What’s the future of NFTs?

What’s the future of NFTs?
Source: 2021/BEEPLE/Handout via Reuters
“The high-end art world and its auction agents and houses have been impacted and will be heavily disrupted,” Bruno Fruscalzo, an NFT curator and creator, told TMS, adding that, “the music business has already been turned on its head.”

Last week, art auction house Christie’s sold a non-fungible token (NFT) entitled “The First 5,000 days” by the graphic designer Beeple for a grand total of more than US$69 million, making the first NFT sold by such a reputable auction house also the most expensive ever sold to this point.

The high price tag rivals the costs associated with paintings by Picasso, Monet, or Van Gogh and leaves many wondering what industries might next be disrupted by future uses of NFTs.

Beeple isn’t the only one cashing in on the NFT explosion.

Twitter chief executive officer Jack Dorsey has his first ever tweet up for auction as an NFT right now, the price reaching well into seven digits. Canadian artist Grimes sold a collection of her digital art for around US$6 million at the beginning of the month.

Even Elon Musk is getting in on the action, tweeting Monday, “I’m selling this song about NFTs as an NFT,” with a video attached of a digitally generated piece of art and music that involved “NFT” in the lyrics.

“The high-end art world and its auction agents and houses have been impacted and will be heavily disrupted,” Bruno Fruscalzo, an NFT curator and creator, told TMS, adding that, “the music business has already been turned on its head.”

The NFT market has exploded in recent weeks – since the last TMS story covering NFTs on March 2, the market has nearly doubled in total art value, going from US$187 million to over US$356 million at the time of writing.

But most of that growth isn’t coming from multimillion-dollar sales. According to cryptoart.io, a site that keeps track of NFT market statistics, the average NFT sale price sits at between US$5,000 and US$8,000.

The music industry is beginning to see a shift too with the rapid growth in NFTs, as more prominent musicians and bands begin to sell music through NFT format.

Last week, Nashville based rock band Kings of Leon announced they would be releasing their new album as an NFT. The move has been compared to U2 and Radiohead selling their music on Apple’s iTunes Music Store more than a decade ago in an effort to shift the industry. The shift to NFTs in the music industry could be the next step in that process, increasing scarcity as a means to increase long-term value.

“Some NFTs are a very worthwhile investment,” said Fruscalzo, “as are the related cryptocurrencies and social tokens.”

These other tokens can take many forms and NFTs could just be the path to further tokenization of real-world items.

Tokenization is when ownership is defined within the realm of the public ledger known as the blockchain, something the real estate token marketplace RealT is doing with physical properties across the United States.

Though RealT’s site doesn’t define what they sell as NFTs, the process is extremely similar. With only a blockchain wallet and some Ethereum, you can buy tokens that represent a piece of ownership in a property.

From your ownership in a RealToken (the digital asset that you own when investing), one receives monthly payments from the rent that the real-world piece of real estate is being rented out for.

But the growth in popularity of NFTs and Ethereum has come under criticism for, of all things, its climate impact. The close relationship NFTs have with the Ethereum cryptocurrency has been deemed problematic by some due to the mass amount of greenhouse gasses that are emitted by mining Ethereum and processing transactions.

Ethereum uses a “proof of work” algorithm for securing its blockchain, a process that is notorious for consuming large amounts of energy. The annual carbon emissions from Ethereum are therefore massive and its carbon footprint is comparable to the entire country of the Ivory Coast.

According to Blockchain for Climate Foundation founder Joseph Pallant, the responsibility of Ethereum’s carbon emissions is similar to that of an airplane. If an individual purchases an airplane ticket, they are responsible for a portion of that plane’s emissions. But that plane would likely have taken off whether they bought a ticket or not. What matters more is if the general demand for plane tickets goes up and more planes take flight.

Similarly, Ethereum is often mined one way or another. But as demand for it increases, so does the volume of the Ethereum being mined and, therefore, the carbon emissions caused by that mining.

Beeple says that he recognizes the environmental impact and that going forward he will offset his carbon emissions related to his NFTs by investing in green conservation projects and renewable energy.

As for the market as a whole, questions still remain about how sturdy its rapid growth is. Some have predicted that the bubble might burst, while others, like Fruscalzo, think it’s here to stay.

“There will be booms and busts,” said Fruscalzo. “It’s currently the wild, wild west, however this is the future.”

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