May - 2022
NFT: Web 3.o, Digital Ownership and Sustainability, Explained
The buzzword NFT is a mystery to many of us. This technology is more than just selling Digital Art. But what does it actually do and how does it actually do it? It’s a subject that is under a lot of discussion and scrutiny because of its volatile nature. So for this edition of Sustainable Insights, we looped in Miranda Verhaar, who is the Co-Founder of Futuratives (bringing Smart Solutions for People & Planet) and an expert that can help solve a part of the mystery.
Miranda is an ardent believer that Smart Solutions must find their way to the problems our Earth and Humanity are coping with and wants NFTs to be the connection and action to get the job done.
What is NFT?
Miranda: Before I start about NFTs, I want you to take a broader look into this moment where NFTs are developing. We are now entering Web 3.0., often called the Web3, also called third-generation Internet.
Inside this issue:
The Internet, in its current form, has undergone several phases. Broadly speaking, these phases are divided into three groups: Web 1.0, 2.0, and 3.0. Web 1.0 can be associated with the age of static websites, as an “only-read” website. Websites were used for the display of static content. Web 1.0 could be described as a one-way street where the user can only see information and cannot add, react to, or judge anything himself. During this period, only SMS messages could be written and sent on your mobile phone. One could not upload or attach images.
The second stage of the evolution of the web can be referred to as Web 2.0. the “read-write” web. During this phase, websites developed interaction opportunities, concepts for social networks and user-generated content appeared. Blogs, social media, and video streaming gained momentum during Web 2.0. Notable keywords are interactive, integrated into everyday life, big, less private, more user-friendly, mobile, and present everywhere.
Today, we are standing at the beginning of Web 3.0, where we will all become the boss of the Web. Open source is an important part of Web 3.0. Anyone can add something to Web 3.0. In addition, all data will be connected to each other in a decentralized way. Whereas in Web 2.0, the data was first in the hands of a number of large (central) players, it is now stored de-centrally in Web 3.0.
Cryptocurrency and Blockchain are already contributing to Web 3.0. Blockchain is a decentralized space where data can be stored and smart contracts exist. Smart contracts are fully digital contracts, that consist of computer code. Smart contracts can ensure that certain tasks are carried out automatically, yet safely, without the need for a middleman.
With Web 3.0, the Web would, therefore, handle data more intelligently and could often process it decentrally and automatically. With the entry of Web 3.0, you will absolutely encounter NFTs on your way.
What is the connection between NFTs and Cryptocurrencies?
Miranda: Now the basics. NFT stands for Non-Fungible Token. Non-Fungible here means that an item is unique and irreplaceable. A token represents the piece of code that represents the item on the Blockchain. Because the NFT is on the Blockchain, you cannot copy this unique token. The right of ownership is recorded on the Blockchain, which you can’t just change.
Each NFT stands for a unique digital item or item that is not fungible, unlike, for example, money or Bitcoins that you can exchange freely and infinitely for each other.
NFTs are still relatively new and many people have not yet become acquainted with digital ownership. That’s why sometimes NFTs are confused with cryptocurrency.
NFT and Crypto have some similarities and various differences. Investing is a popular application of cryptocurrency. Cryptocurrencies are virtual coins with which you can buy or pay for all kinds of products or services. It is increasingly being used in (online) stores. And there are already countless physical stores that accept Bitcoins and other cryptocurrencies. The possibilities are therefore practically endless: you can order a drink with it, book a hotel with it and you can use crypto to buy NFTs!
The possibilities of NFTs have not yet been fully developed yet. The real adoption started in 2021, with the focus mainly on trading illustrations, videos, and items in different games. Nowadays, NFTs can, for instance, be used as digital collectibles, artwork, and for practical applications in the real world.
Can you give us a particular example of NFTs?
Miranda: Digital Artwork.
NFTs, give creators the power to make money from their own work. Artists can put their work as NFT on the Blockchain. This gives the work a unique ‘stamp’ and can immediately be bought by pretty much everyone. Thanks to this traceable stamp, the buyer can be sure that they have an original copy.
The most well-known Digital Artworks are the NFT collections, which consist of thousands of illustrations like Cryptopunks & Bored Ape Yacht Club. Some Digital Works are being sold for millions.
Next is Music. For example, there are artists who release albums as NFTs, and concert tickets too can also be released in the same way. Real fans and collectors also trade in these tokens, giving an artist additional income from royalties.
Event-organizers. Your NFT can be your entrance ticket to the events. The Guaranteed Entrance Token, or GET Protocol, is a Blockchain-inspired ticketing system to be able to sell tickets without fraud.
Videoclips & GIFs. These NFTs can be motion versions of paintings and digital drawings. It can also be a loop video of a memorable moment, like an iconic sports moment.
NFTs for Sustainability. Another way of bringing value to NFTs in the real world is to donate to charity or Sustainable Goals. At this moment, we slowly see a shift from fun-NFTs with a focus on utility for the buyer, to people using and buying NFTs to bring value to the world. Small Sustainable NFT projects are growing day by day. Also, the world’s first Sustainable NFT Awards (link) have been launched on Earth Day 2022 by Futuratives. Here you will find different projects that combine NFT with Sustainability.
Well-known artists are jumping into NFTs as well and are also paying attention to Sustainability and Earth matters. For instance, Beeple who has become one of the most well-known artists working with non-fungible tokens (NFTs), has entered into a collaboration with pop star Madonna.
Together they work on the “Mother of Creation” NFT line: MOTHER OF CREATION (link). Besides NFTs, Sustainable Blockchains producing less than zero carbon dioxide are an upcoming development in the Web 3.0 space. People in Sustainable NFTs are looking for ways to launch these NFTs on sustainable platforms where they find each other.
Miranda: In the future, we will probably see NFTs replace all kinds of traditional contracts in the form of so-called ‘Smart Contracts’. These are pieces of computer codes that record legal agreements between two parties, and that can be executed on a Blockchain. Think about Finance, Real Estate, or Education certificates. In the travel industry, travel documents could be built as an NFT, for example, boarding passes.
Think of medical data about vaccinations and prescriptions, which you can record as NFT on a digital logbook. There’s a reason why many have explored the creation of vaccine booklets like NFT as a way to verify a person’s vaccination status when visiting events and businesses. Sometimes this has already been put into practice. San Marino, a mini-country bordering Italy, passed legislation in July 2021 to create vaccination passports for its citizens. The Digital Tokens would use QR codes that verify a person’s vaccination status using the VeChain blockchain.
The NFT is a new way of interacting with your audience. NFTs ask brands to think differently about their relationship with their fans, or customers. They are no longer just passive consumers but have turned into active ambassadors and investors.
NFTs appeal to our creativity. They ask us to move away from sparse customer experiences and call for engaging interaction that provokes certain actions. People can now become part of your tribe. People can connect with a community of like-minded people. And they can now enjoy something instead of simply using it.
A ticket can just be a work of art based on the theme of the concert. That artwork was created by a groundbreaking or upcoming artist. A ticket is a work of art, that is only available once: in the run-up to the concert. One-of-a-kind. It is the memory of a concert, always present in your digital wallet. A collectible, your ‘tribal sign’ with which you connect with your group.
Brands can create NFT membership cards. People have a natural urge to belong to something. To feel loved. An NFT membership card can help with this. For example, as a catering business, you can offer unlimited free coffee to your ‘VIP members’. Brands can turn members into collectors and offer extra experiences.
Flyfish Club (FFC) (link) the world’s first “member’s only private dining club” in New York, will open its doors in 2022. This NFT restaurant, founded by Gary Vaynerchuk, among others, sold membership cards that are needed to get in at all. People can opt for the ‘Flyish’ (FF) token, which gives you access to the events, outdoor lounge, cocktail lounge, and main dining room.
NFTs can also be linked to products such as clothes or materials. In 2019, Nike has already applied for a patent for ‘Cryptokicks’ (link).
They linked physical Nike shoes to a cryptographic key. This way, you can track the ownership of your Nikes and work on authenticity at the same time. People give that value to NFTs because they want to become part of the story that the brand has created. Linking an NFT to a physical product can add value to the physical item. It also makes it possible to find out the previous owners. So, the product itself also contains a piece of personal storytelling.
There is a lot of talk about NFT and the Metaverse. What is the role of the former in the latter?
Miranda: NFTs might grow to be integrated into the Metaverse, which is a digital network of virtual 3-dimensional
worlds. The Metaverse could have a major impact on our society. For example, a fashion design agency produces virtual clothing that can be worn in the Metaverse. Or architectural building houses and villas in the Metaverse. You can find NFTs decorating the walls in Metaverse spaces.
We are still at the beginning of Web 3.0. If we want to take care of the world, we need to take Sustainability into account when developing further. Web 3.0 can be a major change for people and the planet.
Sustainability and NFTs
NFTs are hot. Quite literally. NFTs themselves do not impact the environment, but how they are minted can have substantial environmental consequences. Blockchains like Ethereum and Bitcoin run using a system called Proof-of-Work (PoW), which is the main reason behind their high energy intensity. Every transaction on the Ethereum PoW platform, including every NFT transaction, uses more than 260 kilowatt-hours of electricity – equivalent to the electricity used by an average US household over 9.05 days (link). While proof-of-work mining is energy intensive, the source of the required energy can be free of emissions. Solar power is a popular choice, but other options include wind and hydro-generated electricity.
With Ethereum, vast amounts of processing energy are needed both to mine (create) the currency, and to confirm transactions on the blockchain (an unchangeable record of transactions). “The Ethereum blockchain uses a global network of computers that compete to process your data for a fee.” “These millions of mining computers all around the world essentially play a game of guess-the-number,” explains Dr Pete Howsen, a senior lecturer at Northumbria University.
The Digiconomist estimates a single Ethereum transaction’s carbon footprint at 33.4 kg of CO2, while artist and programmer Memo Akten estimates that an average transaction specifically for NFTs has a carbon footprint of about 48 kg of CO2. Bear in mind that each time an NFT is minted or sold, that’s another transaction. These estimates tell us that one NFT transaction is likely to have a carbon footprint more than 14 times that of mailing an art print, which Quartz estimates at 2.3 kg of CO2. Despite uncertainties in the calculations, this is enough for one to judge whether a carbon footprint of this scale is acceptable for the act of selling art (link).
A Cambridge University study found that 39% of all PoW work is already run-on renewables, and this number may increase in the future (link).
Most sectors are already moving to renewables, so why should Cryptos be left behind?
But behold! This is not the end of the discussion. If you want to put in your views and thoughts and make us a bit more aware of the digital asset and how to grow it, please reach out to us.