(NFT, aka Non-Fungible Token, is the latest buzzword to have taken the internet by storm. But what does it even mean, and is it even sustainable? Ahead, we give you the lowdown on all things NFT and why this digital asset — a seemingly sustainable item — has the potential to wreak havoc on the planet.
Key Takeaways:- NFTs are unique digital assets that are sold on a blockchain that keeps track of the file’s ownership
- Ever since they began trending, NFTs have sold for millions of dollars and have offered creatives the prized opportunity to produce one-off pieces of art
- However, the technology that supports its transactions consumes an immense amount of energy — using up as much electricity as the entire country of Libya
- Electricity is fuelled by renewable energy or fossil fuels that contribute to a ton of carbon emissions
To even begin to comprehend what non-fungible Tokens (NFT) are, we have first to understand what ‘fungible’ means. According to Investopedia, ‘fungibility’ is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Cash is a prime example of something fungible. When you swap four US$ 5 bills in exchange for a single US$ 20 bill, its value remains the same — fungibility implies equal value between the assets.
Therefore, a non-fungible asset is unique or one-of-a-kind, which can’t be exchanged or interchanged for something similar. Take the Starry Night painting, for example, an original piece of art by Vincent van Gogh. There is only one like it, and even if another painter attempted to replicate the original accurately, minor differences would still exist. A copy could never hold the same value as the original, of which there is only one. In simpler terms, an NFT is a unique representation of value that provides creatives with the opportunity to produce one-off art pieces in the digital world, where a normalisation of mass replication, streaming, downloading, and uploading has driven down the value of their work.
Why are People Buying NFTs?In March 2021, the CEO of Twitter, Jack Dorsey sold his first-ever tweet as an NFT for a whopping US$ 2.9 million. A month before that, a ten-year-old GIF of a flying Nyan cat sold for more than half a million dollars, and now, the NBA has joined the ranks by selling NBA top-shot highlights as NFT video clips raking in US$ 230 million in sales so far.
just setting up my twttr
— jack (@jack) March 21, 2006
The reason why digital artwork is being sold at such unimaginable prices is that the buyers are after proof of ownership for that artwork and not the artwork itself. The tokens act as collectibles recorded on a digital ledger, where they can then be resold and can go up or down in value.
Are NFTs Sustainable?NFTs exist on a blockchain, the same technology that supports cryptocurrencies, including Bitcoin, where the transactions are logged. While blockchains do the work digitally, from a physical standpoint, they rely on a bunch of computers that carry out multiple calculations 24x7. More specifically known as bitcoin mining, where a bitcoin is awarded to a computer that solves a complex series of algorithms, is a deeply energy-intensive process.
Most NFTs are a part of the Ethereum blockchain that uses up an immense amount of energy to conduct these transactions — to put it into perspective; it is reportedly using about as much electricity as the entire country of Libya. This isn’t good from an environmental perspective as generating electricity comes from power plants that are burning fossil fuels, which as a result, constantly increase carbon emissions. According to the Cambridge Bitcoin Electricity Consumption Index, a single transaction of bitcoin has the same carbon footprint as 680,000 Visa transactions or 51,210 hours of watching YouTube.
We’re not certain if the NFT bubble is about to burst, but there is already an artist-led effort to raise money and reward people who can find new ways to make crypto art sustainably.
Published by: Jharna pariani/ 2021-06-01