Buying non-fungible tokens (NFTs) is similar to buying rare Pokémon cards because part of their value is determined by its level of scarcity. However, some may feel that there are still unanswered questions about the niche followers of NFTs.
NFTs are unique assets recorded on the blockchain, which is a digital ledger showing who is buying and selling which NFTs, according to an April 8 Forbes article.
An NFT can take many forms including digital photography, 3D animation or video, but the most publicized form of NFT is digital art.
A popular example of a digital art NFT is the Bored Ape collection by Bored Ape Yacht Club.
Bored Ape Yacht Club is a collection of NFTs featuring profile pictures of various ape-images minted on the Ethereum blockchain, according to a Jan. 25 Decrypt article.
Decrypt is an online publication that aims to provide clarity regarding the “decentralized web,” according to its webpage.
The Ethereum blockchain is a programmable currency that allows anyone from around the world to access digital currencies, according to the Ethereum website.
“What historically people have made money on [when buying art] is the scarcity model,” said Rhonda Holberton, SJSU assistant professor of digital media art, in a Zoom call.
In this model, there is one painting that is sold for a set price and once someone buys the painting, it’s their property.
“In an NFT world, right, what you’re basically buying is not the JPEG,” Holberton said. “What you’re kind of buying is the certificate… which is usually, but not always, coupled with cryptocurrency.”
Digital media art senior Jesus Cristian Gutierrez said he likes NFTs because it's accessible.
Gutierrez said he believes NFTs can provide various benefits including seeing classical art, which he described as a “once in a lifetime opportunity”, because many pieces of art are kept in Europe.
Gutierrez is currently working on a NFT series that will have one central ghost character that is replicated into various different characters that represent his childhood.
“I [transferred] to San Jose State from my Community College in San Francisco . . . and I got into contact with a student professor, who was getting his masters. His name was Tyler Stannard,” Gutierrez said. “He really burst the idea of 3D modeling and 3D environments onto me. And that's where I got the inspiration from [to create an NFT].”
He said he wants to include various themes including his Chicano upbringing, his love of rap music and his fond memories of playing video games.
Gutierrez chose the ghost motif because it resonated with this idea of “going ghost” from your community in order to grow as a person.
“I really wanted to [express] that concept of [independence] about… having to ‘go ghost’ in certain periods of your life in order to, you know, get forward in your success or to grow as a person,” Gutierrez said.
SJSU engineering and technology lecturer Ahmed Banafa said one way to think about NFTs is as if one is buying an autographed poster from their favorite musical artist.
“[The artist] just issued 100 copies of this poster with [their] signature on it and it’s all serialized. So when you buy an NFT, you’re buying one of these 100 copies,” Banafa said in an email. “Of course, on the internet, you can always download one copy. But that’s not the one with [their] signature and it’s not the one with a serial number.”
Once purchased, information from the NFT transactions is recorded to the blockchain and becomes public knowledge which includes the amount paid, transaction date, NFT sender and receiver, according to a March 14 The National Law Review article.
Holberton said the transparency offered by blockchain is taking the traditional art world and “flipping it on its head.”
While both the sale and purchases of NFTs and cryptocurrencies are recorded on the blockchain, the similarities stop there.
NFTs are a unique asset, meaning they are usually rare, digital items (although they are not always digital) that are one of a kind - if not a limited edition, which makes them “non-fungible.” “Non-fungible” means that some NFTs aren’t worth the same amount as others. Each NFT has its own value.
This is different from cryptocurrency Ethereum, where the value is constantly equivalent, according to an Aug. 18, 2021 article by The Verge.
Banafa said there are substantial environmental consequences to NFT, including the energy required for minting. Minting is the term used to describe the energy-intensive process of uploading an NFT to the blockchain so that it can be sold, according to the same The National Law Review article.
“Minting a single NFT using the proof-of-work method uses the same amount of electricity as an average American household over almost nine days,” Banafa said.
In addition to the minting process, for every NFT transaction made on the Ethereum blockchain, about 150 kilograms of carbon dioxide is produced, Banafa said.
One reason the minting process uses so much energy is because of the proof-of-work method, an operating method used by blockchain platforms, according to an March 9 Investopedia article.
Cryptocurrency miners use specialized hardware to perform complex mathematical computations to mint the NFT in the proof-of-work minting method, according to the same Investopedia article.
Holberton said one of her students in her class is working on an NFT and she’s encouraging him to mint using the “lazy style,” which is mint-on-sale because it is more environmentally friendly.
While the mint-on-sale methodology is not dramatically eco-friendly, not minting your NFT until it is purchased is about 2-3 times better for the environment, according to a guide created by the online magazine Branch.
Branch is an online magazine promoting sustainable internet, according to its about page.
Holberton said although there is a lot to be considered regarding NFT’s carbon footprint, they give agency to artists to create and sell their own work to a global audience.
“They're [NFTs] making art more available, especially digital art. They're giving it a value that it didn't have before,” Holberton said.
By decoupling the certificate of ownership and the art itself, NFTs are getting rid of the scarcity model present in the traditional art world, Holberton said.
When someone buys an NFT, they’re buying the certificate to own it as property but they don’t own the copyright to the image, according to a Dec. 21, 2021 Yahoo article.
This allows anyone, even if they do not directly own the NFT, to view the art.
“So instead of this kind of private mine ownership model, it's like you become a steward of the file, like ‘Yeah, I support this artist,’ ” Holberton said.
