The world's digital marketplace is abuzz about the relatively new addition of NFTs, with many businesses working to either add NFTs to their portfolios or to analyse the trend and work out its longevity. Lives are being changed by NFTs, and some influential individuals are touting them as the future. However, with the marketplace remaining mostly unregulated, with many responses proving mixed or negative, and with even the concept of NFTs still remaining unclear to the wider public, some important questions must be asked: What are NFTs exactly? And what value do they bring, if any?

NFTs Explained

NFTs are defined as 'non-fungible tokens', an economic term for items that are not interchangeable as they contain unique properties; for a real-world example one can look to the human fingerprint, copies and reproductions are possible, but they do not grant the level of ownership that an individual with the genuine article possesses. 

An NFT is bought in the digital marketplace, making use of cryptocurrency to facilitate the purchase, and can comprise anything in the digital space – from pictures or music to Tweets and photos, to name a few forms. Given the variety of NFTs, buyers and sellers can engage in several different ways.

Why do people sell or buy NFTs?

An early benefit ascribed to NFTs is that they allow artists greater control over their digital content than other transactional methods. Though NFTs can be exchanged and sold even after their original purchase, the creator can make sure they receive a percentage of future resales, not a guarantee when it comes to physical artwork.

Buyers of NFTs engage with the process differently depending on their motivation. The digital format of NFTs allows buyers to purchase and keep the works of their favourite creators – like any piece of physical artwork – but is also a new avenue for speculators and traders thanks to its involvement with cryptocurrency. Such traders can buy and sell their NFTs in order to make a profit, with the value of an NFT able to fluctuate as interest accrues or wanes. Certain organisations are using this as an incentive, making NFTs part of their value offering – to mixed reactions. Ubisoft is the first video game company entering the NFT space, and has been met with significant backlash by a consumer base who, according to the company’s representatives, “don't get it for now”.

What’s the catch for NFTs?

A significant concern facing the potential buyers and sellers of NFTs is the manner in which this new concept affects the environment. The creation of a typical NFT causes a significant amount of carbon emissions – the equivalent to travelling 500 miles in a fossil-fuel-powered car in America – and this has led to many would-be buyers or sellers of NFTs deciding that the gains are not worth the cost to the climate.

Are NFTs here to stay?

NFTs are a new trend, so it is not inconceivable that improvements will be made to the system and that the concerns of environmentally aware groups or individuals will be addressed and resolved. Similarly, despite the lack of buy-in from many consumers, companies are pushing forward with their NFT strategies and individuals are engaging with the concept in different and unanticipated ways. However, in the grand scheme of events, NFTs still represent uncharted territory in terms of adoption and regulations. It is conceivable that NFTs are here to stay but, until the lasting power and mainstream adoption of the concept is confirmed, it remains to be seen if NFTs will stay in their own crypto bubble or emerge into widespread use.

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By Tim Keogh

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