Written February 13, 2022
Updated December 16, 2022
We’ve all seen the headlines: an NFT of a smiling ape has sold for millions, the subjects of classic memes have sold their photos for hundreds of thousands, and digital artists have cashed in in the hopes of making it big. Celebrities the likes of Snoop Dogg, Ozzy Osbourne, and Serena Williams have jumped into the craze—even ringtone extraordinaire Crazy Frog has his own NFT in the works. With the growing hype, millions of dollars, and growing debate surrounding the technology, you may find yourself wondering, what is an NFT?
An NFT (or non-fungible token) is a unique piece of data stored on a blockchain, which can be thought of as a list of records. Platforms such as Ethereum maintain these records, allowing for the creation and trading of tokens between users. NFTs are generally purchased using cryptocurrency, which is an unregulated, digital alternative to traditional currency. While any kind of digital data can be used to create a unique token, the most popular use of the technology has been in trading digital artwork.
Tokenized trading is unique compared to the traditional sale of art—according to NFT proponents, the technology allows for the collection of royalties and ease of access to the market for artists, and allows collectors an added degree of security and a convenient network to hold and sell their artwork. Additionally, an NFT can be seen as an appreciating asset, something purchased as a future investment. According to Johnathan Mann, creator of the ‘Song A Day’ NFT collection, “The royalties on all secondary sales has become a fundamental part of what makes NFTs attractive to artists of all kinds. If you can find the audience willing to support you, it becomes the kind of passive income artists have only ever dreamed of.”
Indeed, some artists have benefitted greatly from selling their artwork as NFTs. Photographer Dave Krugman, based in New York, has minted several of his original photographs as tokens, and has auctioned them for the equivalent of tens of thousands of dollars. In a Whitehot Magazine interview with Mariepet Mangosing, Krugman expressed his view of NFTs as the future of art trading. “The fact that we have resale royalties built into the smart contracts is a profound change,” he said. “We’re seeing artists profit from their output within their own lifetimes, and we’re living through the greatest transfer of wealth into the creative class in human history.”
However, not all share Krugman’s optimistic view of NFTs. One of the biggest controversies surrounding the technology has been its carbon footprint, as the creation and maintenance of tokens on a blockchain uses large amounts of electricity. As Hiroko Tabuchi stated in a New York Times article, the creation of an average NFT creates “over 200 kilograms of planet-warming carbon, equivalent to driving 500 miles in a typical American gasoline-powered car.”
These concerns have not been lost on students—graduate student Wolfy, who has a master’s in Biodiversity and Conservation and is pursuing a joint master’s in Tropical Biodiversity and Ecosystems at the University of Leeds, is particularly concerned about NFTs’ impact on climate change.
“We are currently in a climate emergency, and the need of the hour is to invest in mitigating the damage we have already done over the years,” said Wolfy. “NFTs, and the crypto affair as a whole, seem to be the most ridiculous way of doing the exact opposite. Unlike other energy expensive activities like transport and agriculture, which can be considered necessities to some extent, NFTs seem much more irrelevant and easily avoidable. The growing popularity of NFTs is therefore almost an intentional choice to further harm the planet, a choice that more people seem to be taking everyday”
Another snag: a non-fungible asset is also non-tangible. Not everyone is convinced that a digital token can represent meaningful ownership of an image, leading some to think of the growing market as a scam. Indeed, some unscrupulous traders have even tokenized other people’s artwork without permission, profiting from the sale with no benefit to the original artist. “Their claim about ‘protecting artists’ is pretty transparently false,” says Northern Irish pre-law student Clubs. “It’s just a pyramid scheme aimed at people who had no interest in essential oils.”
Additionally, the blockchain may not be as robust as once thought. The once-popular cryptocurrency exchange FTX, which held millions of dollars’ worth of NFTs, has since declared bankruptcy. With the company undergoing restructuring, all NFTs minted on the FTX exchange now redirect to a generic page. This loss reveals the fragile nature of digital assets, as the blockchain must be actively maintained for ownership to be upheld. As the FTX bankruptcy demonstrates, anyone buying an NFT is putting immense trust in the blockchain that records the trade.
Ultimately, the unregulated nature of NFTs and cryptocurrency leaves little room for oversight, with the potential for fraud just as great as the potential for artists to strike it rich. Environmental concerns raise serious questions over the sustainability of NFTs, with students and climate professionals raising the alarm over their growing popularity. Despite their booming success, NFTs still have a lot to prove regarding their sustained use in the future—a question which only time can answer.
“I think the jury is still out on this,” said Christopher Kubik, Professor of Finance and Accounting at Regis College. “I think more finance professionals see value in crypto and NFTs, but there are still significant numbers who believe there is little to no value. I tend to side with the latter group.”
Says Wolfy, “By the time we’re done fighting over accurately quantifying an NFT’s environmental impact and finding the mythical ‘sustainable’ NFT, it’ll already be too late.”
