etherum, the market is decentralized, which means there are no middlemen involved. Because of that, NFT artists are now able to strike deals directly with interested buyers with no need for any additional fees, allowing them to keep 100% of the profits they make.
Buyers can also reap the economic benefits of NFTs due to their non-fungible features. Apart from being used for digital art collections, NFTs are also widely bought to be used as investment collateral. The idea of an NFT being unique and one-of-a-kind is its biggest selling point, as in simple economics when the demand for a product meets with low supply, its price will rise. This, therefore, makes every individual NFT worth a lot of money — being one-of-a-kind, there is a lack of supply to fulfil the demand. Because of this investment opportunity and money-making potential, many people are hopping onto the bandwagon and getting their hands on NFTs.
Authenticity
Aside from economic opportunities, the ability to confirm an NFT’s authenticity is another one of its pros. When it comes to traditional art, it is difficult to discern between a legitimate and counterfeit piece, and would often require many resources to establish its authenticity. However, when it comes to NFTs, this might not be the case.
As mentioned earlier, NFTs are found on the Ethereum blockchain, where they are both bought and sold. Aside from serving as a place to purchase NFTs, blockchains also have a unique feature that allows them to trace each NFT’s transactions and history. For instance, anyone can find out who the original creator of an NFT is, and can even trace all of its previous owners simply by looking at an NFT’s details on the blockchain. To put it simply, blockchains like Ethereum ensure that any activity which an NFT undergoes is transparent as it is always recorded and remains accessible to everyone.
The ability of the blockchain to trace and record these details ensures that NFTs are authentic, and gives an extra layer of security to buyers. By being able to assess an NFT’s transaction history and ownership, buyers have more confidence that what they are buying is the real deal. Therefore, the risk of scams and counterfeits are extremely low, which makes it a safe space for buyers who are looking to get their hands on the real deal.
Cons Of NFTs
Excessive energy usage
Every positive brings a negative in a form of exchange, and these are the causes that ‘NFTs’ bring in our daily society. For starters, let’s take their energy use into account.
Ethereum is a platform based around distributed blockchain channels, and its networks are developed to settle transactions with the help of cryptocurrency. Similar to NFTs, cryptocurrency can also be exchanged through digital transactions. It is a form of an NFT because it can also be traded through computer transactions. Upon deal-breaking between the relevant goods traded, anyone can acquire said currency within a short time. The efficiency and understandable methods of NFT exchange have also led to the popularity of cryptocurrency and has led to its growing expansion in the digital market. As great as it sounds, the way cryptocurrency is gathered isn’t that simple.
A single Ethereum transaction consumes more than 70.32 kWh of energy, with the same amount being able to power a U.S household for 2.5 days. This amount of energy can also be used to power a Singaporean household for 9.2 days, thrice the duration of our American counterparts, and thrice our rate of excessive comfort (Nine whole days of non-stop aircon? As wasteful as it sounds, we wouldn’t say no to that, especially on hot sweltering, HBL days!.) Our chances of surviving with electricity. According to Ethereum’s website, Ethereum has a carbon footprint the size caused by Lithuania, as the energy cost of an NFT’s production on the site itself is 332 kWh.
The mining process is so rigorous that resources aren’t scrutinised deeply. Fossil fuels are used as their main form of fuel because of their dirt-cheap cost. As long as high profits are made, miners generally brush their minting methods aside. However, their nonchalance towards their mining methods has inadvertently brought a negative on the earth, such as producing large quantities of pollutants in the atmosphere that is harmful to the environment by increasing risks of death (Causes include respiratory disease and illness). Besides bringing harm to respiratory systems, the excessive emittance of pollutants can damage the environment by merging with our environment’s vapours. In turn, condensing the collective vapours into acid rain and in some cases, smog.
Risks of undermined exploitation
Besides the negatives it brings to the environmental climate, NFTs also wreak forms of havoc in our recent social climate.
Sure, NFTs can be easily exchanged. It’s available for everyone to access for their means. In our current world of technological advancements, anything can be exploited to generate money thanks to the highly popularised tokens. But how far can you go for the sake of making a quick buck?
To honour the memory of deceased Marvel actor, Chadwick Boseman, an NFT artist by the name of Andre Oshea was commissioned to create a tribute NFT for the Oscars in 2021. This piece was also being bidded on Variable amongst the crowd for a chance to win the NFT. Of course, having your image immortalised in the form of art is great, especially when giving these artists a platform to shine, as said in the above benefits of NFTs. Having artists who honour fellow artists is also great as it allows them to earn money. Yet doesn’t the homage seem extremely performative, and very backhanded?
Not only does one sing the praises of a deceased person and get recognition for honouring their memory, but they get a lot of money when the piece is distributed.
As mentioned in the introduction, NFTs have a reputable front that keeps growing with every promotion it gets, whether it is online, by hearsay… To say the least, news travels fast. Thanks to their widespread, reputable front, NFTs can be intensively generated to the point where they can appear on dozens of market platforms.
NFTs seem to be the go-to option when creating art pieces of a variety of mediums. An extreme case where NFTs can be of monetary benefit is when literal selfies can be minted for cash, in the case of Indonesian college student Sultan Gustaf Al Ghozali.
The more people find out about it, the quicker they’re interested in them. With the help of trends gushing over them, these tokens will only be seen as valuable space. Their value is diminished to the point that people purchase them for sport. Being fictitious forms of capital, NFTs are valued for the sake of generating monetary assets, even though they are simply intangible, empty spaces.
The rise of NFTs undermines the value of art as more of them start appearing on digital platforms. Combined with its wasted energy consumption, overhyped presence, and market dominance, NFTs are becoming more than common in the digital age. So much so that it even has the possibility of taking over the art market permanently, and art will only be viewed as digital manufacturing rather than a projection of creativity, taking away its meaning completely.
Conclusion
With every firm having a small share in the digitalised market, it can be said that NFTs lie in a competitive monopoly of who can sell more. These firms take any opportunity they can to reap the benefits from their NFT sales. In return, the interest of the general public is piqued and they will look forward to seeing more of these NFTs’ growth. The supply of NFTs will grow immensely to meet the demand of their vast target numbers, especially in our current society where e-purchases and online credits are the new normal.
Just like the ever-evolving pandemic all of us are undergoing, the NFT market is unpredictable, along with its consequential boons and banes. Who knows if it’s going to develop for the better, or to crash for the worse? The truth would inadvertently reveal itself in the coming future for these ever-evolving virtual properties.
