How NFTs are Reinventing the Digital World
The prices for digital arts sold as NFTs are skyrocketing. The Christie’s auction for the digital artist, Beeple, closed on the final bid of $69 million. The ferocity with which the industry has evolved is shocking. The number of wallets purchasing NFTs, the number of transactions of NFTs across the board, and the prices for NFT artists have all gone up. Many companies are betting that NFTs will enter the video game world in a big way, which if successful, could open NFTs to a massive new audience, and forever change the way we value digital objects.
Role of blockchain in the digital world
Through blockchain technology, digital objects, like a JPEG file or a virtual sneaker, or even a meme that you’d typically think about as infinitely reproducible can now be made scarce. Tokenizing or minting is the process you can go through via blockchain to create a record of scarcity. In the blockchain, you can enter into a ledger that there are only 1,000 versions of this digital object, or 100, or even just one. You can take something that was infinitely replicable and give it artificial scarcity. Only the holder of the NFT can actually own the item and choose to resell them in exchange for cryptocurrencies.
Apart from digital artworks and games, various other sectors are also finding applications of NFTs. People are connecting houses, physical artworks, and even portions of an entire soccer team in a Mexican soccer league to NFTs.
Challenges in the industry
Growing the market for NFTs currently can come at some pretty high costs. Each transaction requires a ton of energy from computers worldwide, potentially resulting in increased carbon emissions. Although the Ethereum network is hard at work to reduce this overall energy consumption, it remains too high to support a scaled version of this model.
Blockchain doesn’t make digital objects better. What makes this technology powerful and exciting is the ability to ignite a community. If you build the right community, then the digital objects you own will be valuable within that community, and people will want to own them and trade them amongst each other.
For many, it’s outrageous to spend $69 million on a Beeple’s piece or $120,000 on a banana duct-taped to a wall. Value for things that have no use-value is entirely the result of perception. A Picasso is just oil paint on canvas. It does not do anything but is valuable because we, as a society, have decided that it’s valuable. So, depending on what the community decides, NFTs could become a brief, weird piece of history or an integral part of the way that we engage with each other and companies.