Have you ever cracked a joke to a group of friends that you invented and they then went ahead and repeated it elsewhere, and you were happy on the inside because you know deep down that it was your brainchild? If the answer to that question is yes, then you’ll follow our article about NFTs just fine today! Even if you have a bad sense of humor and never cracked a joke, I promise I’ll try my best to explain the NFT concept to you.
I know you stand to gain nothing by calling out that it was your joke, other than maybe an argument with your friend, but sometimes you just want the world to know that this joke is your intellectual property. Enter Non-Fungible Tokens or NFTs. Non-fungible as the name suggests means that this is in no way equivalent to anything else out there. On the other hand, fungible is something that can be traded for something equivalent to it, for example, a $20 bill can be traded for two $10 bills or a gram or silver can be traded for another gram of silver. Based on blockchain principles, an NFT is used to tag a digital item of art or music so that the transfer of ownership is always maintained.
NFTs are mostly based on Ethereum token standards, the second biggest cryptocurrency after Bitcoin. Digital art producers can share the original ownership of their content to an NFT purchaser and/or can retain the copyright and reproduction rights. While all of this content can be copied and reused across the internet, the ownership remains with the person who holds the NFT and can be verified, unlike that joke you invented. NFTs have seen use not just in images & video formats but also in audio – Kings of Leon are launching their new album as an NFT. In a bizarre turn of events, Nike also received a patent for blockchain-compatible sneakers dubbed CryptoKicks. This will pair a pair of sneakers with a digital asset so you can always verify the ownership and authenticity of the sneakers. With NFTs, although you can have multiple copies of a file or artwork on the internet, there will be only one owner of the digital key.
In addition to the collector value of ownership rights to some digital art that will live on the internet forever, NFTs can also be beneficial to artists to generate revenue from sales and aftersales. When an NFT is sold from one person to another, it can be designed to pay the creator a certain amount from the transaction. Tech enthusiasts and Silicon Valley investors believe the possibilities for this technology are endless even though we still don’t know what they could be – when the first iPhone was launched we never thought we would use it to book cabs or swipe right at eligible singles.
While there are many positives out there for NFTs, all is not well in paradise. As most of the purchasers are collectors, the sales and resales will only work as long as there is an interest (that spiked in 2021 and hopefully continues to remain). Bit loss is a real thing and your digital art may lose pixels and information over time, then again even the Monalisa has lost some of its original splendor. One of the largest criticisms of NFTs is that they are environmentally very bad. The creation and mining of cryptocurrencies take up a lot of computing power and thus consumes a lot of electricity. According to the Washington Post, the past decade has spawned a financial network with a bigger carbon footprint than entire countries. As the generation that probably has the most to lose from global warming, is this the direction we want to go in?
Fount of wisdom, insufferable know it all, make it go away are just some of the phrases used to define Melwyn. When he is not at his Consulting job, he spends his time reading about technology and current affairs.