The What and Whys of NFTs
Blockchain Creative Labs hosted a NFT Gallery where people could view and make their own non-fungible tokens. Image credit - Kara Carlson/American Statesman
In March 2021, an artist named Beeple sold a piece of digital art through Christie’s for $96 million. In July 2022, The Museum of Fine Arts, Boston, offered an NFT collection of Impressionist pastels, including works by Monet and Jean-Francois Millet, hoping to raise money for conservation work. Houston’s Lago Mar Crystal Lagoon waterpark sold season passes as NFTs this year, granting the owners access to special perks at the park. Coachella is even selling a lifetime pass as an NFT. NFTs are the hottest ticket on the runway this fall. Just kidding. The market crashed. But people are still investing in NFTs, and it’s still worth exploring if it’s the right avenue for your attraction.
Are you asking yourself, “what is an NFT, and why do I care?” To better understand NFTs, start with crypto. Crypto? Start with blockchain. It’s a dizzying array of terms. Let’s talk through them.
Blockchain: It’s not quite this simple but simply put, it’s a way to store data. The blockchain serves as a ledger of transactions. Blockchains are typically decentralized—one company or bank doesn’t control it. Instead, a network of computers stores a public record. Ethereum, QTUM, and Cardano are blockchain platforms.
Cryptocurrency: Digital or virtual currency. Cryptocurrencies, including Ether, Bitcoin, Litecoin, and Dogecoin, use the blockchain to record transactions. There is no regulating authority.
NFT: NFT stands for non-fungible token. Instead of a piece of paper like a car title, or a physical artwork, ownership is recorded with a unique digital identifier on the blockchain, and any sales or transfers are also tracked. Collectors don’t consider copies authentic (so if you were thinking of downloading, stop). The real versions are traced back to the token on the blockchain. The token is considered unique, but the reality feels a little fuzzier. NFTs can be limited to one unique digital piece or more like trading cards where multiple versions can be purchased—but each will have an individual token to verify authenticity. Either way, the piece doesn’t exist in a physical realm to be hung on the wall like a traditional painting—it would have to appear in a digital frame. Although art may get the most attention, NFTs could be digital ticket stubs, music, or video. Or a digital ape.
Yes, I said ape.
BORED APE YACHT CLUB
Welcome to the Bored Ape Yacht Club. It’s kind of like a quilting circle but in the digital world. Pay a few million dollars, own the token for a graphic of an ape that’s bored, and it can go hang out in a bar that doesn’t physically exist. I can’t explain what goes on from there because they wouldn’t let me expense a bored ape for this article.
Sounds great, right? You might be seeing a few applications already. Tickets in the form of an NFT could provide increased interaction with your guest before, during, and after a visit. Many locations have transitioned to digital tickets but providing them as NFTs allows people to preserve the ticket, linking it to the memory of the event. The owners of your NFT could have access to special events or experiences at your location, making them feel like VIPs. And much like the Bored Ape Yacht Club, NFT owners can interact with your brand from home in an exclusive digital club. Of course, there’s also the potential for making a lot of money. Nike has made more than $185 million in revenue from NFTs, and its digital space, Nikeworld, boasts more than 7 million visitors.
NFTs may allow for engaging a new generation of visitors—Millennials are the most common buyer of NFTs. Communities have popped up around NFT ownership, creating a dedicated, loyal base and a strong social media marketing force. Museums like the Lighthouse NFT Smart Gallery in Puerto Rico and Seattle NFT Museum are opening to display NFT artwork. Much like the Museum of Fine Arts, Boston, other traditional museums have created NFTs to generate revenue and attract a new audience.
Emerging artists and artists from underrepresented groups may also find a home in the NFT market. In the NFT marketplace, buyers decide who is worthy of recognition rather than a museum gatekeeper. Artists can prove the authenticity of their work when it’s an NFT because everything is recorded on the blockchain. Artists can also build in royalties for the secondary market, earning a percentage for each art sale.
Aside from trying to figure out what an NFT is, what’s the downside?
NFTs have a significant impact on the environment. Picture Amazon warehouses full of computers constantly running, using massive amounts of electricity. Estimates of Bitcoin’s energy use rival that of entire countries.
COUNTRY RANKING
Country comparisons are, for better or for worse, the most common type of comparison. They are frequently used in the public debate to support positions of concern about the scale of Bitcoin’s electricity consumption.
Source - Data as of Aug 29, 2022
U.S. Energy Information Administration, Country Data, 2019 est. (or most recent available year)
The World Wildlife Fund (WWF) announced earlier this year that they were entering the NFT market with Tokens for Nature to support conservation work. WWF said it used an environmentally friendly version called Polygon, but there was still considerable backlash. Many companies are pushing toward sustainable options, but there’s a long way to go.
The blockchain, in theory, makes things difficult to steal. If you sell one, the blockchain records the transaction in a safe. But as with everything on the internet, there’s a catch. Hackers and scammers have had a field day with NFTs. Scammers can create copies and attach tokens; so, while a buyer may think they are getting an original piece of art with an authentic token, they’re just getting a replica. Open Sea, a large NFT marketplace, said 80 percent of the NFTs created in its free platform were fraudulent. And Open Sea itself has had its fair share of negative headlines. The NFT market isn’t safe from accusations of a plethora of fraud.
Back to those apes…
For now, I’ll visit the real, living apes at my local zoo. But I won’t be surprised if I find a digital version of one of them being adorable available on the NFT marketplace soon.
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