A‌ ‌Peek‌ ‌Into‌ ‌the‌ ‌Darkside‌ ‌of‌ ‌NFTs‌ ‌(Part 2)

Read part 1 here

Complicated‌ ‌&‌ ‌Expensive‌ ‌Minting Process

Compared to the other issues on this list, complexity and price may not be a serious concern for most artists that convert their work to NFTs. However, it could be a barrier to entry for some. While you don’t need to be tech-savvy to mint your own NFT, at the very least it takes a bit of research to understand the process and how it works. But for some even this may even be too much, causing them to forgo creating an NFT or to outsource the process — giving up a bit of control.

And when it comes to price, again, perhaps not a big concern, but if you’re a burgeoning artist living on a shoestring budget, the cost of $100-$200 to mint a single NFT may be a stretch. This also means that you have to sell your work for at least that much to break even. So, paradoxically, while NFT marketplaces may provide another avenue for an artist to gain popularity and share/sell their work, unless they are an established presence in the community, it may be difficult to sell a piece of work for more than the cost of minting.

However, developments like “lazy minting” by OpenSea, which allows artists and creators to make NFTs without the gas fees upfront, can help burgeoning artists create and sell NFTs without having to pay the steep upfront gas fees that may prohibit many creators.

Broken ‌NFT / Missing Asset ‌

‌It turns out that the NFT system is more like a house of cards than previously thought. While there has been a lot of talk about “smart contracts” there still is a significant element of trust that needs to exist in both people and hardware.

An NFT is not a physical asset, but merely just a token that signifies that you own a non-tangible, digital asset. And since it’s digital, it also needs to be stored digitally. This means that it’s going to be kept on a server somewhere — most likely associated with the NFT marketplace where it was bought (Nifty Gateway, OpenSea, Rarible, etc.). But since not much is stored in the NFT itself (usually it’s nothing more than a link and other metadata), where and how it’s hosted is the only thing that shows that the asset exists at all.

This is where the trust comes in. When you buy an NFT you are putting trust in the NFT marketplace and its hosting services that they will continue to operate. The company, Nifty Gateway, for example, could go under. Or, they forget to pay their hosting bill. Or, there is simply a server malfunction. While these events are not likely to be a common occurrence, at some point we are certainly going to see events like these happen. And these are all things that the buyer of an NFT has no control over.

However, there is a solution. Many NFT marketplaces utilize the IPFS (InterPlanetary File System). In this system, the asset file is not stored in a specific domain. Rather, it’s a distributed storage option made up of an interconnected network in which a file is hosted in multiple locations and the IPFS addresses let you find an asset so long as it’s stored somewhere in the IPFS network. The famous NFT by Beeple uses this as its primary hosting. But for other NFTs, it can be simply a backup in case of one of the network failures previously described.

But the IPFS isn’t perfect. The system still needs to be updated and maintained. Check My NFT, which allows checking the strength of your NFTs assets, searched for the IPFS addresses of NFT assets of some major artists (Grimes & deadmau5), and they couldn’t be found. While they were eventually brought back online, it shows the possibility that even with a distributed storage system like IPFS, it still can go down, even to world-famous artists.

Ownership‌ ‌&‌ ‌Copyright‌ ‌Issues‌ ‌

Aside from the environmental problems, copyright theft or copyright infringement is the next biggest concern of NFTs.

Just as many artists have cashed in on the trend, and made significant sums on their work, others have fallen prey to bad actors. Specifically, artists, actors, musicians, and others have found their work or likeness being sold in the form of an NFT without their consent.

The most famous and widespread case of this is the automated NFT tweet-minting bot called @tokenizedtweets. This bot clandestinely creates NFTs of tweets and their media. Examples of assets that have been stolen along with the tweets are pieces of digital art, photos, etc. The content is tokenized and then sold and the owner of the tweet has no idea this is taking place. Some of the victims, which includes artists, authors, and actors among others, don’t find out for months, or even years later.

The NFT concept has provided a platform for some serious irony. On one hand, tokenization can help to verify and authenticate legitimate works — which is what drives such high prices for digital tokens. But on the other hand, it’s never been easier for a bootlegger to profit from the sales of unauthorized NFTs.

The most frustrating aspect is that @tokenizedtweets and other bad actors are operating in plain sight. They are shamelessly hawking bootlegged assets scraped up by a bot. And since NFTs are so new, artists have had to protect themselves. This includes making their accounts private (which negatively impacts their reach) and then filing complaints with each NFT marketplace their work appears as there is no legal protection and the verification practices are seemingly nonexistent. However, as this problem grows, it seems that the verification process is getting better, but still is not nearly enough to sufficiently protect against unauthorized NFTs.

Looking Onwards and Upwards: Ethereum Alternatives and Energy Efficiency

The future of NFTs may seem pretty bleak given the aforementioned arguments, however, that’s not truly the case. Yes, of course, there is cause for concern, but these problems are being addressed. And one of the most concerning ones — the adverse environmental impact — has a solution now. Alternative blockchain protocols are becoming increasingly popular for NFT minting and thus increasingly viable as alternatives to ETH-based marketplaces. Some of these protocols are Solana, Polkadot, Avalanche, and Cardano. All of which are PoS and use significantly less energy than their PoW cousins Bitcoin and Ethereum.

So, how much less energy do these alternative protocols use? A staggering amount actually. As of November 2021, a single transaction on the Solana blockchain uses 1,837 J of energy. Which is just under the amount of energy used to conduct two Google searches (2,160 J). While a single Ethereum transaction uses 692,820,000 J, which is 377,147 times the amount of energy for a single Solana transaction. So, in theory, using the same amount of energy, you can mint over 377,000 NFTs on the Solana blockchain for a single NFT on the Ethereum 1.0 blockchain.

By Tres Kitzmiller, 2022
©ArtAdvance

Resources

Anthony L. Andrady & Mike A. Neal. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2873019/
Joanie Lemercier. https://joanielemercier.com/the-problem-of-cryptoart/
https://en.wikipedia.org/wiki/Celluloid#History
https://www.sciencehistory.org/the-history-and-future-of-plastics
https://digiconomist.net/ethereum-energy-consumption
https://www.investopedia.com/terms/b/bitcoin-mining.asp#:~:text=Bitcoin%20mining%20is%20the%20process,to%20speed%20up%20mining%20operations.
https://ethereum.org/en/developers/docs/consensus-mechanisms/pos/
https://solana.com/news/solana-energy-usage-report-november-2021

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ArtAdvance

ArtAdvance

NFT marketplace but better: NFTs, Web3, Fractional Art, support for artists, social causes.