Nft: the speculative bubble with a high environmental impact | Milena Gabanelli


Nft: the speculative bubble with a high environmental impact |  Milena Gabanelli
Written by aquitodovale

Nft, which stands for non-fungible token, is all the rage. A good can be easily interchangeable with something else: a 100 euro banknote is worth as much as all other banknotes of the same type, and can be exchanged with pieces of 50 and 10 without losing value. Non-fungible, on the other hand, a good that is not interchangeable with something else. The non-fungible token is the deed of ownership and certification of the cryptographic authenticity of a single asset in digital form, guaranteed by a blockchain, which fulfills the task of a digital public register. It can be sold or bought through a marketplace (the equivalent of a commerce site) which only uses cryptocurrency for transactions. Usually theEthereum.

The idea was born in the art world

Nft was born in 2014 in the art world to bypass gallery owners and auction houses and sell directly, with the certainty that from each transfer of ownership the artist collects a commission (generally around 10%). And therefore the higher the value, the higher the commission. The first ever work in the form of Nft Everydays: the first 5000 days. The digital artist Beepleevery day for 13 years, he created a digital image and then grouped the 5 thousand pieces in a maxi jpg which was auctioned by Christie’s in 2021 (on the OpenSea marketplace) for ben 69 million dollars.

Those who paid this amount did not receive a print, but a digital certificate attesting to the ownership of the original of the work

NFTs are becoming a source of income for museums or collectors. For example the company Cinello has associated a digitized reproduction of Michelangelo Buonarroti’s Doni tondo, in a limited series. The original analogical and unique work is always exhibited at the Uffizi in Florence, which was thus able to pocket some useful money for the museum itself.

… And then it spread to everything

From the world of art, NFT has extended to all fields. The genius consists in having set in motion a mechanism that creates scarcity and guarantees properties uniqueness of an asset, material or digital, artistic or non-artistic. In the non-digital world there is natural scarcity and every replication of any non-digital object costs and is never exactly the same as the original. In the digital world, however, the original cannot be distinguished from the copy, which is therefore available to everyone, without natural costs. Artificial scarcity had to be introduced where natural abundance existed instead.

The steps to create, sell or buy an NFT

To create an account on a marketplace, you must have a wallet (digital wallet) and buy cryptocurrencies in a Exchange, a service that allows you to change an official currency into cryptocurrency and vice versa. MetaMask is one of the most used crypto-wallets, and OpenSea is the most popular marketplace platform. At each stage you pay commissions, even very high ones. The most used cryptocurrency for the trading of NFT is Ethereum.

When Nike and Adidas churn out a new model of shoes they associate a NFT with it. You buy physical and virtual shoes. With the physical ones you go for a walk in the real world, with the virtual ones in the Metaverse and only you (and the few others who have paid a fortune for those NFTs) can do it. In short, a new frontier that is seducing young people, collectors, artists. All attracted by the possibility of doing business without intermediaries in the way. In reality mediation just shifted from traditional brokers (auction houses, gallery owners) to platforms, and a long list of new players. We see.

Disintermediation and data retention

Cryptocurrency bypasses the states that issue money, and the banks that the transactions pass through. The guarantee assures you blockchain, and possession of the cryptocurrency determined by a long cryptographic string that the holder must keep in a safe place. If he loses it, no one will ever in any way be able to recover it on the blockchain and therefore the availability of the cryptocurrency he has in his digital wallet is lost forever. It is estimated that over 20% of the existing cryptocurrency is no longer due because the owner has lost his credentials, or if he takes them with him by passing to a better life.

The new mediators

New intermediaries have emerged around NFTs: communication, consultancy or expert companies who advise those who want to do an NFT ul how to do it, on what to do it, how to launch it. It is good to know that the Nft is launched first (drop), and only when someone buys it will it be minted and end up on the blockchain. Since there is a real frenzy about buying NFTs, some sites even provide advice on how to behave at a launch, such as: Avoid launches that don’t fit within your budget, or: Avoid buying launches just because they cost little.

In short, we need subjects capable of creating sentiment and attention on someone and on an event, to induce those who have money (but also those who have very little) to invest them in Nft with the hope of reselling them, earning them

If an unknown artist, without a suitable image hype, his NFT will remain dead and not purchased on the market place where he created it, exactly as happens to a painting by an unknown artist. And then someone has to do the digital files to associate the Nft with. Fiverr a service agency that recruited artists to create some works to which an NFT sold to was then associated astronomical figures; in fact, these artists have been paid a few euros to make some parts, and they will pay nothing of the sales. Who buys what has in hand instead? Nothing physical, but the digital ownership of a digital copy. And how long does an NFT last over time? Because the digital world is made up of fast aging software and hardware.

Anyone can do NFT on anything and anyone, but to give up the rights of something you have to hold them. A hospital orthopedist George Pompidou of Paris has put up for sale the NFT of the X-ray of an injured woman al Bataclan. The direct interested party denounced him, the hospital is taking the doctor to court, and the platform that had put him up for sale with a valuation of $ 2,700 in Ethereum withdrew it. Hermes instead he sued the digital artist Mason Rothscild for creating an NFT on Birkin bags without Hermes’ knowledge. The legal path is very long and the lawsuits are very difficult to win because the world of international NFTs, and the legal framework that regulates them, has not been defined. Meanwhile, who bought the digital version of the Birkin e he spent $ 4 to $ 40,000 (depending on the model) he certainly cannot hope to resell them.

The scam wallows in the hoax

The largest Nft platform with thousands of users, OpenSeahad to suspend all sales for a period, after the owner of the collection of bored NFT monkeys reported it stolen: value 2.2 million dollars. And the question of the security of these platforms explodes. There are so many plagiarized, fake or spam NFTs that even the Cent platform was forced to press the pause button for a while. British tax authorities instead seized three NFTs for the first time as part of a VAT fraud case for 1.4 million pounds through fake accounts and identities, and sound an alarm: the great publicity that revolves around this online trading attracts a large number of inexperienced investors. Investors who do not get scammed only with NFTs: from the Chainalysis report in 2021, the fake platforms that sell cryptocurrency have stolen 14 billion dollars. Again according to the research firm Chainalysis in 2021 the NFT market hovered around 44 billion dollars.

A market that feeds on a collective frenzy and of which few know the mechanisms. In this regard, Flavio Bini’s story on Republic. The only certainty is that it is a speculative tool where someone becomes very rich and many others will remain with the match in hand. Meanwhile there is a cost that we are all paying: the environmental one.

Environmental impact of an NFT from birth to sale

I notice that cryptocurrency production consumes a lot of electricity (thousands of maxi computers that work day and night). But it also consumes the blockchain on which the NFTs are. Polygon one of the blockchains on which the NFTs issued in Ethereum, and considered the most sustainable. On February 3, 2022 – calculated by Digiconomist – which he realizes the Ethereum consumption index – that the 3.7 million transactions Polygon have determined 1,598 tons of CO2that means 430 grams per transaction, 2100 times more than forecasts. So much so that the WWF has suspended its foundrising campaign on Polygon. In a year the Ethereum consume more than 50TWh of electricity (as much as Portugal) and produce 32 MtCO2 equivalent.

So the question arises: with the energy crisis we have and the drama of climate change, do we have to produce cryptocurrency to pay ransoms, promote recycling and blow up the NFT speculative bubble?

interesting to see how the mining businessthat is, the whole process to create new cryptocurrency units and to validate transactions on the blokchain, has changed in the last year.

Previously, the bulk of the business took place in China, where the electricity used was that produced with coal and at the lowest cost. Then China banned them. In the world mining map updated in January 2022 it can be seen that from China the activities have moved to Kazakhstan and from May 2021 in Use.

Giovanna Sissa – professor at the STIET Doctoral School of the University of Genoa collaborated

13 July 2022 | 07:33


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