Crypto this, blockchain that. What the heck is going on with this NFT stuff?
You may have heard about NFTs from celebrities raving about them on TV or from the artists of the internet looking to make some cash. But, what exactly is this digital crypto thing and is it worth spending one’s hard-earned money on?
What is an NFT?
An NFT or a Non-fungible token is a digital piece of art. It’s “non-fungible” because it’s a unique artefact and can’t be replaced with anything else. For example, the Mona Lisa, or trading cards can be non-fungible as they're irreplaceable. NFTs in the crypto world are 'one of a kind' digital assets one can own such as drawings, music, etc, and even tweets.
NFTs are part of the Ethereum (a cryptocurrency) blockchain and are stored in digital wallets.Every NFT is a unique token on the blockchain and they’re bought and sold on special NFT Markets. Examples of these markets are OpenSea, Rarible, and Nifty Gateway. While NFTs are sold on these special crypto marketplaces, the funny thing is, anyone can copy a digital file as many times as they want. That includes the actual art that’s included with an NFT.
How do people make money from NFTs?
So if anyone can copy, download, and view the same file... What is the damn point? Well, NFTs are designed to give you “ownership” of the work. The original creator (artist) of the digital image can still retain the copyright and reproduction rights like with physical artwork but, if you own the NFT, you own the art. Other than earning money from the initial sale of an NFT, artists can earn a percentage every time the NFT is sold or traded. Once artwork has been minted, it can be purchased. (Minting is the process of turning a digital file into an NFT.)
The digital collage from the artist Beeple became the most expensive NFT ever sold in March 2021 when it was auctioned off for a whopping 69.3 million U.S. dollars. This created a boom in the sudden interest in NFTs from artists and investors alike. Buying an NFT gets you some basic usage rights. The image can be posted on social media or it could be set as your profile picture like people have been doing with the apes on Twitter. So many rich people with apes...
Let me go ahead and copy and paste this digital collage someone spent MILLIONS on real quick—
Benefits of NFTs
One of the main appeals of NFTs is being “part of the club”. People like the community aspect of owning an NFT like having access to exclusive discords where they can chat with like-minded folks. NFTs can also be used within online games. While these benefits make sense, there are some NFTs that just don’t... For example, people are spending millions on digital pet rocks which serve no purpose other than being tradable and limited.
NFTs basically give you clout. When you buy an NFT, you get bragging rights that you own the art. You may ask, “Well can’t you just lie and say you own it when you download the image?” The ownership is verified because the purchase is backed up with a blockchain entry.
Blockchain stores a record of each time a transaction takes place which is one of the appeals of crypto in the first place: purchase transparency. While these works of art are seen as an investment, NFT owners can just hope that one day the value of it goes up so they can sell it for profit. However, there’s no guarantee that this will happen. Owners could very well lose money on their NFTs and with the value of crypto being constantly unstable, it’s a risky investment.
Users can have total control over their digital assets in the Metaverse because of NFTs. NFTs are used in the Metaverse to create special environments and digital communities. As previously mentioned, the Bored Ape Yacht Club which you may have heard Paris Hilton talking about, grants users access to premium communities and events both on and offline. It’s all exclusive and password-protected. Very fancy. There is also a rise in the digital fashion industry that will be huge in the NFT space as more and more people enter the Metaverse and want their digital persona to reflect their sense of style.
According to https://www.statista.com/, in April 2021, roughly 23.7 thousand NFTs were sold that month. As of February 2022, the aggregated NFT sales value amounts to roughly 87 million U.S. dollars in the last 30 days. That’s a LOT of money spent on things that don’t physically exist.
NFTs use the same blockchain technology as some energy-hungry cryptocurrencies and end up using a lot of electricity. Cryptocurrencies generate a lot of greenhouse gas emissions. After getting a lot of backlash from people who think dealing in crypto art is environmentally unethical, ArtStation, another online art marketplace, cancelled its plans to launch a platform for NFTs within a few hours. Artists were referring to NFTs as “ecological nightmare pyramid schemes” on Twitter and called out ArtStation’s bogus plans to offset emissions from NFT production.
So if we want to continue with this NFT buying and creation thing, how do we keep it from further ruining the environment? The most obvious solution to the emissions problem of NFTs is “clean energy.” If more cryptocurrency machines run on clean energy, emissions will go down. However, if mining for tokens continues to be hardcore energy-sucking, it will continue to put pressure on electricity grids and eat up renewable energy that could otherwise go toward something more necessary— like keeping the lights on in people’s homes. There are other potential fixes to the climate pollution problem of NFTs and crypto, in general, are in the works but they still haven’t been implemented.
Should I Invest in NFTs?
While it might be tempting to jump into NFT investing with all the hype that’s going on, it’s not a stable investment. Not only that but people are getting scammed left and right. On the surface, the NFT marketplace is made to look like everyone is making money, especially when you have all these wealthy people throwing money at it. But for someone to make money, another has to lose money.
NFTs do not magically generate wealth from thin air. The wealth is taken from people buying into the idea that everyone who’s hopping on the train early is making bank. “NFTs are entirely for the benefit of the crypto grifters. The only purpose the artists serve is as aspiring suckers to pump the concept of crypto — and, of course, to buy cryptocurrency to pay for ‘minting’ NFTs.” - David Gerard, Attack of the 50 Foot Blockchain explains.
If you buy an NFT with the intent to sell later, there is no way to guarantee that you can resell your NFT for profit. Here’s another thing: it may sound morbid but, when you die, your crypto wallet dies with you. Unless someone else has your password and can access your account, everything is lost. So then what? You’re probably better off investing in your education, stocks and bonds, property, or REAL art that is TANGIBLE and sparks joy.
You’ve never seen USD or GBP advertised on TV... It’s dodgy that crypto, “a currency”, needs to be sold to an audience. The push to get on board with NFTs has been just as intense. I’m just saying... Ultimately, it’s up to you! Keep in mind the risks, do your research, and make whatever investments are best for you.