Non-fungible tokens (NFTs) have been circulating among cryptocurrency circles since 2012. Last year, annual NFT sales surpassed $315 million globally with the first launch of a major mainstream collection on NBA’s Top Shot NFT website. According to Reuters, since then demand for NFTs in the first half of 2021 has exploded with total global sales exceeding $2.5 billion so far.
Two of the biggest reasons for the growing adoption and increased sales of NFTs are that humans like to collect things and NFTs are programmed to be scarce. Basic economic theory states that scarcity of nearly anything in demand bids up its price.
Additional attributes of NFTs are:
- Digital permanence – they last as long as the blockchain they’re built on continues to exist
- They cannot be replicated or counterfeited – anyone can confirm authenticity by checking the blockchain
- Provable ownership – which can be transferred if the NFT is programmed for resale
Technically speaking, an NFT is a software app with specific conditions programmed into its computer code. This code allows the NFT to be bought, sold, or transferred to someone else once those conditions are met – so they’re basically a smart contract validating proof of ownership. Smart contracts are self-executing snippets of software that can’t be changed once they go live. As part of a blockchain, additional transactions could be added to the NFT – such as a new owner if it’s sold – but the initial terms of the NFT smart contract cannot be altered.
NFTs’ recent surge in popularity sparked a surge in scrutiny regarding how NFTs are produced – specifically their impact on the environment. Over the past several months, major media outlets have been critical of NFTs because of the potential risk to the environment due to large amounts of electricity used to create and sell them on the underlying blockchain.
Eco-friendly critics of NFTs state that digital art must share the environmental burden of the Ethereum blockchain – which currently supports most NFTs. Ethereum is routinely cited as consuming the same level of electricity each year as small countries such as Hungary or Qatar, resulting in a corresponding carbon footprint. Even while Ethereum programmers are working to migrate to a carbon-friendly Proof of Stake consensus model, it currently uses an electric-intensive Proof of Work (POW) protocol.
In an exclusive interview with DailyCoin Colin Platt, co-founder of Unifty, says creators shouldn’t be “climate-change” shamed or penalized for creating art.
“I’m not going to get into mining and proof of work, defend it or throw it under the bus, but this is a thing we looked at and thought that there are other options. There are other blockchains that don’t operate on POW. Making NFTs available on Proof of Stake gives people an option that they didn’t necessarily have since most NFTs have had to run on Ethereum since it had largely been the only option until now.”
Unifty is an NFT infrastructure platform that currently operates on eight blockchains including Binance Smart Chain (BSC) and Polygon MATIC.
Platt says that having other blockchain options available that run on energy-sipping Proof of Stake (PoS) consensus helps reduce the environmental impact issue or at least that perception of a problem.
“There are other blockchain options available such as BSC, Avalanche, Celo that use proof of stake already, or Moonbeam which sits inside of the Polkadot ecosystem. These are good options for people that are concerned about climate change, environmental issues, and sustainability. Unifity makes NFTs available on those POS blockchains when they weren’t available as options before.”
Additional recent criticisms leveled against the NFT sector had to deal with the economics among the eye-popping sale amounts ranging from tens of thousands to tens of millions of dollars for these seemingly intangible assets. Platt acknowledges those concerns were legitimate:
“There were a lot of NFTs that were created and sold for a lot of money. But there was no real obvious reason to the average person why these things sold for so much money. These large sales created other questions such as who they were being sold to, where the money was coming from, and where it was going. Even inside crypto circles, there were concerns whether some of these NFT sales were next-generation pump-and-dump scams.”
He says the solution to this perceptional problem is flipping the value proposition of NFTs from novelties to necessities.
“NFTs need to be useful, they need to be valuable, they need to have a community, they need to be something that people want and something that people want to connect with. Our view at Unifty is that NFTs are a lot broader than just art. NFTs are a new kind of data structure that makes it easier for somebody to create something completely new. That could be art, that could be games, that could be community and social tokens, that could be financial products. It could be a huge range of things. That model then creates an opportunity for people that are consuming these NFTs to engage in meaningful interactions with each other and the creators. That engagement further enhances the unique or semi-unique property that is associated with any given NFT.”
On The Flipside
- The negative narrative regarding the environmental impact of cryptos and NFTs is difficult to shake despite the lack of clear scientific proof.
- While media often cite a report that Bitcoin’s emissions will increase global temperature 2˚C they conveniently do NOT mention it will take 30 years to do that at peak capacity.
Watch the entire interview here: