NFT: Hype, new reality or just a giant con?

Rye Senjen

1 March 2022

fluxed earth, recent works, 2022

For Rye Senjen, NFTs are profoundly compromised by their vulnerability to exploitation and environmental footprint.

It seems no day goes by without hearing about the “wonders” of NFTs (non-fungible tokens) and cryptocurrency (a necessity to buy and sell NFTs) for makers/artists/collectors. How millions are going to be made (if you are quick), how NFTs are going to change everything, how they herald a new way of business, free from government interference and gatekeepers and an opportunity for all to become collectors of things.

But as so often, the reality is very different from the hype. Key concerns include that NFTs are riddled with fraud, theft of art works, a Ponzi scheme, a giant waste of energy and that they ultimately do not deliver on any of the hype that you will readily come across in articles and on websites promoting NFTs.

The problem for (digital) makers: making money and protecting your work

A key issue in the creation of especially digital art works is how to protect one’s work and make some money from it.  If it can be readily copied and reproduced how can one prove authorship, provenance and distinguish between the original and its copies?

An NFT is a non-fungible token i.e. non replaceable by another identical item. NFTs (known generically as cryptoart) are proposed as a solution to the problem of making money and protecting makers’ digital work. Furthermore, they promise to cut out the middlemen and gatekeepers and open up “art collection” via shared ownership to younger less wealthy collectors. Increasingly auction houses and some makers have also started to attach NFTs to physical objects.

Enter bankers, financiers, hedge fund managers, crypto bros, promoters, collectors, and at times artists themselves who have all championed “art” in a format ideal for trading and speculation.  NFTs are seen as a way of neatly overcoming many of the problems, which can make physical art such a risky investment: liquidity, volatility, fragility, the potentially steep price of individual works, and the cost and hassle of transportation and storage. NFTs can be viewed as yet another aspect of neoliberal capitalism: the financialisation of everything.

What could possibly go wrong?

An NFT in essence is a bit of metadata (i.e. a link to a file, the creator’s name, date stamp, contracts, and purchaser) which is then attached to a “token”. It is this token that is stored in a blockchain.  Blockchains are append-only spreadsheets maintained across decentralised “peer-to-peer” computer networks. The value of this “token” is expressed in a cryptocurrency such as Bitcoin, Ether, Tether etc. Obtaining an NFT for a particular work, involves currently getting a digital wallet (liable to fraud and hacking) and paying real money upfront to obtain cryptocurrency accepted by the digital marketplace you want to sell your NFT on. Again fraud, hacking and stolen artworks are not uncommon features of these digital market places/platforms. Of course, they may simply go out of business resulting in the complete disappearance of your NFT/cryptoart.

As makers of physical objects, we seriously need to think about the necessity and implications of attaching a digital representation and NFT to one of our works.  While an NFT may assist in demonstrating provenance and even originality, it in no way protects the work from being copied.

Long-term (or even short-term) metadata which in effect is the NFT, is typically stored somewhere on a third-party platform, which may or not be there in the future and does require power to access and maintain and are inherently unstable over time. While the hype promises artists more control over their work, it appears control again is divested into others.

The NFT universe: an environmental disaster

An important aspect of the blockchain, cryptocurrency and NFT universe is the obscene consumption of energy used to create them. New blockchains are added by so-called miners, who compete for the right to verify and add new blocks by solving very complex mathematical puzzles and in the process consuming an unimaginably large amount of electricity. When a puzzle is solved the miner gets a reward ie 6.25 bitcoins or some other digital cryptocurrency for each new blockchain. Miners operate in commercial ‘mining’ farms- huge warehouses running thousands of computers.

Due to this vast drain on the energy supply, cryptocurrency mining has been banned in a number of countries, including Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, Bangladesh, and China. Forty-two other countries, including Algeria, Bahrain, Bangladesh, and Bolivia, have implicitly banned digital currencies by putting restrictions on the ability of banks to deal with crypto or prohibiting cryptocurrency exchanges.

You will of course hear the argument that miners will be moving to renewables (think of all the lithium and solar panels that will be needed) and /or will be using a different protocol (think less secure). Either way, the energy consumption will still be obscene.

Blockchains are in themselves problematic, as they are by their nature amenable to misuse for money laundering purposes and illegal purchases, as well as price manipulation for quick returns.   They are essentially a pyramid scheme that wastes electricity in order to make more cryptocurrency.

Costs involved in NFT creation

Naturally, the creation of an NFT does not come for free. There are upfront costs. You will have to attach (“mint”) it to a bit of blockchain (ie enter it into the distributed ledger). Fees for minting vary from $40-$1000 (the so-called gas fee). Plus there is also commission when you sell your NFT on one of the digital NFT marketplaces, currently between 2.5 and 50%. Oh and finally there is the transaction fee to transfer of the money from the buyer’s wallet to your own, typically 3%. To me, it does sound like the old way of doing business with all its associated ticket clippers in new clothing.

Finally, fraudulently obtained/ plagiarised digital art turned into NFT for sale is a growing and serious problem. For instance, Van Baarle, a popular digital artist, with millions of followers on social media, discovered 1000 of her plagiarised/stolen images offered up for trade in cryptocurrency on the NFT platform OpenSea in 2021. DeviantArt, a decades-old online community for digital artists has sent out more than 90000 alerts about possible fraud to thousands of their users.

I highly recommend a visit to Molly White’s blog where she chronicles all the grift, fraud etc surrounding web3 technologies including NFTs and cryptocurrencies, complete with how much money has been lost and swindled for each project featured.

In my view, NFT are not the solution we as makers and artists need. Yes, we need to find ways of protecting our original work from being stolen that is more equitable and accessible then the currently available avenues. Yes, we need ways to get paid for making. I do not think a pyramid scheme that financialises our making is the solution. Demanding universal basic incomes, universal free housing, universal healthcare, divestment from warfare and policing, environmental protections, and actual, functioning income taxes on the wealthy seem to me more fruitful avenues for progress.

About Rye Senjen

Dr Rye Senjen is a ceramicist and one half of fluxedearth (fluxedearth.com).  She is based in Castlemaine, Central Victoria, Australia. She has a background in artificial intelligence and computer technology, as well as Sanskrit and has taught ethics and sustainability to MBA students.

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