From pioneering cryptophiles to the luxury industry, via media billionaires, NFT is rapidly becoming popular. Even to the average Internet user? CTRLZ takes a look at the situation with Manuel Valente, research director of Coinhouse, and Andrew CM, co-founder of Valuables.
$ 2.9 million. That’s what Twitter founder Jack Dorsey’s first-ever tweet is worth, according to its buyer, Sina Estavi, the head of a cryptocurrency company. The most expensive tweet in the brief history of tweet trading – three months since the launch of Valuables, the platform that enabled the deal.
2017: Pioneering investors
3 letters that we are hearing more and more about: NFT. The crypto asset, previously reserved for insiders, has arrived on the mainstream scene with a bang. The principle is (almost) simple: NFT is a non-exchangeable cryptocurrency based on the Ethereum network. “A €10 note can be exchanged for any other €10 note because they have identical value and are therefore fungible”, Coinhouse says in its NFT explanatory panel. In the world of cryptoassets, bitcoins are also fungible – albeit traceable – explains the cryptocurrency exchange platform. NFTs are unique and work as a certificate of digital authenticity. They can also be issued in limited editions (10 of the same NFT for example), like a limited edition of art objects.
The protocol was invented in 2017. Eight years after the appearance of bitcoin and two years after that of ethereum, the ICO (initial coin offering) method appeared on the crypto market and allowed tokens to be generated. “At the time it was more about computer scientists inventing new standards for token types,” recalls Manuel Valente, research director at Coinhouse.
The NFT is one of these standards and is the brainchild of Dieter Shirley. In December 2017, he also invented Cryptokitties: unique, collectable digital kittens that can be reproduced, bought, sold or traded. The game “was created to explore the concept of digital scarcity, implement non-fungible tokens in smart contracts and make the technology accessible to ordinary consumers”, the cryptokitties.co website reads. “At the end of 2017, people made a lot of money. So they didn’t have too many problems investing,” Valente recounts of the economic climate at the time.
2018, the market turns around and falls very sharply: Bitcoin loses up to 85% of its value, the crypto expert recalls. Investors become more cautious and keep their assets warm while waiting for better days.
2020 The luxury industry and art get on board
It is not until the end of 2020 that cryptocurrency sees a further surge. The second wave of more traditional, finance-oriented investors arrives on the market. In February, Tesla invests $1.5 billion in bitcoin and announces that it would accept the currency as payment for its cars. Between August 2020 and March 2021, software company MicroStrategy invests the equivalent of $4.5 billion in Bitcoin. For the cryptophile community, the arrival of these new players is ambivalent, acknowledges Manuel Valente:
“They bring cash flow and the price surge is largely due to these players entering the market. This is positive. What can be worrying are the risks of regulation. When the institutions arrive on the market, they want it to be regulated, which cuts out the anarchistic side that we saw in the early years.”
This second wave of increased interest in cryptoassets spills over into NFTs. The luxury world, for one, seems to see a definite interest in these certificates of authenticity engraved in the blockchain. As early as 2019, LVMH invests in the technique for its Dior and Louis Vuitton products, says Valente. In October 2020, the luxury watch manufacturer, Breitling, introduces digital certificates of authenticity.
The artworld is also seizing this new generation certificate. The most iconic – and extravagant – example is of course the sale on 11 March of the digital work “Everydays: the first 5000 days”, by Beeple, auctioned by the very prestigious Christie’s. The work fetched a record amount of over 69 million dollars. Under the scrutiny of art critic Ben Davis, the individual vignettes, one per day for 5,000 days, are far from brilliant – many are even racist or misogynistic, he reveals on the Artnet website.
This is a “milestone for digital art collecting”, according to Christie’s representatives:
“Digital art has an established history dating back to the 1960s. But the ease of duplication traditionally made it near-impossible to assign provenance and value to the medium”
The artists are pouring in. Digital artist Raphaël Rozendaal raked in around $210,000 (€176,500) for his first two NFTs. Last February, a cryptoart of the iconic ‘Nyan Cat’ was sold for the equivalent of nearly $400,000 (€336,190).
2021: The redistribution of wealth?
Art and music industry players, who have been creating on the net for decades without finding a viable means of remuneration, hope to turn this technique into a new opportunity. According to the Music Business Worldwide (MBW) specialist magazine, between mid-February and mid-March, the music industry saw $25 million worth of NFTs (€21 million) being traded. PelleK, a musician and Youtuber, pre-sold an NFT album, apparently the first of its kind, on 22 February for the equivalent of almost 135,000 euros.
Tech-savvy artist Grimes, who is married to Elon Musk, auctioned off $6 million (€5 million) worth of digital art as NFTs, including the Death of the Old video, which sold for nearly $389,000.
Superstar DJ Steve Aoki sold €3.5 million worth of NFTs in the form of digital images, designed in collaboration with artist Antonio Tudisco.
Aphex Twin auctioned a creation with long-time collaborator Weirdcore and won nearly $130,000 (€109,260).
While the crypto hype has so far benefited the most prominent artists, it is not impossible to invent new remuneration models, projects Manuel Valente. Like using tokens as a kind of ‘local currency’ to an artist’s or media’s ecosystem. These tokens, issued by the personalities or structures, could thus be used to buy preview tickets for concerts or to access premium content, he imagines.
Tokens, a more democratic way of redistributing wealth? This is the wish of Andrew CM, co-founder of Valuables, the platform for selling tweets. For the founders, the challenge is to monetise, or make a living from content published on social media:
“We felt there was a lot of value left on the table. Most of the money goes to companies and we wanted the people creating the content to be able to monetise it. The idea of writing a tweet or a post was never considered work but we are becoming more open about what we consider to be work”.
And for those who would deplore a monetisation of our social interactions? “The truth is that they already have a monetary value. We just don’t get it back ourselves,” he retorts. In three months, more than 1,740 tweets were sold, the founder details, for an average price of $1,768. The cheapest was sold for less than a dollar.
Significant environmental costs
As a cryptocurrency, NFTs are inherently energy-intensive: they require a lot of computing power and therefore energy to mine (the process by which cryptocurrency transactions are secured).
Artist and technologist Memo Atken has taken on the difficult task of calculating the carbon footprint of this sudden craze for digital certificates of authenticity, which he reports in a three-part analysis on Medium. And his findings are not reassuring:
“While not as bad as Bitcoin, a single Ethereum [currency most often used for NFTs, editor’s note] transaction is estimated to have a footprint on average of around 35 kWh. To put that into perspective, this is roughly equivalent to an EU resident’s electric power consumption for 4 days”
The problem, the artist points out, is that “a single NFT involves many transactions. These include minting, bidding, cancellations, selling and transfer of ownership”.
According to Atken’s calculations:
- 2 out of 3 (67%) of the 633 artists on the SuperRare trading platform have NFTs that correspond to a carbon footprint of more than one tonne – even though half of the artists have only joined the platform in the last six months.
- 1 in 5 (18%) have a carbon footprint of 10 tonnes – equivalent to 12 transatlantic flights or the electricity consumption of an EU resident for 5 years.
To those who like to play with numbers, the artist warns: “Are these numbers accurate? Not necessarily. But if research shows that one hour of Netflix consumes 36g, it’s unlikely to be 10 tonnes”. In other words, while the details may be wrong, the scale is right, and it is worrying.
Aware of the ecological impact of this new form of transaction, some artists are committed to donating part of the profits to ecological associations. This is the case of Aphex Twin, who promise to “plant trees or donate to permaculture projects or start one ourselves”, or the motion designer Gavin Shapiro, who is very involved in the NFTs movement.
An approach that does not convince everyone… like the tweet below.
Others put their activities on hold pending a more environmentally friendly protocol.
Already, there is talk of a less energy-consuming mining process, based on the proof-of-stake protocol rather than proof-of-work (to go further on the technical differences, I recommend this article), as used by the Tezos cryptocurrency. Solutions that will require careful consideration and the participation of the most active and therefore most polluting platforms. Until, perhaps, we finally get our happy ending.