NFTs have been splashed across headlines and social media of late. This week Elon Musk turned down $1 million after initially offering to sell his tweet as an NFT. Last week Christie’s sold an NFT art piece by digital artist Beeple for $69 million. Earlier another piece by the artist sold for $6.6 million. Kings of Leon released their latest album as an NFT. The internet meme of the animated Nyan Cat which was uploaded on YouTube in 2011 recently sold as an NFT for nearly $600,000.
So what are NFTs exactly?
NFTs or “non fungible tokens” are unique digital assets that are distinguishable from other digital collectibles. They allow for the tokenization of collectibles like art and even real estate. Ownership of NFTs is supported on a blockchain such as Ethereum, meaning that its record of ownership is publicly accessible. They differ from other cryptocurrencies in that they cannot be duplicated or traded at equivalency as they function in the same category as rare collectors items like mint-condition baseball cards.
So why are NFTs so popular?
NFTs have actually been around for a while. In 2017, the “digital beanie babies” CryptoKitties were so in demand that the game clogged up Ethereum’s digital currency network. According to Non Fungible, CryptoKitties have racked up sales of $40 million to date. The resurgence of NFTs can be traced back to the start of the pandemic which provided ample opportunity for the virtual assets to climb into mainstream recognition in tandem with other cryptocurrencies like bitcoin. In 2020, the total number of NFT transactions grew to $250 million.
Much of their appeal comes from the rights of ownership they extend to creators and buyers alike. NFT ownership agreements are supported on a blockchain which acts as a public ledger that allows anyone with a decent internet connection the opportunity to verify ownership and authenticity of a digital item. For digital artists and creators, it is a medium of restoring power back into the hands of artists by cutting across middlemen and granting them a percentage of profits every time the NFT is sold. For buyers, NFTs grant exclusive bragging rights that come with owning an original work of art as opposed to a factory print.
How do you buy and sell NFTs?
You can buy and sell NFTs on marketplaces such as Nifty Gateway, Open Sea, Mintable, SuperRare and Decentraland. Some marketplaces offer niche digital collectibles, like NBA Top Shot which sells NBA highlight reels as NFTs. In order to create and sell NFTs, artists need access to a digital wallet and a purchase of Ethereum before they can sell on marketplaces.
What’s the controversy?
NFTs are environmentally taxing. According to Time Magazine, Ethereum mining consumes about 26.5 terawatt-hours of electricity a year, nearly as much as the entire country of Ireland and its almost 5 million residents. Wired also recently reported the sale of NFTs consumed 8.7 megawatt hours while the average U.S household consumes around 10.6 megawatt hours per year.