What are NFTs?
NFTs stand for non-fungible tokens. It is a term I often hear about when I listen to my regular podcasts but I never went into detail in learning about it. This is because I felt the term was not the prime focus of the podcast. However this week I decided to find out what it was all about and a whole can of worms came out! I had to do A LOT of research to better understand what NFTs are all about as well as why and who are using them. One of the best explanations states that:
´An NFT is simply a record of who owns a unique piece of digital content. That content can be anything from art, music, graphics, tweets, memes, games – you name it. If it’s digital and it was created, it can be an NFT. It’s ‘non-fungible” because it can’t be readily exchanged for a similar good at a similar price.´
While this was a succinct statement, it rose more questions than answers. How are they created? Who authenticates them? Where are they stored? How are they priced? Here is what I learned.
NFTs in a nutshell.
NFTs are unique digital content and are stored in the blockchain. The blockchain is a ´decentralized ledger of all transactions across a peer-to-peer network. Using this technology, participants can confirm transactions without a need for a central clearing authority.´1. It costs money to create an NFT and can only be done with cryptocurrency. The most popular cryptocurrency used to create an NFT is Ethereum.
After purchasing Ether you can then create an NFT. The question then arises; where do you mint (create) an NFT? This can be done on an NFT marketplace such as OpenSea, Rarible, or Mintable. The cost to mint an NFT varies from platform to platform and the majority of them fluctuate significantly. This is because ´users are responsible for paying for the computing energy required to process and validate transactions on the blockchain. The gas fees fluctuate depending on the time of day.2´ So the price you pay to mint an NFT may not translate in a profit margin when selling that same digital asset a day later. You may even be losing money.
Why do writers use NFTs?
In essence, writers might be interested in NFTs as an additional income and would particularly appeal to core readers and fans. Some examples of NFTs that authors might create include:
- Different book covers.
- Multiple endings of a book.
- An additional chapter.
- A limited-edition reading of a newly released book.
- Special editions that include a special forward, a signed (digital) copy, or notes from the author.
There are endless possibilities. While I believe there are opportunities to explore in regard to the digital space, I am hesitant in diving headlong into the NFT world. The first reason is the environmental cost when generating an NFT. An article published in The Time this March brings to light critics who say that ´Ethereum mining consumes about 26.5 terawatt-hours of electricity a year, nearly as much as the entire country of Ireland and its almost 5 million residents.3´
Moreover, no copyright rules have been established that would help authenticate the ownership of an NFT!
The future of NFTs.
I personally believe that the current craze of NFTs will eventually settle down and a more accurate assessment will be made. I am currently not an established author and I think it would be foolish to get onto the NFT bandwagon. However more personally, I am not sure my environmental conscience would allow me.
I have collected a list of reading material for this post. If you would like to learn more about NFTs I have listed the articles below.
Learning more about NFTs:
- NFTs, explained.
- NFTS FOR BOOKS: HOW THIS EMERGING TECH CAN REWARD AUTHORS & READERS.
- 9 Ways Writers Can Use NFTs
- THE CLIMATE CONTROVERSY SWIRLING AROUND NFTS.
- Building an open digital economy.
- Create Your Own NFT. Fast.
- Will NFTs Finally Fulfill The Blockchain Promise To Music?
- Selling crypto art can come with huge hidden fees, leading some people to lose hundreds of dollars.
- Making sense of bitcoin, cryptocurrency and blockchain.
- Digital NFT Art Is Booming—But at What Cost?