NFT is all the rage right now. Everyone wants to the involved in the NFT, from big publishers like Marvel, to the pro skater Tony Hawk. Everyone is eager to taste the delicious profits of NFT trades. But, where there’s the good, there’s always the bad. The same rules apply on NFT. While it seems very profitable, NFTs also have their own negative impact.
What is NFT?
NFT or Non-Fungible Token is a unique digital item stored on a blockchain. NFTs are usually presented as various forms of digital artworks, such as pictures or videos. The uniqueness of NFT comes from the ability to apply scarcity and limited exclusive quantities to the artwork using a blockchain. So, instead of copying or downloading the artwork, NFT owners essentially own the original copy of the artwork.
The popularity of NFT started after a digital artist sold his artwork for $69 million in 2021. Since then, everyone wants to get involved in NFT trade. Due to the limitless technology of blockchain, everyone began to authenticate their so-called “artwork” into NFTs. These artworks range from digital arts, memes, and even a tweet. This also attract many investors to invest in NFTs, in which they spend over millions of cryptocurrency.
What’s good about NFT
NFT can be a good opportunity for digital artists to generate income. Utilizing several NFT platforms such as OpenSea and Axie Infinity, digital artists across the globe have generated over millions of dollars in cryptocurrency form. On top of that, NFT also provides a record of authenticity and ownership. So, digital art can now have an actual extrinsic value as well.
Some big companies also utilize NFT as a proof of ownership. One of the example of this NFT implementation comes from Macallan distillery. Utilizing NFT technology, they have successfully sold their vintage whisky cask for $2.3 million. The physical cask was sold using NFT as an authentic proof of ownership. The buyer received the physical cask along with digital scans of artworks and other exclusive digital items.
What’s bad about NFT
Despite all that gleaming fortune that the NFT has, there are also several negative sides. First, NFT is very speculative and illiquid. Being newly formed, there are no supportive research and historical data about NFT. Like many physical arts, NFT is also very volatile. The value of NFT is relative and depends on how much someone is willing to pay for it.
There is also a lot of potential fraud in NFT trades. People might sell artwork which they claim as unique. But in actuality, the artwork belongs to someone else. The last unfortunate impact of NFT is carbon footprint. Like many technologies on the planet, NFT trades require a lot of energy to operate.
Average transactions in NFT marketplace like OpenSea and SuperRare are dependent on Ethereum blockchain. According to DigiEconomist, a single Ethereum transaction requires the same amount of energy as an average US home energy consumption in 9 days. This is the reason why NFTs are deemed as potential threats to global warming.
Despite all that negative impacts, it is impossible to see the end of NFT as more and more people are eager to get involved in it. So, until there is some kind of alternative, NFT will continue to exist.