Non-Fungible Tokens Take Flight
The Australian Financial Review published a piece this week titled "Crypto-art becomes the new cultural currency" which updates the whirlwind rise of non-fungible tokens but regretfully continues to spread myths and mistakes about blockchain and this exciting way that collectibles are going digital.
Digital collectibles have been around for a long time; from the days of physical / digital Tamagotchis through to purely digital critters and collectors today. The epic market created by companies like Blizzard and Epic in their massive online multiplayer games World of Warcraft and Fortnite continue to grow.
These siloed and centralised markets rake in vast sums of money from users who are delighted to buy and collect digital collectibles which can only be stored and used only inside the developer's environment.
Non-fungible tokens (NFTs) represent an important shift away from the existing walled garden of digital assets games and open up collectibles of all kinds to a new global audience. Those playing online games and spending their hard earned cash on skins and art and other assets risk a problem if they stop playing, the value of all the in-game collectibles is lost when the user leaves the game environment. This has led to odd situations like game accounts being offered for sale (usually in breach of terms and conditions of the game itself).
NFTs are designed to be portable and transferable so that collectors can engage trading at a peer-to-peer level, just like takes place with collector cards in school yards and at card meets and stamp trading conventions now. The biggest change is a a true global reach and lower barriers to reaching keen collectors.
This lowering of barriers has led to some pretty spectacular price action in certain collectibles, with the NBA being a leading issuer of tokens (and strangely the AFR piece fails to mention a major organisation leading the charge).
Some myths still persist, repeated in the AFR piece which are worth clarifying:-
The AFR reports on "complaints" of NFT marketplaces, which charge people to list items for sale, just like eBay does, which is entirely consistent with almost every marketplace currently operating to sell goods or services;
The AFR also notes that "unpredictable 'gas' payments" are needed to "cover the cost of ethereum's baroque processing methods" a curious choice of word given Gas is a straight processing fee for the ethereum network shared by the computers processing transactions. It's not remotely "baroque".
Despite most NFTs being on Ethereum, which is rapidly moving towards proof of stake, it wouldn't be a news article if a shot wasn't taken about electricity usage. It would be useful to compare the costs of what NFTs are delivering with the existing systems of galleries, storage and the payment rails globally which enable artists to sell their creations but it is impossible to calculate the magnitude of electricity used in all of that infrastructure. Needless to say, we are comfortable in saying the Ethereum network is vastly more efficient in energy use for what it delivers than the existing "real world" infrastructure it replaces.
At the risk of engaging in whataboutism, cat and other videos use vastly more electricity than even the power hungry Bitcoin network and there is an absence of news online criticizing video streaming or YouTube as an environmental vandal.