Opinion Piece - Kieron Cartledge - What is an NFT?
Hey, Kieron Cartledge here Global Sales Director from Baanx Group Ltd. In this article I am going to be discussing NFT’s. What are they? Are they good for the sector? Are NFTs good, bad, or pointless? Along with a couple of other points too. I am not trying to sway any opinions here as we all have our own, right? This is what makes each of us individual. Anyway now I’ve given the disclaimer, lets jump into it.
What is an NFT?
An NFT or a non-fungible token, means that this token is unique and can’t be replaced with another. As an opposite to an NFT Bitcoin is fungible since you can trade your Bitcoin for another Bitcoin. You will end up with Bitcoin in both cases.
You can compare an NFTs to something like Pokémon Cards - one-of-a-kind trading tokens that if you trade one for another like you did in the school playground, you will receive a token different from the one you gave away. So as an example, you can trade your XTZ for a Tezos based NFTs. Some collectors even trade NFT’s for another NFT this is known a swapping.
NFTs can be anything you want them to be! They can be a jpg image, music, or digital art or trading cards.
Are they good for the sector?
There are many opinions out there about NFTs and weather they are good or bad for the sector. The excitement around NFTs feeds a similar narrative to other recent price surges we have seen such as the dogecoin price increases as an example.
We have seen lots of celebrities, music artist and YouTubers like Logan Paul, Grimes, Akon, and many more releasing their own flagship NFTs to ride the wave. As well as well-known brands like Adidas, Nike and Bape showing us that big brands are gearing up for the metaverse and the future of Web3.
But there are more than just the big brands that are benefiting from NFTs. We must look at the humble unknown or under appreciated artists, games developers, music artist and many more that NFTs are helping to get their names out into the world. We can use the Bored Ape Yacht Club as an example, this serious was created by 4 friends who just wanted to see if they could test their skills and create something ridiculously dope, well, they did! BAYC was built on the Ethereum network and has with an average price of 16.4 ETH and a total volume of over 400 ETH.
If we look back in history, it will tell us to be careful about dismissing NFTs as a passing fad! A lot of other technological innovations often becomes clearer once the hype dies down. If take a step back in time to the late 90’s when the first wave of the dotcom era many people where stating it would be a bad move. Fast forward to present day, EVERYONE is using it! How many of us wished we had listened to the crazy guy in the office raving about this new digital currency Bitcoin in 2017 when the price of a coin was on average $250 and now one BTC is on average $45,000 per coin!
Are NFT’s bad?
The main concern facing NFTs are simple:
- The environmental impact
- Rug pull NFT Scams
- NFTs are in their own bubble
What is the environmental impact of NFTs?
Let’s start with the environmental impact of NFTs. The NFT space is highly reliant on cryptocurrency mining, this is well documented to consume huge amounts of power. The most used blockchain for NFTs is Ethereum which uses on average the same amount of power of a small country. A single Bitcoin transaction on averages using more power than a million Visa network transactions. A single Ethereum minting transaction can use 35 kWh of power which us more than the average UK household does in a day!
We can flip this argument though, the creation of new chains like Solana, Polygon and of course Tezos who are a long-standing believer in the adaptation of a greener ecosystem. Minting or mining on the Tezos blockchain uses the same amount of power as sending a tweet!
We could also argue that having a trading card NFT game is no different to cutting down trees in the amazon to create a real-world trading card game.
What is a rug pull, why is it Bad?
In simple terms, a rug pull occurs when a artist, creator or project suddenly stops backing their idea! The results of this would be that the price of the NFT falls to Zero and in turn means the investor or holder of the NFT is out of pocket.
An example of this would be Frosties, the creators were super active on social media about the project and managed to build up a HUGE following with the NFTs flying off the shelf. On 10 January the Frosties website, Discord and Twitter accounts had vanished! The creators had withdrawn nearly $1.1 millions of ETH over two days to their own crypto wallets. This left investors out of pocket and at a huge loss, not only financially but also at the NFT market. This was the biggest scandal of NFT fraud in 2022.
There are many other examples on the web but platforms like OpenSea or Tezos based marketplaces have been able to limit losses of such scams. The only think with this type of scam is it is almost impossible to lay one person to blame so the likeliness of regaining funds is very low.
What we have to remember though is every sector has a similar “rug pulling” mentality there are these types of scams happening across all sectors not just crypto currency.
NFTs are in their own bubble
Due to the hype of the NFT space and the sheer speculative and the gains that have been made from minting, buying, selling, and creating NFTs has led many people both in and out of the crypto community believe that they are in a bubble that could burst at any point! This is basically because people are over buying them expecting these investments to sour, this could lead the NFTs reaching a point where no one will be able to sell them as the prices will become unaffordable.
What we are saying here is that the people are treating the NFTs to profit and not as a useful piece of technology innovation. Some people have even gone to say that NFTs have no fundamental value at all. Some would say they create an artificial scarcity to inflate the value of certain digital assets.
Ubisoft recently put their hat in the ring and have said that they are going to get involved in NFTs. This created a huge wave of arguments throughout the NFT and gaming space. Some of the gamers believe it is hard to see how gamers can benefit from the move as it is not at all clear how NFTs can serve to make games better. Many of the platforms where these games are used already offer an in-game purchasing for mods etc and the feeling is if it isn’t broke, don’t fix it.
So, to summarise there are both pros and cons of NFTs and I think it is down to the individual to get involved in the space if they want to. Myself as Kieron Cartledge, I like them, I own them and I play P2E games I feel they have a great influence in the market, we could use them as digital identity for travel, KYC. I like how they help new artist get seen! I mean it is basically digital graffiti!
There are lots of chains out there looking to adapt this space to make is even more eco-friendly like Tezos and also Solana.
Bringing NFTs into the gaming sector is a great idea, just think, cross platform transferring of data and mods as well as being able to trade offline your mods etc. Isn’t this one of the reasons BTC was first created in the days of WOW?
Again, this is my opinion, you can make up your own mind there are plenty of publications out there in the market that are discussing NFTs. One piece of advice I would stress is ALWAYS do your research before buying anything!