In November 2017, the Canadian studio Dapper Lab launched, CryptoKitties, one of the first examples of NFTs. Since then various other kinds of NFTs have exploded and now we have to listen to Jimmy Fallon and Paris Hilton talking about buying digital apes. The said apes (or avatars if you want to call them) came from a website called Bored Apes Yacht Club, which launched on April 30th. It offered 10000 iterations of the bored apes, all of which sold out in a day. And if you spend any amount of time on the internet, I’m sure you have come across some crypto bro talking about how NFTs are the future.
NFTs stand for Non-Fungible Tokens, meaning that they are unique and cannot be exchanged for something else. They exist on the blockchain and most NFTs, as of now use, the Ethereum blockchain. Ethereum is a cryptocurrency just like bitcoin or dogecoin. These NFTs can be like an original Monet painting where there is only one actual version, like in the case of a digital artist Beeple who sold one of his works for $69 million or like trading cards, like Bored Apes Yacht Club. But they can take the form of any digital media. Jack Dorsey sold his first tweet for under $3 million( and I thought the world could not get more bizarre after 2020). Logan Paul sold an NFT video clip, from his videos which are available on YouTube for free, for up to $20000.
One of the main ideas behind NFTs is to enable artists and creators to control their work, sell it and prevent it from being appropriated without permission. It also allows them to get compensation every time the NFT is sold or changes hands. The digital files can still be copied even if they are included with an NFT. But the NFTs are supposed to provide you something different-the ownership. Even though anyone can buy prints of the Mona Lisa, only one can own the original. They contain a digital signature the same way a painting does which confers upon it the certificate of originality. The non-fungible nature of these tokens creates a digital scarcity, meaning that only one of them can exist and they cannot be traded for something similar because there isn’t something similar. This scarcity is said to favour both the creator and the buyer.
But there is a catch. When you buy any digital art or file as an NFT, you own the codes to it, so if the website hosting it goes down, all you’ll be left with are a bunch of numbers and letters on the blockchain. The technology is also relatively new and thus, has some loopholes. There have already been some cases of thefts and scams. People have sold NFTs of other artists works, without their permission.
NFTs have found many detractors. One of the main criticisms against NFTs is that they aren’t really energy-efficient, so they use a lot of energy, as much as an entire country. Although, some “green” NFTs have emerged, as Anil Dash pointed out in his piece in the Atlantic, “the blockchain and crypto enthusiast of the past decade have shown that the environmental responsibility is less than an afterthought. No evidence suggests that NFT traders will make more money by embracing green NFTs.” But NFTs have many advocates as well, including celebrities, like Matt Damon, Reese Witherspoon, Grimes, Gwenyth Paltrow. These celebrities often portray their investment in these NFTs as promoting charitable causes but what is often left unspoken is that they stand to profit from more people buying NFTs after them.
Even some major companies and brands, including soda and potato chip companies have started selling their own NFTs to capitalize on their popularity. It is easy to get caught up in the mania of it all (I understand the urge to flex some digital apes). But it is important to note that investing in them involves a certain amount of financial risk. And the people most vulnerable are, in most cases, the ones who did get caught in it-not the venture capitalists and the celebrities who helped build their popularity.
So, are NFTs a way to provide creators more control over their work or just a hobby for people who have too much money to spend on digital cats? Is it the future of the internet and the way markets will the organised online or just a scam? The jury is still out.