The Rise (And Potential Downfall) Of NFTs

The Rise (And Potential Downfall) Of NFTs

The NFT boom is real and it may just be here to stay. But does it have potential downfalls, and is it just a reiteration of the ills it was trying to get rid of in the first place?

A digital artwork makes history when sold for $69.3 million. A tweet is being auctioned off for more than $2.5 million. A clip of LeBron James dunking is going for upwards of $200,000. All digital items that are impossible to be taken out of circulation. The NFT boom is real, and it may just be here to stay. If you’ve been on the internet for the past few months, chances are you’ve seen the term NFT crop up - a lot. A Non-Fungible Token, or an NFT, is essentially a unit of data on a blockchain (or a data ledger) where each NFT represents a one-of-a-kind, non-interchangeable digital item.

As for what exactly constitutes a digital item? Think of any form of creative work – from illustrations, to tweets, to even Vines and a virtual home – nothing is off limits. One can purchase an NFT using cryptocurrencies like Ethereum, but other cryptocurrencies are also making their own versions of NFTs. So, what are people getting exactly? The buyer of the artwork is purchasing an NFT which contains the high resolution digital artwork file itself, as well as an indelible signature of the artist and all transactions associated with the artwork — basically digital proof of authenticity and uniqueness.

The one question on everyone’s minds though, is – can a digital item really be unique? The short answer is, no, it can’t. Millions of copies can be created of an original digital artwork, especially before it becomes an NFT, and they’re impossible to remove from the internet. The one distinction to note here is that NFTs essentially ensure your ownership of the work – and believe you me, there’s a gigantic market for it. Think about it this way, a first edition Faulkner is clearly more valuable than a sixth edition – even though it’s the same book – and an original Rothko holds an unfathomable value, especially over knockoffs – no matter how masterfully the painting has been replicated.

There’s a sense of pride that comes with owning an original, or well, bragging rights. Treat your NFT artwork the same way you would treat an original, physical first edition - except in this case, your spoils will be digital. And in the grander scheme of things, does it really matter that someone else duplicates the work that you ultimately own? A lot of people seem to think that it doesn’t really matter – after all, they’re spending hundreds of thousands on NFTs, and the hype surrounding it is definitely real.

Let’s look at Beeple, A.K.A. Mike Winkelmann, a graphic designer from Charleston, South Carolina, who does a variety of digital artwork. His most popular artwork, Everydays: The First 5,000 Days, was auctioned off at Christie’s for a whopping $69.3 million. Before NFTs, the most he’d ever charged for a print was $100. But Everydays isn’t the artwork we’re looking at. Let’s take a closer look at Crossroad by Beeple. Sold for $66,666.66 originally in October 2020, the buyer resold it over a span of four months – and here’s the kicker – for a jaw-dropping $6.6 million. Beeple never got the spoils of the reselling (although after the success of Everydays, it’s not that big a deal) thus solidifying the idea that the artwork is really owned by the buyer.

Some other artwork that has been auctioned off as NFTs recently includes the infamous Nyan Cat meme artwork that was sold for $590,000 by creator, Chris Torres. And now Silicon Valley is on board too. Twitter founder Jack Dorsen is auctioning off his first tweet for over $2.5 million, and internet-dividing billionaire (or is it gajillionaire now?) Elon Musk created a song about NFTs to sell as an NFT. (Which is a little too meta.) The hype has gotten to a point where there’s an actual virtual house that’s going to be sold as an NFT, by architect Krista Kim, titled Mars House. Yeah, you read that right. A VIRTUAL house, in case we didn’t emphasise it enough.

With tweets, videos, internet memes, even furniture and houses being sold as digital art – is it about time we questioned our definition of art? Probably not, since art is what you make of it and take from it, and all that jazz. In any case, that’s not the real point of contention here. The real trouble with wrapping one’s head around NFTs comes from, firstly, its misuse. It’s becoming more and more of a business-driven model, which you would think is great for artists, right?

Well, not quite. While the general idea remains that NFTs are democratising the art world, it’s not that simple. NFTs are making a select few artists very rich, and haven’t given artists new ways to earn money from the financial exploitation of their works by collectors. For instance, Beeple’s buyer has already made enough off a previous bundle of purchases to be able to buy this work from those profits. And NFTs are not necessarily creating more transparency in the art world; the buyer has been giving interviews without actually revealing his identity.

Also, in the highly volatile and mercurial world of crypto, with prices fluctuating constantly, there’s no reason to believe that an artwork can’t be turned into something with a nominal value a hundred times higher once bought – and the artist gets none of the financial profit unless they’ve added a clause for royalties once resold further. But let’s face it, you shouldn’t need a law degree or insanely technical know-how to profit off of your art.

Second, the NFT world has led to a bizarre increase in copyright thefts. Once minted NFTs can provide the transparency of ownership that protects the owners’ anonymity, which provides a very obvious loophole – who is going to protect artists from being ripped off? Particular case in point – NFTs inspired by the works of notorious artist Banksy have so far netted $900,000. The catch here, though, is that Banksy’s authentication body Pest Control clarified that the British street artist isn’t affiliated in any way, shape or form with the NFT series.

Similarly, an automated NFT tweet-minting bot with the name @tokenizedtweets creates NFTs of tweets without alerting the owner of the tweet. Weird Undead, a Russian artist, said she became suspicious of theft when she saw a user mention @tokenizedtweets beneath a tweet of hers that featured images promoting her most recent artwork, and realised that her artwork had been minted as an NFT without her knowledge. Aside from the difference between URLs and artworks, there's ultimately nothing stopping someone from minting another artist's work (not just a link to it) and then trying to sell the NFT. No one controls who can make an NFT.

A tweet with this Weird Undead artwork was minted and put up for auction without the artist's consent. Source: Twitter

And of course, the third most important point to note – NFTs are pretty awful for the environment. A 2018 study found that cryptocurrency mining consumes more energy for every dollar of value generated than extracting gold or copper. So, if a digital artist wants to sell an NFT, they first have to “tokenise” their work on a blockchain. To do that, they pay Ethereum miners a fee of up to a few hundred dollars to have their computers crank out the necessary calculations.

But from the artist’s perspective, they’re just paying money on a website to get a token in return, masking the environmental cost. This issue also extends far beyond the digital art world. It’s long been a problem for Bitcoin, the largest and most mainstream cryptocurrency, and it only stands to become a bigger dilemma as other kinds of assets, like financial securities and real estate, also become tokenised.

None of this is to say though, that NFTs are inherently bad (although some of the *worst* people are minting NFTs. We see you, Elon.) Beeple’s moment in the sun is already a benefit to anyone who makes art not suited for the traditional market; even if not all of them will monetise their art the way he has, his example gives them hope of inclusion. And based on the fact that the crypto world produces, lives, breathes and monetises hype, NFTs are probably here for a while. The road ahead for NFTs is a very long one. The technology shouldn’t be dismissed. But the more we see of how it plays out in real life, the more it replicates all of the ills it was supposed to resolve.

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