Are NFTs Dumb or Brilliant? Should You Buy One?
You're going to get polarizing opinions on NFTs (Non-Fungible Tokens). It's like politics. Everyone has an opinion. Some say it's incredible or brilliant. Others think it's the stupidest idea humans have invented. Why the heck would someone pay $69,346,250 for a digital image that they could just right-click and download, saving it to their hard drive? Is the artist crazy for creating a NFT that sold for over $69 million dollars? Is this the modernized future of art?
If you haven't heard of an NFT, you're not alone. I didn't know about them until a few months ago and had no clue what they were, why people wanted them, and why artists were creating them. If I'm honest, I still don't really know why they are so popular.
What is an NFT?
A non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable, by definition. Ok...
Right?! That's how I felt too.
Non-fungible tokens are tokens that can't be exchanged for something else of equal value. You can exchange a U.S. one dollar bill for four quarters. You can exchange 1 Bitcoin (BTC) for another Bitcoin. You cannot, however, exchange a NFT for another NFT of equal value. It doesn't exist. They are all 100% unique. The token part of a non-fungible token is simply a unit of currency on the blockchain for a specific cryptocurrency.
What's a blockchain?
A blockchain might sound super complicated (And in terms of 0s and 1s, it is), but all it is is simply a database. It's a collection of information, called blocks, that are most often used to record transactions. These blocks are then chained together in chronological order which makes up the blockchain. This information is recorded across thousands, if not millions, of different nodes. These nodes store the information in a blockchain independently of other nodes. This means that if someone maliciously changes information on one of the nodes, it has those other nodes with which it can cross-reference and correct the information. It means that the information in the blockchain cannot be deleted or changed. It's irreversible. This data can also be viewed by anyone and this is a crucial aspect to cryptocurrency and NFTs.
Why are NFTs becoming so popular?
As blockchains have a record of transactions and this information is available to everyone, it creates a record of ownership. Much like when you purchase art from a gallery, the transaction is recorded. Instead of a receiving a physical piece of art with that transaction, you gain a digital record and image on the blockchain when purchasing a NFT. This provides value to the right investors.
Think of this way, how much did you spend this last year on digital assets instead of physical copies? When's the last time you bought a record or CD of someone's album? You probably bought it digital, right? Or maybe you don't even own the rights to the music and, instead, pay a for a music streaming service monthly? When's the last time you bought a physical movie? More often than not, you likely buy your movies online to be able to stream. Or, perhaps, you pay for a streaming service to watch TV shows and movies without ever owning them?
Whether we recognize it or not, NFTs resemble the future of the world we live in today. NFTs could easily provide the ability to own those same movies, music albums, TV shows, and anything else we can imagine. I mean, if someone can buy a tweet, a historical event in the NBA, or a King of Leon album, why not other items as well?
The Dangers of NFTs
Now that I've demonstrated a value for an NFT and provided reasons as to their existence, you might be interested in purchasing one yourself. When looking into purchasing your first NFT, you'll want to make sure you do your research to ensure that the NFT is authentic. There are people taking advantage of investors in this new market by stealing others' work and posting it on marketplaces as the real deal. Checking the author's website or Twitter account for verification that the NFTs are legitimate is the easiest step. Contact the artist if you cannot find verifiable proof online. You are buying the NFT to have a record of ownership, so you want to make sure that this ownership is true and valid.
NFTs have gotten a lot of press lately as well, but not the good kind. The Ethereum (ETH) blockchain uses a massive amount of energy. Energy consumption for an Ethereum transaction is estimated to have an average consumption of 35 kWh. As this article puts it, "this is roughly equivalent to an EU resident’s electric power consumption for 4 days." That's a massive amount of energy for a single transaction. An NFT on the Ethereum blockchain uses this same amount of energy, but also more. This is because each NFT must also be "minted". Minting is a process where a request goes out to a miner to create a token on the blockchain. This brings to the total to an average of 340 kWh needed for a NFT transaction to occur! This is over a month of power consumption!
The effect ETH has on the environment is the main reason I chose not to sell any crypto art on Ethereum. But wait, I see above and below in your photographs that you have NFT collections for sale! Are you a sell out?!
While I did choose to sell NFTs, I chose to go with a different NFT market, even though there are not as many investors on the blockchain. Instead of using the Ethereum blockchain for creation of my NFTs, I chose Cardano (ADA). This is due to Cardano using a Proof-of-Stake instead of a Proof-of-Work system like ETH. This makes Cardano 155 THOUSAND times more energy efficient than Ethereum.
The Future of Art?
While selling art has certainly shifted online with COVID-19 shutting a lot of the gatherings at galleries down, I do believe that artwork on our walls is here to stay. This method of investing, however, isn't going away and, I think, will become very prevalent in today's quickly evolving digital world. I was blown away with the interest in my NFTs and how quickly they have sold. All of them sold in minutes of them being released. One person commented on how my images were gorgeous and a breath of fresh air to the marketplace. He said "People want to invest in something other than 10000 mints of random-generated collectables!" Among the thousands of NFTs being minted, my NFTs are among the few that are manually selected, minted, and sold. A lot of people see value in that. As long as they keep selling and it allows me to keep feeding my family and my photography obsession, I don't mind minting NFTs one bit.
If you're reading this, I can't believe you've stuck around through all of that. You must really like pain...or you're a nerd like me.
Well, if you want to purchase a NFT, make one of mine your first! Check out my current NFT collections here. If you have further questions, please reach out and connect with me directly through my website.