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The intangible collectibles with tangible impact.
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What is an NFT?
Often described as a way of tracking ownership of a unique digital asset, an NFT is ultimately just a bunch of text: a unique string of characters called a token when grouped and tracked on a blockchain, usually the Ethereum blockchain.
They exist in an attempt to create a sort of scarcity online, where files are constantly being copied as part of how the internet operates. For collectors, investors, and some artists, the idea of introducing scarcity or uniqueness into the worlds of digital art, content, and memorabilia has obvious appeal. And, behind all of this excitement lies another, quieter, story: NFTs have an enormous environmental impact, one that should give artists and customers pause.
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2012: Bitcoin users start adding bits of metadata to the blockchain to signal transfer of other assets.
2014: Technologists Kevin McCoy and Anil Dash invent “a first version of a blockchain-backed means of asserting ownership over an original digital work” which they call “monetized graphics.”
June 2017: Matt Hall and John Watkinson, of Larva Labs, use smart contracts to allow the images to be traded on the Ethereum blockchain.
April 2018: Major League Baseball partners with game developer Lucid Sight to offer NFT baseball cards.
March 2021: Digital artist Beeple sells a work for $69 million, the most expensive NFT purchase yet.
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The carbon footprint of NFTs
Shipping a digital print to a customer within the US might total something on the order of 2.3 kg of CO2 emissions, the equivalent of taking a short ride in a gas-powered car. What about for an NFT? It’s hard to know exactly, but somewhere in the neighborhood of 128 kg of CO2 emissions, the equivalent of approximately 500 miles driven by car.
The reason for all those emissions is the tremendous amount of electricity used by participants in the Ethereum blockchain to verify their transactions. NFT advocates say this will improve dramatically once Ethereum switches from a proof-of-work to a proof-of-stake system for verifying transactions, which will require far less electricity.
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Quartz saw everyone having fun with NFTs, so we created the world’s first news-article-as-non-fungible token, and raised $1,800 for charity in the process. Here’s how we did it:
- We turned to OpenSea, the largest marketplace for NFTs.
- OpenSea asked us to install MetaMask, a browser extension that manages digital assets.
- We uploaded the article, fashioned into an image that included its text, lead image, and a QR code with a link to this piece online.
- We paid $250 in fees, in Ethereum.
- We waited for bidders. Spoiler: We’re no Beeple, and the bidding was plodding.
- We chose to buy a carbon offset. Our transactions were responsible for the equivalent 267 kg of carbon dioxide emissions, a little more than a flight from London to Rome.
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Will NFTs change art?
Since Christie’s historic $69.3 million auction for crypto art ignited light bulbs around the world, digital content creators of all caliber have been plotting their own Beeple moment, hoping to find instant riches and fame via single-lot sale. Despite the immediate backlash, stunts of all sorts have followed the $69.3 million purchase.
Are NFTs truly a democratic platform for artists? Artists are earnestly looking into how blockchain can bolster their livelihoods. But for now, to strike gold in NFTs an artist must have two things: acumen and an audience.
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NFTs, but make it fashion
“Luxury is the business of building identity. You don’t buy a luxury handbag because of its incredible utility. You buy it because the brand has built culture, and that culture is something you want to be a part of.” —Ian Rogers, former chief digital officer at LVMH, who now works for crypo firm Ledger
Exclusivity plays a big part in luxury’s value, and NFTs support that as well. A digital asset can be copied, but the private key proving ownership of it is unique. It creates the conditions for scarcity, which is vital to the perceived worth of luxury goods. That’s why fashion brands are wondering how much consumers might spend on NFTs for high-end fashion.
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NFT reading list
- Quartz’s complete guide to NFTs.
- Ars Technica also has a good overview.
- OpenSea’s “NFT Bible.”
- VC firm Andreessen Horowitz’s podcast on NFTs (with transcript) and reading list.
- Who can sell a Wonder Woman NFT: the artist who drew her or DC Comics?
- It’s not too early to start worrying about NFTs and money laundering.
- A primer on the Interplanetary File System (IPFS) that is used to store the files linked to some NFTs.
- The IRS says purchasing an NFT with cryptocurrency triggers the US capital gains tax.
- How much would you pay for a virtual sofa?
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