What are NFTs?

By: Noah Wortham

There has been a lot of recent discussion and controversy over the minting and sales of NFTs. NFT is an acronym that stands for non-fungible token and Ethereum.org defines NFTs as “tokens that we can use to represent ownership of unique items… They can only have one official owner at a time, and they’re secured by the Ethereum blockchain.” In other words, they are a digital good that is for sale, and the consumer who secures the NFT has a digital receipt that points to their ownership. Due to this blockchain aspect, NFTs are comparable to bitcoins.

The popularity of NFTs is partially due to the fact that they have been sold for large amounts of money. For instance, according to The Verge, the music artist Grimes sold pieces for a combined total of $5.16 million. According to Los Angeles Times, Graphic artist Beeple sold a “digital collage” for $69 million.

Why then is there such controversy? Some individuals are concerned about power consumption and the carbon footprint left behind by the use of NFTs. According to The Verge, the issue is that NFTs are built on the Ethereum “system called ‘proof of work’ that is incredibly energy hungry.”

According to The Verge, transactions are made “secure” through a system in which “users, or ‘miners’ add a new ‘block’ of verified transactions to a decentralized ledger called the blockchain.” This process is a sort of “complex puzzle” and, in order to solve, it requires the use of machines and ultimately the process is considered “energy inefficient.” According to digiconomist.net, a single Ethereum transaction converts to 242.26 kWh or the equivalent of 8.19 days of power consumption in the average U.S household.

There have also been issues of piracy and the creation of NFTs without permission. For instance, another person created a series of NFTs based upon YouTube channels like DreamcastGuy, BeatEmUps, Caddicarus and Jim Sterling and placed them on the NFT website OpenSea without the permission of the YouTubers.

OpenSea responded to thegamer.com about the YouTube channel NFTs that had been listed and explained that “One of our operating principles is to support creators and their audiences by deterring theft and plagiarism on our platform. To that end, it is against our policy to sell NFTs using plagiarized content, which we regularly enforce in various ways, including delisting and in some instances, banning accounts (as was the case in this instance).”

Despite controversy, Ethereum explains on their website that “Digital artists are seeing their lives change thanks to huge sales to a new crypto-audience. And celebrities are joining in as they spot a new opportunity to connect with fans.”

One of the inventors of NFTs, Anil Dash, has commented on the phenomenon. According to The Atlantic, Dash explained that “The idea behind NFTs was, and is, profound. Technology should be enabling artists to exercise control over their work, to more easily sell it, to more strongly protect against others appropriating it without permission.”

He continued that “By devising the technology specifically for artistic use, McCoy and I hoped we might prevent it from becoming yet another method of exploiting creative professionals. But nothing went the way it was supposed to.”