As the tech savvy among you doubtless know, there’s a new type of digital asset taking the cryptocurrency scene by storm. Non Fungible Tokens or NFTs for short, are a type of digital asset that have garnered an incredible amount of attention in recent years. Much of this attention has been positive, some of it has been negative, but all of it has been confusing. After all, what the heck even is an NFT, more exactly?
If you’re sitting in front of your computer scratching your head with a confused expression on your face, don’t worry: that’s normal. While NFTs in and of themselves are not particularly difficult to understand, the world of NFTs is anything but simple. From social media controversy surrounding the morality of NFTs to arguments in their favor on the basis of their ability to help under-recognized artists disseminate their work, there’s a lot of ground to cover.
For those of you who are still confused, we’ve got just the thing: in this article, we’re going to be breaking down NFTs on an almost unnecessarily granular level. First, we’ll define NFTs in a simple but comprehensive manner, so you’re familiar with the basic terminology and concepts. Then, we’ll be delving into the arguments for and against their popularity and use. We’ll be doing our best to remain unbiased, but we can’t promise complete objectivity. That said, let’s begin!
NFTs: what the heck are they?
As we mentioned earlier, NFT stands for Non Fungible Token. An NFT is a sort of unique digital receipt for an asset, which can be anything from a piece of digital art to a musical arrangement or a simple photograph. There are a lot of different NFTs on the market currently, but their most popular use is buying and selling art. In simple terms, owning an NFT provides you with a unique receipt listing you as the owner of the digital asset.
Let’s say you buy an NFT of a piece of street art created by an underground artist in Melbourne, Australia. The physical art might be covered up, destroyed or painted over by another artist, but with your NFT you’ll retain ownership of its digital presence for as long as you decide to hold on to the token itself.
NFTs can be and often are one-of-a-kind, but the creator of an NFT can also create multiple tokens for the same asset and then sell these as they see fit. The creator of the NFT can also choose to retain ownership of the original asset, as well as the right to sell, alter or destroy their copy of it. This is completely discretionary on the part of the creator, who will outline these details in the metadata of the NFT itself.
So how are NFTs protected from theft and/or destruction? Well, it’s simple really. NFTs are part of the Ethereum blockchain, an open source ledger detailing transactions made in the eponymous cryptocurrency. Their owner is listed in their blockchain entry, along with the nature of the asset itself. To tamper with it in any way, you’d need to hack the hundreds of thousands of computers that make up the Ethereum blockchain!
Arguments for and against NFTs
When it comes to NFTs, we can’t say one way or the other whether this technology is a net positive or negative when it comes to its effect on the human race as a whole, but we can’t argue with the fact that they are a thoroughly novel concept. In the following sections, we’ll be taking a look at both sides of the coin, and doing our best to remain impartial throughout. Let’s hear some arguments for and against NFTs!
For: NFTs provide upcoming artists with a viable platform
In the discussion surrounding NFTs, one argument that frequently surfaces in their defense is the fact that they provide upcoming artists with a platform to disseminate and monetize their work. Considering the fact that the modern art market is more monopolistic than it’s ever been, this is without a doubt a strong argument in favor of the popularization of this medium.
Recently, we’ve seen a number of underground artists capitalizing on the freedom provided by NFTs to create media and monetize it in a way that was previously difficult if not impossible through conventional channels. Many street artists, independent musicians and other creators have been able to successfully secure a steady stream of revenue by selling NFTs of their work, lending a substantial amount of credence to the notion that this is the future of the art market.
Against: NFTs incentivize cryptocurrency mining
One of the most common arguments against NFTs is the way in which they incentivize cryptocurrency miners to put unsustainable amounts of strain on electric grids, especially those in developing countries. Since NFTs are bought and sold using cryptocurrency, this market has led many to double down on their mining efforts, sometimes causing power outages and other untenable conditions for entire communities.
Another worrying concern raised by opponents of NFTs is the amount of environmental damage done by crypto miners buying and selling these tokens. Due to the high power consumption of mining rigs, a single crypto miner can often account for more environmental damage than entire households, something that should not be taken lightly.
For: NFTs level the playing field in the art market
From a consumer perspective, NFTs do have the benefit of being almost completely beyond the grasp of monopolized auction houses. Last year alone, Christie’s auction house and Sotheby’s auction house alone accounted for over a third of global art sales, racking up a staggering $29 billion in sales.
According to those who defend them, NFTs help level the playing field and redistribute buying power through a channel that simply can not be dominated by a single player in the way that the conventional art market can. In a world ever increasingly monopolized and corporatized this is without a doubt a compelling argument.
Against: NFTs are heavily susceptible to market manipulation
On the other hand, the decentralized and completely unregulated nature of NFTs can also be exploited by devious opportunists. Due to the fact that they can be bought and sold anonymously, many NFTs are bought and sold by the same individual to create the illusion of demand, leading buyers to spend exhausting amounts on assets that have little or no investment value.
While the conventional art market has its fair share of problems, one way in which it is superior to the NFT trade is its ability to assess and appraise art based on current market conditions and trends. Some artists or specific art pieces may be somewhat inflated or deflated in price, but the extent to which this phenomenon can be exploited is heavily limited in comparison to NFTs.
Conclusion
At the end of the day, NFTs are much like any other technological advancement with so many obvious advantages and disadvantages. It’s up to you to decide whether or not you support this new market, and whether or not you’d like to invest. As with any investment, the best piece of advice we can give you is this: never invest more money than you can afford to lose. This is doubly applicable in a market as volatile as that of NFTs!
