NFTs work because they create digital scarcity and are a great way to encourage people to participate on a platform. However, what is also clear is the massive potential for NFTs to disrupt industries and bring change.
VALUE CREATION VIA NFTs
In April 2021, we wrote about the increasing awareness of NFT technology after Mike Winkelmann sold an NFT for artwork at an eye-watering $69 million. Since then, the use of NFTs has been expanding from the art world into areas unforeseen seven months ago.
WHAT IS AN NFT?
Non-Fungible Tokens (NFTs) is a piece of digital media that, once minted, becomes part of a blockchain or a digital asset that allows ownership to be uniquely identifiable and traceable.
With works of art, a person is buying the prestige of original traceability rather than the artwork itself. Artworks can be reproduced. NFTs allow a person to hold cultural history traceable to its creator rather than simply a reproduction. An NFT linked to a work of art verifies its authenticity and assigns ownership to the creator.
Since April, the use of NFTs has expanded to areas as diverse as scientific research, the not-for-profit sector, and the film industry.
FILM INDUSTRY AND NFT's
The 64th Grammy Awards held in January, announced that NFT collectables were given as awards. A group of actors are using NFTs to fund a weed-themed online cartoon series exclusive to token holders (of TOKEns). The first lot of TOKEns for this series sold out in 35 minutes, with 10,420 tokens selling for about $800 each TOKEn. The total value is approximately $8.3 million.
The actors didn’t set out to use NFTs; however, it became the solution to raise funds for the cartoon series. The capability of NFTs to raise this amount of funding means it will potentially outstrip grant funding and crowdsource financing as a way to fund the Arts. It also means that diverse, alternative or little-known artists can potentially raise funds in alternative ways.
THE NOT-FOR-PROFIT SECTOR AND NFT'S
NFTs are also now used in the not-for-profit sector as a way to raise funds. Jack Butcher, the founder of New York-based graphic design agency Visualize Value, partnered with the Cooperative for American Remittances (CARE) charity and launched a non-fungible token funk to provide care packages to displaced Afghan families.
The NFT care packages are priced around US$85, and post-purchase, donors get to own their care package NFT. Each package supports an Afghan family for one month with shelter, food, and water. The fund raised over US$90,000 and supported 1,000 Afghan families.
The ethics of creating scarcity to drive profitability, particularly when scarcity has a significant environmental impact, must be weighed up.
Other examples of NFTs in the not-for-profit sector include Jack Dorsey selling his first tweet for over $2.5 million with the proceeds going to the American charity – Give Directly.
Charities and not-for-profit organisations using NFTs to raise funds dramatically change the philanthropic landscape and how organisations engage in fundraising.
SCIENTIfic RESEARCH AND NFT'S
In the US, scientific laboratories are beginning to sell NFTs as an alternative/additional funding source for research. This could potentially create a decentralised organisational body that funds critical research without third-party interests taking priority.
NFTs work because they create digital scarcity and are a great way to encourage people to participate on a platform. However, what is also clear is the massive potential for NFTs to disrupt industries and bring change.
SHOULD WE GET ON BOARD WITH NFT's?
Some of the change resulting from the use of NFTs is undoubtedly beneficial. For example, the opportunity for upcoming artists to fund their creativity in alternative ways is a positive for the Arts sector that is traditionally underfunded. The ability for not-for-profit organisations to raise much-needed funds to meet increasing community problems is also a positive.
However, the application of NFTs and how they are used is still in its comparative infancy. New technologies and their application often outstrip legal and ethical implications that get worked out when things go wrong with implementing the technology. As outlined in the earlier article, the impact on the environment of mining NFTs continues to be high.
NFTs work because they create digital scarcity. The ethics of creating scarcity to drive profitability, particularly when scarcity has a significant environmental impact, must be weighed up.
However, given the increasing expansion in the industries where NFTs are being used, we need to consider can we:
- Use NFTs in our industry?
- Use them ethically to achieve good?
- Rationalise that the benefit outweighs the cost, and what will we put back into the environment to help balance the cost of the NFTs we use?
[1] https://beincrypto.com/learn/nfts-explainer
[2] ibid
[3] https://www.pinkvilla.com/tech/news
[4] https://cryptonews.com.au/the-grammy
[5] https://www.vice.com/en/article
[6] ibid
[7] https://forkast.news/headlines/nfts-to-provide-support-to-afghan-families/
[8] ibid
[9] ibid
[10] https://bitcoinist.com/how-nfts-could
