Not so long ago, I remember being inundated with proposals for new blockchain-based music delivery systems. The promise made to musical artists was, “You can charge what you want for your music” and “Take all the money instead of giving it to a label.” It got to the point where instead of just labeling the blockchain as a technology underlying their offering, they labeled it as a feature. After a year of unrealized predictions, the mere mention of the blockchain put the proposal in the “next” file. If the very smart folks in the record companies weren’t already using the technology, then maybe there wasn’t “there.”
Basics of NFT
However, February 2021 shed new light on the technology, this time in the form of NFT, or non-fungible tokens. An NFT is simply a record of who owns a unique piece of digital content. This content can be anything from art, music, graphics, tweets, memes, games – you name it. If it’s digital and it was created, it could be an NFT. It is “non-fungible” because it cannot be easily exchanged for a similar product at a similar price.
When someone “hits” an NFT, they create a file that lives on the blockchain. The beauty of this technology is that once this happens, it cannot be copied and pasted, edited, deleted, or otherwise manipulated. This is the original creation, and although copies of the work may be made and distributed, they are not the original and therefore have less value.
When people think of blockchain, they immediately think of Bitcoin, which is also technology-based. NFTs, however, use a different cryptocurrency called Ethereum, which means that you must first buy Ether to buy an NFT.
The promise kept?
Recently we saw an NFT digital flower sell for $ 20,000, a looping music video for $ 26,000 and a LeBron James sock and clip for over $ 100,000. Even Nike
Electronic music producer 3lau sold 33 NFT for a total of $ 11,684,101, which included a platinum-plated vinyl record redeemable for a custom song by the artist as well as access to unreleased music and a vinyl record. bonus physics.
Daft Punk released several collectible NFTs on the Rarible platform before announcing their breakup. Grimes sold 10 works of art, one for almost $ 400,000, while the aftermarket (which is booming) for the works brought in $ 2.5 million. Mike Shinoda of Linkin Park sold a digital artwork for $ 30,000. Many artists, seeing the potential income, are understandably interested in following suit.
One of the big attractions for artists is that NFTs provide ongoing payment beyond the initial sale. If the token is sold later in a secondary market, the creator will be paid 10% of the purchase price, and this will continue for any sale of the coin thereafter.
There are costs
Most entrepreneurs envisioned blockchain as a way to democratize getting paid, where the average artist could finally make money just as easily as the superstar. However, NFTs turn out to be the exact opposite, as only top performers in all areas of entertainment seem to be making money so far.
Not only that, there are costs involved. According to industry analyst Cherie Hu, the cost of minting an NFT is at least $ 70, which means the price of the token would start somewhere in the neighborhood of $ 100. This is because the online sales platform will take between 3 and 15% of the transaction for the initial sale, with a 10% fee being typical for secondary sales.
This high initial price makes the token banned for the average fan, who is quickly shut out of the market. NFTs seem to be for super-fans only.
Yet a potentially bigger problem is the fact that typing NFTs, and crypto-media in general, is incredibly power hungry and, therefore, poses a significant risk to the environment. For example, in 2018 it was estimated that Ethereum mining alone used more energy than the entire country of Iceland to validate its blockchain. Although a new, more energy-efficient method is promised, for now the process is anything but carbon neutral.
And there are concerns
NFT sales raise a number of fairly common issues which are easily addressed in the non-crypto world and which do not appear to be explored here. On the one hand, how are the royalties calculated and paid? While the artist benefits from the sale, how are co-authors, publishers and producers paid?
Another concern is copyright issues. Currently, there is no platform authentication to verify that the creator of a token is actually the owner. What if someone decides to create an NFT of something they don’t own?
NFTs are indeed the hot trend of the day and it is more than likely to continue. It’s a great use of blockchain as it fulfills its promise of being an income generator for creators, but by far it’s not perfect. We are going to take an interesting tour.