Back in February, a simple, pixelated gif of Nyan Cat in NFT form sold for 300.00 ETH, worth £430,000 at the time (now about £678,000 – making it a bargain).
But are NFTs all they are cracked up to be, or are they something our furry friends might have dragged in?
This mysterious world of NFTs has revealed to be growing rapidly this year, and seems to demonstrate solid future potential.
What exactly are NFTs?
Let’s quickly clarify what that actually means.
The term non-fungible refers to something one of a kind. Each NFT is unique in the sense that an encrypted version of it on the blockchain can be identified in perpetuity as the first version (if you print screen, you have a perfectly good copy…)
One £5 note is “fungible” because it’s interchangeable with any other £5 note. Van Gogh’s Starry Night is distinct (“non-fungible”), and so it has to be traded with something else.
Anyway, the other interesting aspect of NFTs is that they are mostly part of the Ethereum blockchain. The market in NFTs normalises the day-to-day use of cryptocurrencies and their fates are currently tied together. They preserve, boost, and devalue each other’s worth.
The current situation with NFTs
NFTs seem to bring together all of today’s political, economic, socio-multicultural, and environmental problems and opportunities (a mouthful I know). That is a lot of pressure for a badly drawn kittie.
Questions of corruption, government control over the economy, society’s desire for more independence and the impact on climate change are woven into blockchain and therefore also NFTs.
The recent hype surrounding NFTs has created a lot of engagement within the gaming, art, and music industries. These communities have collaborated together to create room for growth of NFTs.
An example of this is the CryptoPunk #3100 artwork. It first sold for around £2000 in 2017, and is now being listed for around £65 million. The cat is well and truly out of the bag. One moment you have an image of a pixilated character worth the value of a used Ford S, then suddenly that character is enough to pay for a 12-bed terraced house in central London (living a digital nomad dream).
The value of NFTs is however still uncertain. When you purchase a non-fungible, you don’t necessarily purchase the copyright to that art. All that you really own is a record stating your ownership of the token behind the original asset. This means that people can still find copies of your art all over the internet and are capable of copying and pasting it wherever they like.
The value of NFTs all comes down to how collectors view and value them in the future. The same way the value of that CryptoPunk character went up, is exactly the same way it can go back down.
Your investment is it at risk. We all know, after all, what curiosity killed.
What will be the future of NFTs?
If you’re rich and want to splash some cash to own something unique(ish), why not?
If you want to focus solely on the environment, then NFTs are perhaps not the best idea?
NFTs in their current state need improvement. The environmental cost alone counts against their current form, and crypto generally.
We have to find a way for the rule of law to apply to NFTs and crypto as much as they apply in the rest of our working lives. As most business people will tell you, law is good, provided it is implemented intelligently. The problem will be that regulators little understand blockchain technology and will struggle to enforce rules across borders.
More than one way to skin an NFT
Blockchain itself has great potential. In the field of law, smart contracts could record and perform the obligations of a legally binding contract. Computer code can conduct automatic monitoring, then execute and enforce a legal agreement. This provides greater peace of mind for all parties, as no one can alter the ledger or affect its credibility and authenticity.
How could NFTs come into play here?
NFTs increase chances for engagement from potential users. This in turn provides greater support towards blockchain technology by causing it to become more mainstream.
So far as the future uses of NFTs go, it is interesting to consider Mark Zuckerberg’s metaverse concept. The idea of extending our current reality, into a digital online AR/VR world. How would you know who owned what in such a world?
This is where NFTs come in. They have the potential to solve this problem by storing and verifying the digital ownership of an asset via the blockchain.
Expensive meme cats may not have nine lives, but blockchain and NFTs could well have multiple uses. And like all revolutionary ideas, they sound impossible until they sound inevitable.