Opinion: The Problem with NFTs
NFTs, or “Non-Fungible Tokens,” have become a prominent topic of discussion across the internet recently. We have seen large brands and corporations hopping onto this trend, and witnessed some of the obscene prices that the NFTS have been sold at. The truth is, this trend is far more dangerous and unstable than it seems.
NFTs are pieces of online art, GIFs, or collectibles. They aren’t physical things. Instead, they are digital pieces of art with an embedded signature within the art code. Unlike other online Cryptocurrencies, there is no exchange rate for them. They are valued by the people who seek to buy them.
Many praise NFTs as a way for online artists to finally receive financial compensation for their work. This is true, and artists are finding ways to make thousands upon thousands of dollars for their works. For example, one NFT was sold for a record USD 69.3 Million back in March.
NFTs run on what is called the “Ethereum BlockChain.” The blockchain is run on the cryptocurrency Ethereum, and to earn this, one must “mine” Ethereum. In doing this, miners expand the number of Ethereum in circulation, gaining rewards of Ethereum itself.
The whole process is highly complicated, meaning that it requires a massive amount of energy. This is where some of the problems of NFTs arise.
Ethereum, like Bitcoin, uses “Proof-of-Work,” a system that allows the decentralization of mining and cryptocurrencies in general. The system requires a large sum of energy consumption. One “NFT Drop,” also called a token, consumes 340 kWh (kilowatt-hours).
To put that number in perspective, that amount of energy equals leaving a laptop on for three years, and its energy consumption equates to 211 kgCo2, which is more than natural gas. NFT holders and Ethereum miners alike claim Ethereum will become more environmentally friendly, which many other cryptos have already done.
The NFTs themselves aren’t the leading cause, but rather the mining of Ethereum is. This issue with people claiming that NFTs are absolved of blame is that NFT holders themselves must use Ethereum to purchase their NFT, making them complicit in the environmental damages mining is causing.
Lack of Safety
Due to the decentralization of the blockchain, the system is just as hackable as any other online account. The difference being NFTs are stored in an NFT account, not a bank account. This makes theft nearly impossible to prove as if someone is to hack into your account and transfer the NFT to their account, that’s it, it’s their NFT now.
Anonymity does not help this issue. Many users on these sites can be anonymous. It’s challenging to track who owns what, as public records don’t show actual names. In one instance, a popular NFT trading site, “Nifty Gateway,” reported countless hacks and the loss of thousands upon thousands of dollars worth of NFTs.
Not to mention the fact that many artists have reported their art being stolen and turned into NFTs without their permission. And due to the ability to not display a real name, getting compensation or comeuppance for stolen work is nearly impossible. Without a trademark, this reality is almost unavoidable.
Just like anything else in the financing, buying NFTs is a risk. Please do your research before attempting to purchase them, as there are many downsides, but could be perceived upsides as well. Though I think the slim chance of hitting the economic jackpot does not outweigh the moral consequences of further harming the environment.