Vignesh Sundaresan, aka MetaKovan, paid a record $69.3 million in March for a virtual collage of JPEG images and a hyperlink. He was ready to pay even more for Beeple’s NFT “Everydays: The First 5000 Days”, bidding for which had started at $100 at Christie’s.
According to the Indian-origin blockchain
entrepreneur, the rise of non-fungible tokens, or NFTs, would be seen as the start of a new age of digital art. “Indians and people of colour, that they too could be patrons, that crypto was an equalising power between the West and the Rest, and that the global south was rising,” he later wrote in a blog, believing this blockchain
technology allowed artists to trade art easily and democratically.
The technology has exploded over the past few months and sales of NFTs, according to many estimates, have now topped $500 million. Digital artists like Beeple (Mike Winkelmann) are among the biggest beneficiaries. Until a few months ago, the most Beeple had ever sold print for was $100. Then in October 2020, he sold his first series of NFTs — each pair going for $66,666.66. Two months later, he sold another series of work for $3.5 million; and then came the $69.3-million windfall. The collage of 5,000 JPEGs — pieces of art that he created every day since May 1, 2007 — now ranks third among the most valuable artworks sold by a living artist, following works by Jeff Koons and David Hockney.
Besides, one of the NFTs that originally sold for $66,666.66 was resold for $6.6 million and Winkelmann got 10 per cent of that deal as royalty.
So, what’s this tech? An NFT is a unique cryptocurrency
token representing an asset, such as digital art, music, tweets, pixelated GIFs, games, and even memes. It can be bought and sold, and since it’s based on blockchain
(decentralised and often public digital ledger of records), ownership of the said asset can be tracked easily. An NFT is different from a regular cryptocurrency, such as bitcoin, in one key aspect: A crypto coin is fungible, i.e trade one for another, and you’ll have the identical thing; an NFT is a one-of-a-kind trading card.
When someone sells an NFT artwork, the buyer purchases a unique token, through which he/she can prove authenticity and ownership of the digital art. But essentially, the wealthy collector, in most cases, just gets a digital file and vague bragging rights, even as the work is shared, viewed and copied online, endlessly. Recently, Twitter boss Jack Dorsey sold his first tweet — “just setting up my twttr”— as an NFT for over $2.9 million. But that tweet has been already widely shared, even on his platform, after the sale. So, where’s the uniqueness of ownership? Several creators, who share their work on social media, are worried about how art theft will evolve with the rise of NFTs. An artist, who goes by FlyingSausage, claims to have created a Harry Potter poster: “What would Hermione do?”. “It’s been stolen and sold on several different sites and continues to make its rounds on social media,” the artist was quoted as saying by Polygon. FlyingSausage fears the poster will someday appear for an NFT auction as well.
Several artists are creating blocklists to prevent automated accounts from creating unauthorised NFTs of their work available on social media, while many others are locking their accounts, so only existing followers can view their posts.
Also, many environmentalists are concerned about the carbon footprint of art sales that rely on blockchain, which is notoriously inefficient in terms of power consumption, although supporters of Ethereum (which is a Goliath in the NFT space) say such worries are overblown.
According to an estimate, Beeple’s “Everydays” sale generated 78,597 kg CO2 — the same amount emitted for electricity used by around 13 homes in an entire year. Then there is the threat of the NFT bubble popping sooner or later, orphaning a slew of NFTs. Even Beeple in several interviews has said: “I do think there will be a bubble, to be quite honest.”
Also, as with anything on the internet, getting hacked is an ever-lurking threat and if adequate security precautions aren’t taken by exchanges or NFT owners, they risk losing a lot.
Because of the aforementioned challenges, NFTs may well turn out to be a fad, but this tech can influence spaces other than art auction. According to a Bloomberg report, Walmart is using the technology for managing the supply chain for food it sells.
Another area perfect for NFTs can be real estate, where proving ownership sometimes is nothing short of an ordeal. By putting NFTs representing titles on a blockchain, the need for title insurance can be made redundant.
The concept of non-fungibility allows for new kinds of transactions, where users are not limited to monetary exchanges. They can exchange assets, digital or physical, through this medium. The technology behind NFTs can help power the so-called decentralised commerce (or dCommerce, the idea of reconfiguring decision-making and removing the need for a centralised middleman), with asset’s royalties stamped forever on the smart contract.
So perhaps the craze of NFTs may be short-lived, but it can represent a larger disruptive shift in the digital economy, for better or worse.