Rebutting Common Non-Fungible Criticisms
“NFTs are going to change the way we think about art, music, and other forms of digital content. They’re giving creators a new way to monetize their work, and collectors a new way to own and enjoy it.” — Mark Cuban
As exuberant as this quote may sound, it only references a small group of use cases.
Non-fungible tokens, or NFTs, are more than digital stamps on a blockchain. They are set to become integral parts of numerous multibillion-dollar industries, yet legions of otherwise savvy people still see them as frivolous playthings.
More than novel additions to user experiences, ‘niftys’ or NFTs will soon become something consumers expect and demand. Few industries will remain untouched by this technology: from real estate to fine art, patent licensing, ticket sales, equity, and everything in between.
A ‘nifty’ society is not in the far future; non-fungible tokens are currently overtaking headlines, and there is a decent chance you (YES, YOU, you non-tech normies!) may benefit from this technological revolution.
There is no better time to learn as fair-weather fans exit the stadium, and the infrastructure matures. Skepticism is a natural reaction to enthusiasm; they are perennial counterweights. In money matters, or anything that smacks of them, caution is the cardinal virtue, but failing to see a new idea’s potential can cost us dearly.
NFTs are misunderstood because of how they are presented in popular media outlets. Prospective creators and collectors are put off by sensational stories of garbage JPEGs selling for millions. It is unfortunate, as their applications go beyond immortalizing memes.
- Objection: NFTs are not suitable for anything useful in the real world. Why would anyone in their right mind buy weird online cartoons? Where is the utility?
Whatever the artistic merits of Bored Apes and CryptoPunks may be, these statements reveal how little the critics know.
NFT enthusiasts are not excited about using ugly cartoon characters to launder money (not just that anyway), but with the technology’s underlying value proposition.
Remember, NFT is an acronym for non-fungible token. What does that mean?
All dollar bills (or fiat currency) are interchangeable unless bearing rare misprints or are sullied beyond recognition. They are fungible. The clerk at the gas station is indifferent to which crumpled wad of “Washingtons” you hand them, so long as it covers your purchase.
On the other hand, an original Rembrandt is irreplaceable. Nothing can duplicate its properties or provenance, making it a paragon of non-fungibility. Fine art is an obvious example, but buildings, shipments, land, and patents are also fungible.
Imagine wanting to invest in a skyscraper or a Monet. Chances are you can’t do it by yourself, and that’s fine. Fractional ownership is easy with NFTs, which typically run on top of distributed ledger technologies (DLTs) like blockchain. In these ledgers, NFTs have inherent transparency and immutability. Who owns what is set in stone on the DLT? No third party can modify it on a whim unless specified in a smart contract. Any actions undertaken by any of the parties involved can be seen by everyone else, making it ideal for licensing software, inventions, or other forms of intellectual property.
A great example? Circulating supply chain products can be represented on a blockchain, something Walmart, UPS, FedEx, and others are all incorporating into their operations.
SOOOO COOL, RIGHT!? Okay, Okay, Fine- Maybe NFT’ed wheat and car parts on the supply chain may not seem too exciting, though these applications are for a relatively small percentage of people and a few big companies.
What’s the big deal? Alongside the crypto vanguard, multinational corporations and celebrities are among the first to test the waters, but NFTs are ultimately a democratizing force, granting creatives dominion over their creations.
What if NFTs were bound to become indispensable to a fun industry worth rapidly approaching a $200 billion valuation? And what if they paved the way for millions to make money off their hobby? Video games aren’t disappearing anytime soon. Their share of the entertainment market and command over shriveling attention spans isn’t waning either. Zuckerberg’s metaverse may have imploded, but AR and VR are only improving. More people may seek to supplement their real income with them or make virtual worlds their full-time job.
NFTs will be indispensable to delivering what players will inevitably demand: ownership of what they produce. This is a big deal because, up to this point, players generally don’t own items they’ve made or even the characters they’ve spent months or years leveling up. Would you play a game, particularly one driven by content you and others like you have produced, if you knew its parent company intended to profit off of what you’ve done with no intention of ever compensating you?
Of course not.
To return to the main thread of this rebuttal: cryptocurrencies like Bitcoin are fungible.
Chances are you won’t care which set of bits represents the BTC your customer is sending you. Blockchains like Ethereum allowed developers to fashion more sophisticated ecosystems, making NFTs possible. Blockchains are a transparent and tamper-resistant way of recording transactions. Transactions are secured to prevent unauthorized changes. They are decentralized systems, meaning they do not rely on any authority or intermediary to verify transactions. DLTs are referred to as trustless because you don’t have to trust them any more than you need to trust the laws of motion, heat, or gravity.
2. Objection: NFTs can facilitate copyright infringement and piracy, making reproducing and distributing digital content easy.
This objection is second on our list because, while valid and worthy of our sympathy, it is absolutely foolish.
NFTs do not directly prevent the unauthorized distribution of digital content.
This was never their stated purpose. NFTs are a way for creators to authenticate and monetize their work; they are a way for collectors to know what they’re getting by making sure, through the meticulous markings on the digital ledger, where it originated and where it has been.
One should note; Forgery is far more complex with NFTs than without.
Hammurabi, king of Babylon, promulgated laws to curb piracy nearly four thousand years ago.
He was probably not the first and surely not the last. It hardly seems fair to expect a technology in its infancy to fix a dated problem. Yet without swashbuckling or letters of marque, they are putting a dent in it. NFTs can ensure creators receive their due. They offer fast proof of when and by whom an item was first made. The aforementioned case of virtual worlds is just one example of how placing power in the hands of creatives can foster productivity, trust, and community. This is noteworthy in a sprawling global economy where intellectual property seems to be overtaking all other forms of capital in terms of importance.
3. Objection: NFTs are bad for the environment. Minting and trading them use too much electricity.
Before we further upset Greta Thurnberg, take a deep breath because…they’re not.
Yes, that’s right, as tree-loving spiritual technologists, we are happy to report, the truth is NFTs are not great for the planet (as most human activities are not), but that is rapidly evolving as technological solutions arise, which is more than you can say for the vast majority of planet-killing industries (cough-cough, animal farming for food & fashion- here’s looking at you.)
The process of minting and trading NFTs on specific blockchains requires a significant amount of energy; this isn’t a permanent state of affairs. There’s no need to vilify NFTs, an abstract concept, but to push for more sustainable practices from blockchain designers. The issue is not inherent to them but to the hosting platforms.
On the bright side, minting NFTs is as inefficient as it will ever be; a variety of incentives are pushing programmers to design better blockchains and overhaul existing ones.
Lastly, most forms of art, besides assembling sculptures from empty soda cans, come with a cost: whether it’s canvases, paints, musical instruments, production equipment, or kilowatts consumed by a PC. Even if we confine our analysis to carbon output, the 48 kg of CO2 from minting an NFT on Ethereum is vastly outstripped by a desktop computer running for an average workday of eight hours (70 kg of CO2).
4. Objection: NFTs are a speculative bubble that will eventually burst.
This can be said for dozens of industries. The overgrowth and pruning of new technologies can be a painful but natural cycle from the rapid onset of excitement and experimentation.
**Like yall didn’t do Penny Stocks back in the day! **Does anyone else here have experience with penny stocks hawked by dozens of sleazy “investment” letters? lol Don’t lie- we ain’t judging!
Hype should be handled cautiously, as it can be a cover for the absence of substance, though that’s not always the case-
One article, written by an anti-nifty evangelist, states: “the current froth…could fizzle out, but that doesn’t mean the idea of digital ownership is going away.” The articles link now returns a 404 error, which is just as well because it’s unclear what other modes of digital ownership the author could be referring to as centralized ownership has been around for a very long time and is, for all intents and purposes, still the only game in town. It works, but it has shortcomings.
NFT’s unparalleled power for authenticating and monetizing digital content in a decentralized manner cannot be dismissed, especially as the network effect compounds. Their network can claim some prominent figures.
Whatever you may think of NFTs, names like Tom Brady, Paris Hilton, Mark Cuban, Snoop Dogg, and Shawn Mendes attract people. They can make believers out of heathens by their presence.
While some celebrities only put their toes in the water, others will almost certainly stay. And since they’re making money, why wouldn’t they?
5. Objection: NFTs exacerbate wealth inequality by creating a new class of super-rich artists and collectors.
Okay- it’s fair to state some have gotten very rich from NFTs. Why is this a problem? How is this a bad thing, in general, or for the space? Isn’t this more of a compliment than a criticism? How is it any different from the traditional art market?
Like others that failed to make our list, this objection seems to stem from envy. But there is no need to be jealous or feel we’ve missed out.
Though, the first boom has come and gone. Many nefarious characters have left the hype cycle phase. Things are less congested and more mature than they were at the beginning. Both collectors and creators should embrace this trend: the philosophy and applications of NFTs are too perfect for this time, too ideal to be dismissed. Minting your vacation photos as NFTs on OpenSea is not a foolproof retirement plan, and neither is dropping a small fortune on the next cartoon animal fad. However, NFTs will become part of your life in one incarnation or another.
Want to learn more? We got you! We are Tech Professors & College Textbook Authors!
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