By: Riona Duncan
Over the last year, the market for non-fungible tokens (NFTs) has exploded. These artworks, videos, and event tickets are a trendy new form of cryptocurrency. Although most people hadn’t heard of them a year ago, NFT sales reached $11.3 billion in 2021 Q4. Beyond becoming a larger part of the financial sector, NFTs have also become much more visible in the public eye. For example, they’ve integrated into Twitter, which has a special hexagonal-shaped frame for people using them as profile pictures. There are even social clubs that require membership to be bought as NFTs.
Although Twitter discourse may make you think otherwise, you can’t steal an NFT by right-clicking it. NFTs are minted, or made into cryptocurrency, by having a certificate of ownership coded onto the blockchain. The blockchain is a decentralized network that processes transactions by having computers solve computational problems, which is called proof of work mining. Once the data shared on the blockchain is confirmed, it can’t be changed. Elise Swopes, an NFT artist, says that one of the biggest benefits of NFTs is “sovereignty. It allows you to have a substantial contract within the blockchain.” It’s very easy to verify ownership and legitimacy because the history of transactions of an NFT is irreversibly coded into the blockchain.
Coding this data onto the blockchain uses a lot of energy. Most NFTs are based on the platform Ethereum, and Ethereum mining consumes about 26.5 terawatt-hours of electricity a year. Because of this, there has been a backlash against people who make and use NFTs, and some drops have been canceled. Lucinda Lindstrom, a Chicago-area teen, said “you have to think about where your money is going. It’s not worth it, even if the bigger problem is a lack of renewable energy.” In response to this kind of pressure, companies such as Tezos have transitioned towards a proof of stake model, in which users who have a certain amount of cryptocurrency are selected randomly to verify transactions.
Ethereum plans to move towards the proof of stake model this summer despite the technical difficulties and is forecasted to rise in value accordingly. As institutions like the NFL and Coachella adopt them, it’s clear that NFTs are here to stay.