Are NFTs nonsense or the future?
Written by: Sharlene Guiriba
Bitcoin. Dogecoin. Now NFTs. NFT is one of the newest evolutions of blockchain. NFT stands for non-fungible token; it is being used to sell digital art. Non-fungible means that a token is distinct and unique. Tokens cannot be substituted for one another. An NFT acts like a digital certificate of authenticity and ownership that is attached to the digital art or collectible. People can make copies of a video or tweet but owning an NFT means you own the original work. Since NFTs are on the blockchain, people can track and verify the original artworks. This has caught the eye of artists and art collectors alike.
Trends and Shifts in NFTs
Despite the recent explosion of interest in NFTs, they have essentially been around since 2017. There was a craze for Dapper Labs’ CryptoKitties, blockchain-certified images of cats. The most lucrative piece sold for more than $100,000. This was followed by a drop in interest due to the fall of cryptocurrencies in 2018. Dapper Labs collaboration with the NBA created a resurgence of interest in NFTs as they released digital “baseball cards”. These collectibles have generated sales of $345 million in March. Cryptocurrencies surging past a value of $1 trillion has catapulted NFT value and mania to a new level (NYT). Artists from Grimes to the Kings of Leon are now experimenting with NFTs. With record-breaking sales from NFTs, it is easy to see why artists want to capitalize on this digital asset.
NFTs are not without criticism. More people are speaking out against the environmental damage NFTs can cause. Ethereum uses a mechanism called Proof-of-Work (PoW). PoW requires a significant amount of computational energy to do the mining work required to validate NFTs. Some websites like crypto-art footprint estimate the amount of energy used from NFT platforms. This generates a large carbon footprint. One artist learned that his NFT auction (which lasted only 10 seconds) consumed 8.7 megawatt-hours of energy, the equivalent of two years of energy use in his studio. NFT supporters are hopeful that Ethereum will finally move to Ethereum 2.0 which is less carbon-intensive. However, this has been in development for years with no date on the horizon. Another alternative is for NFTs to move off Ethereum and use blockchains that do not utilize mining. These ethical concerns can prohibit artists and collectors from adopting NFTs. It is important to note that these NFT carbon emission measurements are new and a work in progress (Wired).
Chingona’s Take on NFTs
It is easy to write off NFTs; it’s an asset driven by human momentum and interest. There is no concrete, tangible value attached to them. It seems nonsensical for people to want to buy a token to demonstrate authenticity over digital art when digital art can easily be copied and pasted. Furthermore, this current iteration of NFTs is heavily dependent on cryptocurrency, an extremely volatile asset. Their futures are tightly intertwined. But, blockchain and cryptocurrency have proven to be resilient over the past few years.
NFTs create a unique opportunity for artists to monetize and track their digital works of art. NFTs can enable artists to receive royalties upon resale of the NFTs, extending their value. NFTs also mints an artist’s work into perpetuity since it will forever live on the blockchain. Based on investments in cryptocurrency and its resilience, Chingona does not see an immediate end in sight for NFTs. However, the major concerns around NFT carbon emissions may stifle some of its growth.
NFT Alternative: Alphaa.io
Alpha’a is one of our portfolio companies that connects artists to audiences around the world who are looking to furnish their spaces with high-quality work. It was founded by Manuela Seve and Renata Thome. Alpha’a’s goal is to make the visual arts accessible through a community-oriented platform that deploys today’s most powerful technology toward connecting artists to audiences around the world and using the arts to empower change, while still honoring the profoundly human aspects of creating and acquiring works of art.
Before the recent NFT rage, Alpha’a has been utilizing Alphaa.io as a certificate solution to authenticate ownership and provide a transactional history on the artwork. Alphaa.io is another blockchain technology that is an extension built on Block.one (Alpha’a). Block.one uses blockchain protocol EOS.IO that leverages the cryptocurrency EOS. Unlike Ethereum, EOS.IO mechanism is called Delegated Proof-of-Stake (DPoS). DPoS is a more efficient way to run a blockchain compared to PoW as it uses a smaller fraction of energy. EOS has a partnership with sustainability experts from ClimateCare to measure and monitor their own CO2 emissions (Block.one). Moreover, Alphaa.io utilizes cash as its payment mechanism which enables it to avoid crypto volatility.
Alphaa.io is a prime example of how another blockchain method can empower artists. Alpha.a does not have to compromise environmental sustainability to progress the arts forward. It will be interesting to see if NFTs will move to this blockchain method to curtail growing ethical concerns. In the meantime, Chingona looks forward to learning about what other innovations Manuela and Renata will introduce to the growing online art industry.
