The NFT Contingency

 

NFTs which stands for Non Fungible Tokens is the up incoming buzzword that is all the news these days. With NFTs people can manage to sell a simple jpeg image for thousands of dollars. An example being how a guy took a selfie every day only to turn them into NFTs and that resulted in him gaining a million dollars. And the thing is these do get bought, like how Eminem bought the Bored Ape Yacht Club NFT for $452,000. But what is an NFT? And why do we care?

Let’s find out.

“Non Fungible” more or less stands for something which is unique and cannot be exchanged or replaced. Like how cash can be completely exchanged with the same amount of cash and at the end you will have the same thing as it is interchangeable. However a one of a kind trading card is non fungible as it is unique and cannot be exchanged with another. It uses blockchain technology to verify who has the original ownership over a digital product. The issue with digital goods was that they were harder to monetize. A physical product like a painting can be sold in the market for a good price and it would be impossible for someone to copy it the exact same way. But with digital goods like art that is released as a jpeg image can be copied with a click of a button and hence it has no value. NFTs change that by providing a token of ownership that has a value. So the exchange is the buying and selling of virtual ownership over something. As someone who can be an artist, I find this idea very fascinating as it provides a new way of earning and new way of support from someone who likes my drawings. Instead of them just donating money they can have a piece of your history with them. Throughout all of this there are no long and boring contracts but instead smart contracts which define the operation of the NFT. For example, the artist can set a condition that everytime their item is bought or sold they get some percentage of cut.

They make for a good collector’s item as a lot of people gain pleasure just by knowing the fact that they have something rare. This happens all the time in the world of trading cards, like how a Charizard Pokémon card was sold for $220,000 on the basis of it being hard to find. Through NFTs comes an opportunity of similar kind as one can become a sole owner of a digital piece which is completely backed by a fraud proof authentication, providing for a similar thrill that comes from owning a rare item. This can even be an investment opportunity for a lot of people and it is not as intimidating as The Stock Market and does not require large investments like Housing Real Estate. 

This is sounding very pleasing till now and shows a lot of potential but there is a problem. 

Although I totally believe in the core technologies, the more I learn, the more I get concerned about what’s to come. NFTs are not entirely what people think, they can have the ownership but they are not the owner as there are no commercial rights attached, meaning whilst you do own the digital product, you cannot merchandise and sell it. There is no question that it is your property and something a little more than bragging rights is the only way to prove it. An NFT may have started out as a way to respect the artist but as of now the market is heavily dominated by opportunistic business men who just find it a means to make a lot of money. For example, Lazy Lions are another set of unique avatars but lately people are finding a lot of repetitive facial features in them. This is because these are not made by any artist but are computer generated by business men who mass produce them for cash grabs. Another ridiculous concept is Digital Land which has no purpose in the real world at all, you cannot do anything with it and the irony is anyone can set this up and start selling virtual land acting like they own the planet. Moreover NFT transactions are made with cryptocurrency, namely Ethereum which is pretty bad for the environment. It is what makes the NFT so fraud proof but this security mechanism requires a lot of computational power resulting in a large consumption of energy. Apart from that NFTs are riddled with illegal activities where people are taking copyrighted content and tokenizing it with a tiny amount of alteration. 

But this is the way I look at it. The value of an NFT is perceived on the basis of the technology it’s based on. People are buying them as they are trending and the emerging technologies like Web3.0 and the Metaverse will use this to prove who owns what digital item. Suppose when NFTs might not be trending any more and reach a level of saturation because of the amount of people making them, they might not be useful in these theoretical future worlds. So if one decides to buy an NFT it should not be on the basis of the cool factor. They should buy the ones which they genuinely like and want to support the artist, buy something that even if the market crashes you would be glad to own it as it made you a part of that history. The NFT might be a bubble which can pop in the future.