What on earth is an NFT?
You’ve probably been hearing about NFTs in the news and online. NFTs are the next big thing, but what exactly are they? NFTs or non-fungible tokens are the newest way to buy and sell digital media. But what does non-fungible even mean? Basically, NFTs cannot be replaced or interchanged. Bitcoin and dogecoin are considered fungible tokens, meaning you can easily exchange one for another, meaning all bitcoins are the same. When you buy an NFT you buy a one of a kind piece that cannot be interchanged. This one of a kind piece is made possible by a blockchain, which ensures its authenticity.
Traditionally, art has been sold primarily through brick and mortar galleries that are both tricky for artists to gain access to, and make it difficult to sell digital art, a medium that has been gaining traction in this digital age. But, like nearly every brick and mortar business in this Covid era, they have been forced to join the online buying and selling platform. The cultural phenomenon of NFTs has been made possible by the current digital age, techies, and cryptocurrency fans, but it has been accelerated by the Coronavirus. Just like the global pandemic accelerated such as distance learning, company wide zoom calls, and grocery delivery, technological advancements that were inevitable but were previously thought to be much further in the future, it also drastically increased online shopping for all items from clothing to groceries to high end art.
But what exactly are people getting when they buy an NFT? NFTs are not limited by a format or medium. The only requirement for developing an NFT is that it is digital. Most of the hype surrounding NFTs has come from the high end art world. Perhaps the main poster-child for NFTs is an artist called Beeple, who sold a collage of 5,000 pieces of his artwork for 69 million dollars. Before marketing his artwork as NFTs, the most one of his pieces had sold for was $100. NFTs have given Beeple, as well as other digital artists a platform to be incredibly successful artists.
Although it would be easy to romanticize NFTs and applaud them for giving small artists a chance at fame and fortune, many people profiting off of NFTs are already rich and famous. Grimes, successful musician and partner of billionaire Elon Musk, made around six million dollars selling her digital artwork as NFTs. Grimes collaborated with her brother to produce this collection of images entitled “WarNymph” that center around a demonic winged baby. Some of the pieces were just static images, while others were short videos that included original music by Grimes. The majority of the money made off of this collection came from the sales of two of these videos entitled “Earth” and “Mars” thousands of copies of which were sold for $7,500 each, which you can watch for free on the internet. This brings forth the question, why would people pay thousands of dollars for artwork they can view for free? Especially if they are paying $7,500 for a copy, not even for exclusive rights to the original.
Nyan cat, an internet meme of a cat merged with a poptart flying through space, became popular on YouTube in 2011, but 10 years later in February 2021, Nyan Cat sold for almost $600,000. Why did a YouTube video that is free to watch sell for hundreds of thousands of dollars? The answer is tricky, but similar to the question, why would someone spend millions on an original Picasso when they could buy a print for free?
The success and value of NFTs cannot only be attributed to mysteries of art, however, as other forms of digital media are also receiving attention and selling for obscene amounts of money. The NBA has seen immense success from selling digital trading cards called “moments” on their digital marketplace, Top Shop. These moments feature video clips of exciting plays such as dunks and the like and are bought, traded, and sold by fans. These moments are sold in packs, similar to traditional trading cards, and only a limited number of these packs are sold, usually a few thousand, thus creating a scarcity, giving these moments value.
But while NFTs of digital art and trading cards mimic the traditional selling of the “real life” versions that came before, there have also been sales of more bizarre digital media. For instance, an NFT of a New York Times article about NFTs sold for $560,000. Even more strange, is the sale of tweets. Jack Dorsey, the founder of twitter, recently sold his tweet, which also happens to be the first tweet ever posted, “just setting up my twttr” for almost 3 million dollars. Celebrities have also jumped on this bandwagon with Mark Cuban selling his tweets for around $1,700 (significantly less impressive, but equally strange).
While NFTs have definitely given us a great deal of entertainment and have made some people rich and others richer, not everyone is thrilled with their recent rise in popularity. Many people are up in arms about NFTs, claiming that they are environmentally unethical. But how can something that is completely digital be bad for the environment? Although you’ll never see a piece of digital artwork floating in the ocean after its owner tires of it, the average NFT uses as much electricity as the average person uses in a month. This is because NFTs are typically bought and sold on marketplaces such as Nifty Gateway and SuperRare that use the cryptocurrency Ethereum. Ethereum is incredibly energy inefficient because it uses the energy hungry “proof of work” system. Basically, this system operates by using energy sucking machines to keep people’s transactions secure, causing Ethereum to use as much electricity as the entire country of Libya.
Not all NFTs are sold using this energy system however, NFTs such as NBA Top Shot moments are sold using “proof of stake,” which, put simply, means that they use a whole lot less electricity. Ethereum has expressed plans to switch to this energy system in the near future, and, if actually executed, this switch will drop their electricity consumption to nearly zero, eliminating the biggest problem posed by NFTs.
Either way, whether you love NFTs or find them ridiculous, we have truly entered the digital age and this new, bizarre method of buying and selling is here to stay.