The world is evolving too quickly for me to keep up with anymore and if you are in the same boat then this article is perfect for you. Today we discuss the topic that has taken over the internet by an uproar and which has come to see almost all celebrities endorsing the object of this particular topic.
I came across NFTs for the first time on my twitter feed in late December of 2021 and since then they have exploded over the internet and honestly, I still do not understand what they are but I have heard that they are bad for the environment. Let us explore exactly why!
What Exactly Are NFTs?
An NFT is a non-fungible token that is a non-interchangeable token of data stored on a blockchain. Now, a blockchain is basically a growing list of records that are called blocks. These blocks are linked together by cryptography which can be simply said that it is a digital ledger.
Types of data stored on an NFT can be associated with digital files such as photos, videos and audio. An NFT is extremely different from blockchain cryptocurrencies such as Bitcoin as each token is uniquely identifiable.
NFTs can be traded and sold on digital markets and are associated with a particular digital or physical asset along with a license to use said asset for a specified purpose. An NFT is hardly a little more than a status symbol as due to its extralegal nature trading usually results in the informal exchange of ownership of the asset that has no legal basis for enforcement.
Ownership of an NFT does not grant copyright or property rights to the digital asset the token represents. The owner of the digital asset is allowed to sell an NFT of their work but the buyer does not necessarily receive copyright privileges which grant the owner freedom to sell more copies and NFTs of the same work.
An NFT is merely proof of ownership which is separate from a copyright. Hence, in practical life, NFT purchasers do not acquire the copyright of the underlying artwork.
How Are They Harmful To The Environment?
Now, you might be wondering that if an NFT is merely a digital token then how does it cause practical damage to the environment? NFTs are Ethereum based tokens and are a part of the Ethereum blockchain. NFT trading platforms typically need to use Ethereum to make purchases.
Environmentalists have claimed that Ethereum already uses as much electricity as the entire country of Libya does. More demand for NFTs and the digital currency means profitable opportunities for the cryptocurrency miners which leads to consumption of more energy which ultimately means more harmful emissions.
The craze and recent popularity gained by NFTs can significantly drive up demand and the value of Ethereum which brings forth an incentive for profit-hungry and energy-consuming miners which increases the number of machines used, therefore, leading to more pollution.
Devesh Mamtani, an NFT expert at Century Financial in the UAE says, “With electricity consumption of cryptocurrencies being more than several countries, the rush towards NFTs has further increased this issue. This is very concerning.”
“NFTs’ computation requirements are notably higher due to various stages involved including the minting, bidding, selling and transferring process,” he further adds, noting the energy cost of minting an NFT on Ethereum is 332kWh.
What Other Criticisms Do NFTs Face?
Like most blockchain securities and traditional art sales, NFTs can be potentially utilized for money laundering. Plagiarism and art theft are also major concerns in the world of NFTs. There have been multiple reported cases where digital files of art have been sold for huge profit as NFTs without prior permission or knowledge of the original artists.
Insider trading has also reared its head as the BBC reported a case where an employee of NFT marketplace, OpenSea bought specific NFTs before they were launched with the knowledge that they would be promoted on the company’s home page.
As mentioned above, NFT trading is an unregulated market which means that such offenses as insider trading have no legal consequences.
Last but definitely not least, the NFT market and trading have been recognized to have similar backgrounds as a Pyramid or Ponzi scheme does where early buyers enjoy profits at the expense of the late ones.
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