NFTs explained: the benefits and disadvantages

Farrah Zerola, Staff Writer

   NFTs have taken the world by storm and now they appear constantly in the news due to their rapid gain in popularity. Yet many students at Weston High School are wondering: what is an NFT?

   “I don’t really know what an NFT is; I’ve just heard about them,” senior Melina McDonald said.

   NFT stands for non-fungible token, and represents ownership of a digital item. “Non-fungible” means that these digital items cannot be exchanged for other currency or items. “Token” means that the digital work has a unique identification code, and therefore makes it possible for someone to own something digital. So if someone screenshots or copies an NFT, it does not make them the owner of it as they do not possess a different code than the actual owner. This is not the same as owning the copyright, but some NFTs are sold with intellectual property (IP) rights, limiting the re-use of the same item for multiple sales.

   NFTs are like collector’s items. They make digital work closer to a tangible object that can be owned. Just like a painting by Picasso can be replicated, the original is what holds value, while replicas are worth almost nothing. The cost of an NFT is the underlying value, potential value, the perception of the buyer, and similar market value. NFTs are not cryptocurrencies (such as Bitcoin or Ethereum), but are bought using them.

   Almost anything digital can be sold as an NFT. This includes artwork, GIFs, tweets, music, and avatars for video games. Anyone can create one as well. Once the digital work is created, it has to be converted into an NFT. This process is called minting, and after that occurs, the NFT can be sold.

    NFTs exist on a blockchain, which is a permanent and secure way to track and store transactions. Typically, NFTs are held on the Ethereum blockchain. Ethereum is almost always the currency used to buy NFTs. Blocks are what store the data on the blockchain. 

   NFTs have many benefits. Besides secure online transactions, artists now have the means of confirming their digital work’s authenticity, and the buyer’s ownership of it. Artists also have a definite, constant income in royalties if their art is resold. This payment goes straight to the creator of the NFT, as it is coded into the NFT itself. Selling NFTs also avoids the incredible amount of work that goes into manufacturing and distributing items necessary in the physical world. Because NFTs are digital, it’s easier to acquire, exchange and store the items for buyers. NFT marketplaces enable sellers to reach a global market and buyers to see the work of artists that they otherwise wouldn’t have been able to.

   As NFTs gain in popularity, big companies and celebrities have contributed to the growing market. Those who have launched collections include Snoop Dogg, Paris Hilton and Shawn Mendes, Taco Bell, Gucci and the NFL.

   NFTs aren’t perfect, however. NFTs hurt artists who don’t sell their artwork this way, or who spend time on their creations, because they can lose money. This is because some of the work on NFT marketplaces is simply computer generated, so people purchasing NFTs could end up giving their money to someone that didn’t spend hours of work on their NFT. Some of the work of artists is stolen and some buyers purchase the stolen work unknowingly. Just like buying art in the physical world, people who purchase NFTs also feel good for supporting artists. When it is hard to differentiate between work that takes time and fakes, this issue begins to affect buyers as well.

   In January, over 80% of the NFTs minted for free on OpenSea, the largest NFT marketplace, were “​​…plagiarized works, fake collections, and spam,” OpenSea stated on Twitter. This puts all artists whose main source of income is their art at a disadvantage.

   Another drawback of NFTs is that their high energy consumption is racking up costs as more people become interested in buying and selling. The energy that is used to mine, mint, sell, buy and everything in between is mainly powered by fossil fuels. The more traction these platforms gain, the higher the energy consumption.

   “If we don’t figure out sustainable energy any time soon, this could be a pretty big problem,” senior Joshua Lee said.

   NFTs have an extremely negative impact on the environment. Just the minting of an NFT on average uses 142 kWh, while one transaction uses 48 kWh. The average electricity consumption in the US per household per day is about 29 kWh. Because the Ethereum blockchain uses a proof-of-work system, computers have to solve complex

problems to confirm each new block in the chain. Huge servers are used to keep filling these blocks, and blocks must continue to be filled, otherwise everyone involved is at risk. This is known as mining, and is another way that massive amounts of energy is consumed in this repeating process.

   Many believe that NFTs have a future, so finding a way to make them sustainable is increasing in importance. Instead of using a proof-of-work blockchain, a proof-of-stake blockchain can be used instead. 

   “There are solutions called layer two solutions, and basically what they do is take all of the computation that is happening on layer one Ethereum, and they do all that computation on a second layer,” junior Theo Luu said.

   These types of blockchains use much less energy. They can be run off of a regular laptop instead of specialized equipment, so more people can mine and secure the system. Miners can “stake” their tokens to have a chance at being selected to write the next block and receive the rewards. It also ensures that miners will act in the best interest of the network, as the blockchain holds a miner’s stake until the block is complete. If a block has inaccurate information, some of this stake can be slashed. 

   The switch to proof-of-stake is in the process right now, as Ethereum 2.0 is making its way online. It is said that the energy usage of the platform will drop by 99.99 percent. This project’s projected end date is late 2022, but one step that could be taken immediately by NFT marketplaces is displaying the total carbon emissions associated with each sale. This could help buyers thoroughly evaluate how their purchase will affect the environment. Being conscious of how every action affects the planet can help prevent the increase in greenhouse gasses.