NFTs: Good or Bad?

After attending the last lecture of the series that featured Wim Delvoye in zoom conversation with Marina Pizziolo and Romano Ravasio on the topic of the Art Book and new technologies, my curiosity about NFTs was sparked. The concept of the Non-Fungible Token has been widely discussed and debated across the world. According to Wikipedia, an NFT is “a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded.” Digital collectibles are being sold at high prices to interested investors. This form of digital art is uniquely characterized as being non-fungible, which means that the commodity does not have “more than one unit, all of which are the same and interchangeable, and each of its parts being indistinguishable from the other (Rodriguez, 2021).”

Some Examples of the most expensive NFTs sold:

1. CryptoPunk #5822 — $23.7m 

2. Everydays: the First 5000 Days — $69.3m

3. Pak’s ‘The Merge’ — $91.8m

(Source: https://www.dexerto.com/tech/top-10-most-expensive-nfts-ever-sold-1670505/)

So the big million-dollar question: Is investing in digital art (NFTs) a good or bad decision?

The risk of trading money for digital artwork is high with many unknown concerns and consequences that may arise from such an investment. So what are some factors that drive NFT collectors to purchase digital art?

It is firstly important to acknowledge the economic advantage that comes with investing in NFTs, in which the value of a digital masterpiece grows exponentially. This means that the collector has the freedom to decide when he/she would like to sell the digital artwork at a price with the highest return on investment possible. I think that the value growth of NFTs is personally interesting to me as an economics major since I have learned over time that economic concepts are constantly changing and new models/theories are being developed with the rise of data and research. As a result, the way humans perceive value can change throughout the years, and new ways of reaching capital accumulation and wealth creation are being developed, such as investing in Non-Fungible Tokens.

Secondly, securing your ownership of an artwork through the traditional process is quite tricky and could be prone to theft. In terms of owning digital artwork, investors rest assured that their collections will be authenticated and their presence will be included as a part of the blockchain of each masterpiece. Therefore, investors view NFTs as a safe hub for trading artwork on a digital platform that is completely recorded and monitored in the form of data. On the other hand, I find it interesting how people choose to trust NFTs despite the rise in cyber security warnings with the spreading of hackers and digital piracy on the web.

Joining a new promising trend is a contributor to the eagerness of investing in NFTs since people are willing to focus on the positive outcomes that could arise from being one of the early investors of digital art giving them an advantage over others when this trend is successfully implemented to its fullest potential.

On the other hand, many speculations doubt if we should throw huge amounts of money into this futuristic form of investment. As much as the NFT trend is being promoted and pushed across the world, it is also being widely judged and criticized in the public eye.

One of the main confusions with regards to NFTs, is what exactly do you own when in the system records? You only officially own the token behind the original asset. This means that you do not have control or authority over the copyright of the masterpiece, and you cannot stop people from posting and sharing copies of it online. Consequently, this raises questions on the value of buying an NFT that you do not necessarily control how it’s shared in public since you do not own the copyrights to it. Is it worth spending your money on digital art in the long term?

From the point of view of environmentally driven individuals, NFTs are a threat to our earth with large amounts of energy being wasted each time a record is computed into the blockchain. It is stated that “A new study from Cambridge University found that mining bitcoin, perhaps the best known blockchain-backed digital currency, now consumes more energy per year than the entire nation of Argentina.” This environmental threat can highly affect the success of NFTs, especially when it is claimed that “Scholars argue that bitcoin emissions alone could raise the Earth’s temperature by two degrees (Tiffany MSNBC Opinion Columnist, 2021).” Despite the possibility of NFTs being implemented regardless of the environmental impact, it could yield fewer investors, since their morals towards the environment could restrict them from joining this energy-draining trend. Once again humans must decide if embracing a new technological advancement is worth the environmental costs that accompany it, will monetary rewards overshadow their judgments?

This diverges me into thinking about how those who are financially capable of spending such great amounts of money will benefit the most from NFTs. Is the NFT scene dominated by the rich or will it gradually give opportunities to investors with different income levels as it expands in the future?

Another conflicting thought from the perspective of people who are immersed in the artistic world is related to comparing the possession of digital versus physical art. They are concerned with how physical art can be digitized on such a platform and sold with no regard to the difference between experiencing the authentic artwork in real life and viewing it online through a screen. They claim that these Non-Fungible Tokens do not give the same satisfaction of owning and appreciating the beauty of a masterpiece in real life.

Lastly, you must be wondering what is the point of view of the Belgian neo-conceptual artist, Wim Delvoye. During the very informative session, he shared an example of him suffering for ten years in a car investment as he tries to drive it in a village with no proper roads. Therefore, he would constantly be “stuck in the mud” with many issues along his path yet he prefers to have the “first-mover advantage”. In contrast, he states that having the “first-mover advantage” in the NFT Metaverse investment is the best approach when starting a new endeavor. Even though NFT and the Metaverse are boring and look terrible he still believes it will be the next best thing. He is waiting for more companies to get involved in the NFT world for it to succeed, which will be developed into easier techniques to fix the speed of its usage and its accessibility in the 3D world. He expects big revolutions to come with political candidacy and their usage of new technologies such as NFT. He considers this new technological advancement inevitable and he says that it is “a silly question to ask if it is good or bad, because it will happen anyway (Wim Delvoye 2022).”

Resources: 

• https://www.moneycrashers.com/non-fungible-tokens-nfts/
• https://www.dexerto.com/tech/top-10-most-expensive-nfts-ever-sold-1670505/
• https://www.msnbc.com/opinion/bitcoin-nfts-other-crypto-fads-are-destroying-our-planet-n1261139
• https://www.investopedia.com/pros-and-cons-of-investing-in-nfts-5220290#:~:text=The%20bottom%20line%20is%20that,is%20indicated%20by%20a%20blockchain.