tag:theconversation.com,2011:/global/topics/non-fungible-tokens-100652/articlesNon-fungible tokens – The Conversation2023-10-01T19:16:08Ztag:theconversation.com,2011:article/2141452023-10-01T19:16:08Z2023-10-01T19:16:08ZAre NFTs really dead and buried? All signs point to ‘yes’<figure><img src="https://images.theconversation.com/files/550799/original/file-20230928-25-9i311a.jpg?ixlib=rb-1.1.0&rect=53%2C35%2C5937%2C3952&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Non-fungible tokens (NFTs) are in dire straits. With the market in a severe downturn, it’s safe to assume the NFT bubble has well and truly burst.</p>
<p>It was never clear why these digital collectables traded for such large amounts of money. Now they mostly do not. What’s behind their turn of fate? And is there any hope for their future?</p>
<h2>What are NFTs?</h2>
<p>Non-fungible tokens are a blockchain-based means to claim unique “ownership” of digital assets. “Non-fungible” means unique, as opposed to a “fungible” item such as a five-dollar bill, which is the same as every other five-dollar bill. </p>
<p>But just because an item is unique that doesn’t make it valuable. Digital assets are easily copied, so an NFT is essentially a receipt showing you have paid for something that other people can get for free. This is a pretty dubious basis for value.</p>
<p>The <a href="https://coinmarketcap.com/nft/">two most traded sets of NFTs</a> are the Bored Apes collection created in April 2021 and the CryptoPunks collection launched in June 2017. </p>
<p>Both sets consist of 10,000 similar-looking but unique figures, distinguished by differing hairstyles, hats, skin colours and so forth. The <a href="https://opensea.io/collection/boredapeyachtclub">Bored Ape</a> character seems derivative of the drawings of Jamie Hewlett, the artist who drew Tank Girl and Damon Albarn’s virtual band <a href="https://www.gorillaz.com/">Gorillaz</a>. The <a href="https://opensea.io/collection/cryptopunks">CryptoPunks</a> are even less interesting.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/550778/original/file-20230928-19-s52sc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/550778/original/file-20230928-19-s52sc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/550778/original/file-20230928-19-s52sc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/550778/original/file-20230928-19-s52sc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/550778/original/file-20230928-19-s52sc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/550778/original/file-20230928-19-s52sc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/550778/original/file-20230928-19-s52sc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/550778/original/file-20230928-19-s52sc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The CryptoPunk NFTs are basic computer-drawn faces.</span>
<span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/en/0/07/Cryptopunks_general.jpg">Wikimedia</a></span>
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<h2>Why did people buy NFTs?</h2>
<p>Although the first NFTs emerged around a decade ago, the trend really started to take off in 2021. And for a time NFTs were very fashionable.</p>
<p>Even the venerable auction house <a href="https://www.sothebys.com/en/buy/auction/2021/ape-in/101-bored-ape-yacht-club">Sotheby’s</a>, founded in 1744, jumped on the NFT bandwagon. Sotheby’s sold 101 Bored Ape NFTs for more than US$20 million in September 2021. They’re now facing a <a href="https://www.artnews.com/art-news/news/sothebys-added-defendant-investors-lawsuit-bored-ape-yacht-club-nfts-1234677041/">lawsuit</a> from a disgruntled buyer.</p>
<p>As with Bitcoin and similar speculative tokens, the primary driver for buying NFTs <a href="https://www.theguardian.com/artanddesign/2022/jan/04/bored-ape-nft-art-eminem">was greed</a>. Seeing the initial price rises, people hoped they too could make huge profits. NFTs are essentially a superficially sophisticated form of gambling. <a href="https://theconversation.com/what-is-bitcoins-fundamental-value-thats-a-good-question-171387">Like Bitcoin</a>, they have no fundamental value.</p>
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Read more:
<a href="https://theconversation.com/nfts-an-overblown-speculative-bubble-inflated-by-pop-culture-and-crypto-mania-174462">NFTs, an overblown speculative bubble inflated by pop culture and crypto mania</a>
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<p>Generally, one would only profit from buying an NFT by finding a “<a href="https://www.chase.com/personal/investments/learning-and-insights/article/greater-fools-day-dont-be-the-one-holding-the-joke">greater fool</a>” willing to pay even more for it. So there was never a shortage of people – including <a href="https://hypebeast.com/2022/1/eminem-bored-ape-yacht-club-nft-450000-usd-purchase">some quite</a> <a href="https://twitter.com/ksicrypto/status/1430511420454719497">famous ones</a> – talking them up and hoping to instil a fear of missing out. </p>
<p>Eminem bought a Bored Ape that looked a bit like him. Rapper KSI <a href="https://twitter.com/ksicrypto/status/1430511420454719497">boasted on Twitter</a> about his Bored Ape rising in price. </p>
<p>For a while there were large increases in the prices of many NFTs. But like all speculative bubbles, it was likely to end in tears. Although it’s almost impossible to predict when a bubble for a speculative asset will burst, we have seen this process play out before.</p>
<p>Centuries ago there were the <a href="https://theconversation.com/tulip-mania-the-classic-story-of-a-dutch-financial-bubble-is-mostly-wrong-91413">Dutch tulip</a>, <a href="https://curiosity.lib.harvard.edu/south-sea-bubble/feature/the-crash">South Sea</a> and <a href="https://www.investopedia.com/ask/answers/09/mississippi-bubble.asp">Mississippi</a> bubbles. Around 1970, there was a speculative bubble in the shares of <a href="https://www.rba.gov.au/publications/confs/2003/simon.html">nickel miner Poseidon</a>. Then came the <a href="https://www.ft.com/content/1563d643-332f-3887-8c6e-caf7435f396a">Beanie Baby</a> and <a href="https://www.rba.gov.au/publications/confs/2003/simon.html">dotcom</a> booms of the late 1990s – and more recently, <a href="https://www.theguardian.com/business/2021/feb/02/gamestop-shares-plunge-as-traders-dump-stock">meme stocks</a> and <a href="https://www.nber.org/papers/w31160">Terra-Luna cryptocurrency</a>. </p>
<h2>The NFT crash</h2>
<p>Punters now seem to be as bored with NFTs as the apes. Google searches for “NFT” – which grew rapidly through 2021 – have <a href="https://trends.google.com.au/trends/explore?date=today%205-y&q=NFT&hl=en-AU">fallen away</a> dramatically. Trading volumes <a href="https://www.ft.com/content/f3e40b9b-8b29-4483-a3cd-91cef39c4d49">have collapsed</a>.</p>
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<a href="https://images.theconversation.com/files/550784/original/file-20230928-15-eoxphh.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/550784/original/file-20230928-15-eoxphh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/550784/original/file-20230928-15-eoxphh.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=361&fit=crop&dpr=1 600w, https://images.theconversation.com/files/550784/original/file-20230928-15-eoxphh.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=361&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/550784/original/file-20230928-15-eoxphh.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=361&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/550784/original/file-20230928-15-eoxphh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=453&fit=crop&dpr=1 754w, https://images.theconversation.com/files/550784/original/file-20230928-15-eoxphh.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=453&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/550784/original/file-20230928-15-eoxphh.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=453&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Google searches for ‘NFT’ reached an all-time high around early 2022.</span>
<span class="attribution"><span class="source">Author provided/Data from Google Trends</span></span>
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<p>Prices in the NFT market have also seen huge falls. The prices of Bored Ape NFTs are <a href="https://www.coingecko.com/en/nft/bored-ape-yacht-club">down about</a> 90% from their peak. The CryptoPunks have done <a href="https://www.coingecko.com/en/nft/cryptopunks">slightly better</a> by losing only 80%. </p>
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<span class="caption">The value of Bored Ape NFTs has fallen dramatically since March of last year.</span>
<span class="attribution"><span class="source">Author provided/Data from Coingecko.com</span></span>
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<p>A recent <a href="https://www.theguardian.com/technology/2023/sep/22/nfts-worthless-price">report</a> covering about 73,000 NFTs estimated 70,000 are now valued at zero. This leaves 23 million people holding a worthless “asset”.</p>
<p>One <a href="https://www.bbc.com/news/world-us-canada-56307153">high-profile example</a> is an NFT of the first tweet by then-Twitter CEO Jack Dorsey. Crypto entrepreneur Sina Estavi <a href="https://www.theguardian.com/technology/2022/apr/14/twitter-nft-jack-dorsey-sina-estavi">bought this NFT</a> for US$2.9 million in March 2021. When he tried to sell it a year later the top bid <a href="https://www.theguardian.com/technology/2022/apr/14/twitter-nft-jack-dorsey-sina-estavi">was US$6,800</a>.</p>
<p>What drove the NFT collapse? As well as losing their novelty, the market was hurt by the large falls in the price of Bitcoin and other cryptocurrency, as well as the collapse of the <a href="https://www.investopedia.com/what-went-wrong-with-ftx-6828447">FTX exchange</a> and <a href="https://www.theguardian.com/technology/2022/aug/24/nfts-stolen-non-fungible-tokens-criminals-scam-cryptocurrency">publicity given to scams</a>. </p>
<p>Beyond that, the lifting of COVID lockdowns meant people who began trading NFTs now had <a href="https://www.theguardian.com/commentisfree/2023/sep/27/nfts-non-fungible-tokens-pandemic-loneliness-craze">other ways to pass their time</a>. And higher interest rates from mid-2022 made most speculative assets seem less attractive. </p>
<p>Collectively, all of these factors made NFTs seem like a riskier proposition. Prominent people started jumping off the bandwagon. Some of <a href="https://twitter.com/ksicrypto/status/1395026285068435461">KSI’s</a> later tweets lament the losses he suffered from his gambles. </p>
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<p>Last year, British Prime Minister Rishi Sunak announced, when he was chancellor of the exchequer (their equivalent of treasurer), the Royal Mint would produce an NFT. The plan has now been <a href="https://www.bbc.com/news/uk-politics-65094297">abandoned</a>.</p>
<p>Some foolish people had even taken out loans using the “value” of their <a href="https://www.afr.com/technology/bored-ape-owners-sent-broke-after-nft-price-collapse-20230706-p5dm7c">NFTs as collateral</a>. When the lenders wanted the money back, they were in trouble: forced to sell their NFTs, they got back much less than they’d paid. Fortunately, there weren’t enough people like this to lead to a systemic problem in the financial sector.</p>
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Read more:
<a href="https://theconversation.com/damien-hirsts-dotty-currency-art-makes-as-much-sense-as-bitcoin-166958">Damien Hirst's dotty 'currency' art makes as much sense as Bitcoin</a>
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<h2>Gone for good?</h2>
<p>NFTs probably won’t completely disappear. Some subjects of past bubbles are still around. Tulips are still grown in the Netherlands. Poseidon shares, <a href="https://www.firstlinks.com.au/fifty-years-ago-poseidon-made-todays-waaax-look-waned#">which ran up</a> from 80 cents in September 1969 to $280 in February 1970, are still listed (and currently trading <a href="https://www.marketindex.com.au/asx/pos">for 2 cents</a>).</p>
<p>But unless some actual use is found for them, NFTs are likely to fade further from public discussion, with their prices increasingly trending down (although the occasional blip up may give die-hard fans some hope).</p>
<p>They will probably join the Dutch tulips and dotcoms in the history of speculative follies.</p>
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Read more:
<a href="https://theconversation.com/almost-no-one-uses-bitcoin-as-currency-new-data-proves-its-actually-more-like-gambling-207909">Almost no one uses Bitcoin as currency, new data proves. It's actually more like gambling</a>
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<p class="fine-print"><em><span>John Hawkins does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>This is why no one is buying your cartoon ape.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1912992022-12-11T13:41:48Z2022-12-11T13:41:48ZNFTs in the art world: A revolution or ripoff?<figure><img src="https://images.theconversation.com/files/486288/original/file-20220923-10674-ahh3cj.jpg?ixlib=rb-1.1.0&rect=4%2C2%2C986%2C556&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Many NFT creators come from a practice of 3D modelling, graphic design, animation or video game design. </span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Non-fungible tokens (NFTs) are digital objects that represent something else, such as a work of art, a video or even a <a href="https://www.theguardian.com/technology/2022/apr/14/twitter-nft-jack-dorsey-sina-estavi">tweet</a>. They certify the existence and the ownership of this item through a data recording on a blockchain (a <a href="https://www.cpacanada.ca/en/business-and-accounting-resources/other-general-business-topics/information-management-and-technology/publications/introduction-to-blockchain-technology">distributed ledger technology</a>).</p>
<p>Since the emergence of NFTs in 2016, many artists have experimented with this new digital device to market their creations. NFTs are most often bought and resold via auction sites, where payments are made in cryptocurrency (such as <a href="https://ethereum.org/en/eth/">ether currency</a>). It is this notion of a certificate registered on a blockchain that distinguishes an NFT from a standard digital work.</p>
<p>The public and media discourse about NFTs is polarized: in the eyes of their strongest enthusiasts, NFTs represent the future of art, while their detractors consider them a vast ripoff and waste of energy.</p>
<p>How can this NFT phenomenon be characterized? To what extent does it challenge the established codes of contemporary art?</p>
<p>As a researcher specialized in media studies and sociology of culture, I am providing a brief overview of the situation.</p>
<h2>Crypto-evangelists and crypto-skeptics</h2>
<p>On one hand, there is the camp that can be described as crypto-evangelists: they adhere to a discourse that present NFTs as a radical revolution that will change everything.</p>
<p>This is precisely the discourse surrounding the sensational 2021 sale of a work by the artist Beeple (a collage of vignettes created by digital software) at the prestigious auction house Christie’s for nearly US$70 million. According to the <a href="https://www.thetimes.co.uk/article/beeple-how-i-changed-the-art-world-for-ever-tggbx99vm">two main buyers</a>, the purchase was “emblematic of a revolution in progress,” and marked “the beginning of a movement carried out by a whole generation.”</p>
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<p>On the other side, there are the crypto-skeptics. This is the position of Hito Steyerl, a widely recognized media artist. She believes that NFTs are the “equivalent of toxic masculinity,” and owe their development to “the worst and most monopolistic actors” who are “extracting labour from precarious workers” and “<a href="https://www.holo.mg/stream/hito-stereyl-nfts-like-toxic-masculinity/">take up way too much attention and use up all the oxygen in the room</a>.”</p>
<p>This polarization means that the real potential of NFTs, as well as their flaws, which are also very real, tend to be overshadowed by caricatured positions of principle. However, within this ecosystem of NFTs, there exists a set of rich and plural artistic practices.</p>
<h2>Emerging creative scenes</h2>
<p>The NFT format definitely represents a new type of object being traded. It is based on a new type of contract (known as “smart”), which is itself the result of the innovation of blockchain technology. In this way, the NFT format has given rise to the emergence of a new creative scene. Or, rather, scenes, in the plural, which are characterized by a great effervescence — but also by certain contradictions.</p>
<p>The “native” scenes of the NFT format, that is to say, those born with the invention of this format, are characterized by a strong media visibility, a volume of far-reaching financial investment, and, for some of its actors, a will to reshuffle the cards of the art world by criticizing its established order.</p>
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<p>A large portion of NFT creators come from a practice of 3D modelling, graphic design, animation or video game design — in other words, from the creative industries sector. In recent decades, this sector has generated a very large pool of skills, whose <a href="https://doi.org/10.1080/07053436.2004.10707657">creative surplus</a> finds a mode of expression in the NFT format, but also a source of additional income to cope with the often precarious conditions of creative work.</p>
<p>Many figures of the native NFT scenes are, to use the expression of the <a href="https://www.simonandschuster.com/books/Outsiders/Howard-S-Becker/9781982106225">sociologist Howard S. Becker</a>, outsiders (neophytes) in comparison to the established art world. That is, they socialize in circles other than those of the institutional art world, and they transgress its rules in many respects.</p>
<h2>A more egalitarian art world?</h2>
<p>The discourse of the main purchasers of Beeple’s sensational work is very enlightening in this sense. MetaKovan and Twobadour (two investors of the crypto world, both of Indian origin) reveal in an interview:</p>
<blockquote>
<p>We have been conditioned, from a very young age, to think that art was not for us. <a href="https://www.thetimes.co.uk/article/beeple-how-i-changed-the-art-world-for-ever-tggbx99vm">…We have always been against the idea of exclusivity. The metaverse is all inclusive. … A metaverse in which everyone will have the same rights, powers, will be legitimate. … It is particularly egalitarian.</a></p>
</blockquote>
<p>However, there are major contradictions between the discourse of egalitarianism they are advocating here, and its implementation in the projects of these two investors. For example, during the technological art event <a href="https://www.dreamverse.life/ticketing.html">Dreamverse</a> that they organized in New York in 2021, the price of admission to the evening varied between US$175 and $2,500 — an unaffordable cost for many amateurs. This hierarchy of prices leads, rather, to the reproduction of a logic of exclusivity that favours the most fortunate.</p>
<h2>Museums are cautious</h2>
<p>The gap between the market value of NFTs and their value in museums is unprecedented. The former is reaching unprecedented heights, while the latter is still at rock bottom. Indeed, the collection of NFT by museums remains, to this day, a very marginal practice. Only a handful of NFTs are integrated into museum collections. Some of them are acquired following an exhibition in a museum, where they are presented on digital screens hung on the wall.</p>
<p>Cultural legitimacy is affected by the disintermediation (elimination of intermediaries) and reintermediation (introduction of new intermediaries) that characterize the world of NFTs. In its disruptive impulse, the proclaimed revolution of NFTs cuts itself off from a chain of well-established, legitimate intermediaries — the gallery owners, curators, art critics, conventional collectors and public subsidies.</p>
<p>It has replaced them with new intermediaries, primarily “whales” — investors who have made a fortune in cryptocurrency — or popular culture celebrities. These new intermediaries overinvest in financial capital in the production of NFTs with the aim of gaining a position of prestige as a collector, or to enrich themselves by increasing the value of works. But they often lack the social and cultural capital to find a way to access museums and their exhibition spaces and their collections.</p>
<h2>In search of legitimacy</h2>
<p>However, these works are publicly accessible, as all NFTs are freely searchable on their buyers’ e-wallets. Some collectors buy works only to speculate. Others gain visibility by displaying their NFTs in a metaverse (a virtual world) such as <a href="https://decentraland.org/">Decentraland</a> or <a href="https://www.tryspace.com/">Space</a>.</p>
<p>And for others, still, the quest for legitimacy goes further: in the spring of 2022, a group of artists, curators, collectors and NFT platforms organized a <a href="https://decentralartpavilion.io/">Decentral Art Pavilion</a>, in parallel to the Venice Biennale. Remaining outside the official program, the exhibition aimed to position NFTs in the orbit of this key contemporary art event.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1527990090319790080"}"></div></p>
<p>But the presence of NFTs remained marginal in this edition of the biennial. Only the <a href="https://www.labiennale.org/en/art/2022/cameroon-republic">Cameroon pavilion</a> exhibited NFTs under the leadership of a curator with a <a href="https://news.artnet.com/art-world/outrage-kenyan-pavilion-venice-biennale-281137">shady reputation</a>, and the result was disappointing.</p>
<p>The recognition of the NFTs by the consecrated art world will perhaps come about by other avenues, like the more experimental practices presented at the <a href="https://documenta-fifteen.de/en/">documenta art exhibition in Kassel, Germany</a> this year, or through artistic movements from developing countries, like the <a href="https://balot.org/">Balot project</a>, which used an NFT to criticize the <a href="https://www.theguardian.com/artanddesign/2022/feb/19/congolese-statue-loan-legal-battle-nfts-colonial-rule-us-museum">appropriation of a work originating from the Republic of the Congo by an American museum</a>.</p>
<p>So recognition could come through the margins. But in these cases, the marginal players could more easily access the established art world because they share its codes.</p><img src="https://counter.theconversation.com/content/191299/count.gif" alt="La Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nathalie Casemajor ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>Creators of NFT art are organizing themselves into new art scenes, but they are still searching for cultural legitimacy while museums remain skittish.Nathalie Casemajor, Professeure, Institut national de la recherche scientifique (INRS)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1946872022-12-02T13:40:41Z2022-12-02T13:40:41Z3 ways cryptocurrency is changing the way colleges do business with students and donors<figure><img src="https://images.theconversation.com/files/498040/original/file-20221129-16-igul3k.jpg?ixlib=rb-1.1.0&rect=53%2C0%2C6000%2C3988&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Universities are seeking to boost bottom lines and personal connections with cryptocurrencies.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/illustration/woman-study-by-stock-trading-royalty-free-illustration/1356601296">Irina Marchenko/iStock via Getty Images</a></span></figcaption></figure><p>Until about 2020, universities used cryptocurrencies only to <a href="https://theconversation.com/ransomware-criminals-are-targeting-us-universities-141932">pay ransoms to criminals attacking their networks</a>. A fast payment to criminals helped victim universities restore their networks quickly.</p>
<p>With <a href="https://www.insiderintelligence.com/insights/us-adults-cryptocurrency-ownership-stats/">increasing public adoption</a> of cryptocurrencies, especially <a href="https://www.ypulse.com/report/2022/04/07/buying-into-crypto-and-nfts-trend-report/">among young consumers</a>, universities are exploring them, too. As of early 2022, <a href="https://www.cnbc.com/2022/03/31/cryptocurrency-news-21percent-of-adults-have-traded-or-used-crypto-nbc-poll-shows.html">20% of U.S. consumers had used</a> cryptocurrencies. According to an <a href="https://www.ypulse.com/report/2022/04/07/buying-into-crypto-and-nfts-trend-report/">April 2022 report</a>, 28% of 13- to 39-year-olds had purchased at least one type of cryptocurrency. Among consumers in this age group, <a href="https://www.ypulse.com/article/2022/04/11/heres-how-many-gen-z-millennials-have-bought-crypto-nfts/">13% had purchased and 38% were interested in</a> a particular offshoot of cryptocurrencies called non-fungible tokens.</p>
<p>Cryptocurrencies have lost market value from a peak of <a href="https://www.bloomberg.com/news/articles/2022-06-30/bank-of-america-s-crypto-users-shrunk-by-50-in-bear-market">about US$3 trillion in November 2021</a> to <a href="https://coinmarketcap.com/">$804 billion in November 2022</a>. And their uses are not as widespread as they were as recently as 2021. Despite <a href="https://www.thetimes.co.uk/money-mentor/article/is-bitcoin-crash-coming/">the crashes in value</a> and loss in confidence due to <a href="https://www.nytimes.com/2022/11/17/briefing/crypto-collapse-ftx.html">the collapse of some large crypto exchanges</a>, universities appear to me to be open to a potential market recovery. </p>
<p>In my recent <a href="https://scholar.google.com/citations?user=g-jALEoAAAAJ&hl=en&oi=ao">research</a>, I have looked at educational institutions’ use of crypto assets such as <a href="https://www.e-elgar.com/shop/usd/the-rise-of-blockchains-9781802208160.html">cryptocurrencies</a> and <a href="https://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=9903860">non-fungible tokens</a>. I see three ways that universities are using cryptocurrencies.</p>
<h2>1. Accepting tuition payments</h2>
<p>People want to be <a href="https://investors.sofi.com/news/news-details/2022/SoFi-at-Work-Study-Reveals-Three-in-Four-Workers-Are-Stressed-About-Financial-Issues-Spending-9-Working-Hours-Per-Week-Dealing-With-Personal-Finances/default.aspx">paid in cryptocurrencies</a> and use it to <a href="https://cointelegraph.com/news/airbnb-users-want-crypto-payment-options-according-to-ceo-twitter-poll">buy goods and services</a>. Businesses are responding to this trend, setting up systems to <a href="https://usa.visa.com/about-visa/newsroom/press-releases.releaseId.18711.html">accept payments in cryptocurrencies</a>. </p>
<p>Universities are responding, too. <a href="https://www.bizjournals.com/boston/news/2022/05/04/bentley-university-crypto-payments-tuition.html">Since May 2022</a>, Bentley University outside Boston has allowed students to pay tuition with <a href="https://www.bentley.edu/offices/student-accounts/payments">cryptocurrencies such as bitcoin, ethereum and USDC</a>. Some universities accept cryptocurrency payments only for certain programs. For instance, in the fall of 2021, the Wharton School of the University of Pennsylvania <a href="https://almanac.upenn.edu/articles/wharton-first-ivy-league-school-to-accept-tuition-payments-in-cryptocurrencies/">announced it would accept</a> cryptocurrencies to pay tuition in its executive education program in the <a href="https://news.wharton.upenn.edu/press-releases/2021/10/wharton-launches-economics-of-blockchain-and-digital-assets-executive-education-online-certificate-program/">economics of blockchain and digital assets</a>.</p>
<p>Paying tuition in cryptocurrency is faster, cheaper and easier for international students, because doing so lets them avoid paying fees for <a href="https://www.upromise.com/articles/pay-for-college-with-crypto/">currency conversion and international transfer transactions</a>. And universities benefit by receiving cryptocurrency payments immediately, rather than facing a delay of several days for overseas bank transactions.</p>
<p>Universities around the world deal differently with crypto’s price volatility.
The University of Nicosia in Cyprus <a href="https://www.topschoolsabroad.com/posts/list-universities-allow-pay-tuition-fees-bitcoin/">immediately converts bitcoin</a> to euros. But Paraguay’s Universidad Americana <a href="https://www.banklesstimes.com/cryptocurrency/resources/which-universities-accept-cryptocurrency/">evaluates price trends</a> before converting into its national currency.</p>
<h2>2. Receiving crypto gifts</h2>
<p>It is becoming increasingly common for universities to accept cryptocurrency gifts. In 2021, the public charity organization Fidelity Charitable received the equivalent of <a href="https://www.bloomberg.com/news/articles/2022-02-15/crypto-gifts-surge-1-082-at-fidelity-s-philanthropic-powerhouse">US$331 million in digital gifts</a>, which was about 12 times more than in 2020.</p>
<p>As of 2021, technology company The Giving Block agreed to help <a href="https://www.bestcolleges.com/news/analysis/2021/12/13/crypto-philanthropy-higher-education-bitcoin-ethereum/">about 100 universities</a>, such as the University of Arizona, the University of Maryland, the University of Alabama, Catholic University and Wake Forest University, handle cryptocurrency payments and donations. Some universities have added cryptocurrency guidelines on their “How to Give” pages and <a href="https://uif.uillinois.edu/cryptocurrency">provided instructions for donors</a>. </p>
<p>In early November 2022, Vitalik Buterin, a co-founder of the ethereum blockchain, gave the University of Maryland <a href="https://today.umd.edu/record-breaking-9-4m-crypto-gift-to-fund-study-of-air-disinfection-to-prevent-future-pandemics">$9.4 million in cryptocurrency</a>. The money will be used to fund public health research.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/498064/original/file-20221129-24-aquvft.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A screenshot of an auction listing for an NFT" src="https://images.theconversation.com/files/498064/original/file-20221129-24-aquvft.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/498064/original/file-20221129-24-aquvft.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=220&fit=crop&dpr=1 600w, https://images.theconversation.com/files/498064/original/file-20221129-24-aquvft.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=220&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/498064/original/file-20221129-24-aquvft.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=220&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/498064/original/file-20221129-24-aquvft.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=276&fit=crop&dpr=1 754w, https://images.theconversation.com/files/498064/original/file-20221129-24-aquvft.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=276&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/498064/original/file-20221129-24-aquvft.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=276&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The University of Pennsylvania auctioned off NFTs of images from university-held patents to raise money for further research.</span>
<span class="attribution"><a class="source" href="https://onlineonly.christies.com/s/university-pennsylvania-mrna-nft-vaccines-new-era/university-pennsylvania-mrna-nft-vaccines-new-era-1/157132">Christies</a></span>
</figcaption>
</figure>
<h2>3. Exploring non-fungible tokens</h2>
<p>Some universities are successfully capitalizing on this trend to raise money, and to strengthen connections with alumni.</p>
<p>When blockchain technology, <a href="https://theconversation.com/can-blockchain-technology-help-poor-people-around-the-world-76059">a database of transaction records stored in many computers at once</a>, was first invented, it supported only money-like assets such as bitcoin and other cryptocurrencies. The technology has evolved to create a special kind of digital asset called non-fungible tokens. A non-fungible token is a unique image, video or audio file <a href="https://blockchainhub.net/blog/blog/nfts-fungible-tokens-vs-non-fungible-tokens/">representing an item such as a physical painting</a> or a song stored on blockchains. The file, and information about who owns it, are stored on a blockchain. </p>
<p>Of course, a non-fungible token is not the asset itself, but is a <a href="https://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=9903860">one-of-a-kind, exclusive digital version</a> of it, which some people value and view as <a href="https://www.luxurytribune.com/en/nft-the-ultimate-in-dematerialised-social-status">a social status symbol</a>. One non-fungible token artwork, “The Merge,” which was created by a pseudonymous artist, was sold for <a href="https://cointelegraph.com/news/life-changing-money-the-10-most-expensive-nfts-sold-to-date">$91.8 million</a> in December 2021.</p>
<p>In June 2022, the University of California, Berkeley minted a non-fungible token based on the <a href="https://www.insidehighered.com/news/2022/01/20/colleges-cash-nfts-new-fundraising-mechanism">Nobel Prize–winning research of immunologist James Allison</a>. The token’s auction raised <a href="https://www.bloomberg.com/news/articles/2021-05-27/nft-for-nobel-prize-winning-data-to-be-auctioned-by-uc-berkeley#xj4y7vzkg">about $50,000</a>. The proceeds funded immunology research.</p>
<p>Colleges such as Brigham Young University and Syracuse University are <a href="https://www.businessinsider.com/colleges-nfts-marketplaces-nil-student-athletes-2022-9">bundling non-fungible tokens with real-world perks</a> such as VIP seats for events they organized. Some people are willing to pay more for the combination than for the real-world items alone.This increases non-fungible tokens’ attractiveness.</p>
<p>In May 2022, Harvard University announced that every graduate from Harvard College would <a href="https://www.thecrimson.com/article/2022/5/24/class-of-2021-nfts/">receive a commemorative non-fungible token</a>. And Duke University grants <a href="https://pratt.duke.edu/about/news/duke-engineerings-fintech-program-sends-certificates-coursera-students-nfts">completion certificates in the form of non-fungible tokens</a> for those who pass one of its blockchain technology courses.</p>
<p>Georgetown University’s McDonough School of Business gave the members of its class of 2020 non-fungible tokens as a gift. The tokens were digital twins of the physical 2020 Challenge Coin gifts <a href="https://twitter.com/GtownBlockchain/status/1530300142431088640">given to the students as a token of appreciation</a>. The coin’s back features the building that <a href="https://msb.georgetown.edu/news-story/a-token-of-appreciation-mcdonough-delivers-georgetowns-first-nft-to-the-class-of-2020/">houses the university’s business school</a>.</p>
<p>Universities are using cryptocurrencies to manage operations, raise funds and enhance relationships with students and alumni. If these assets recover from their current crash and begin to boom again, these trends may further accelerate.</p><img src="https://counter.theconversation.com/content/194687/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nir Kshetri does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite a recent crash in value, universities are using cryptocurrencies for a variety of purposes and reasons.Nir Kshetri, Professor of Management, University of North Carolina – GreensboroLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1828192022-06-15T12:26:20Z2022-06-15T12:26:20ZHow we describe the metaverse makes a difference – today’s words could shape tomorrow’s reality and who benefits from it<figure><img src="https://images.theconversation.com/files/465865/original/file-20220529-53562-v9r9jp.png?ixlib=rb-1.1.0&rect=3%2C0%2C2552%2C697&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The metaverse might be a work in progress, but a key prototype – the virtual world – has been around for several decades.</span> <span class="attribution"><span class="source">Screen capture from Second Life by Tom Boellstorff</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>Quick, define the word “metaverse.”</p>
<p>Coined in 1992 <a href="https://www.penguinrandomhouse.com/books/172832/snow-crash-by-neal-stephenson/">by science fiction author Neal Stephenson</a>, the relatively obscure term <a href="https://trends.google.com/trends/explore?q=metaverse&geo=US">exploded in popularity during the COVID-19 pandemic</a>, particularly after Facebook rebranded as Meta in October 2021. There are now myriad articles on the metaverse, and <a href="https://venturebeat.com/2022/03/31/everyones-joining-the-metaverse-but-the-real-business-opportunity-is-building-your-own/">thousands of companies have invested in its development</a>. Citigroup Inc. has estimated that by 2030 the metaverse <a href="https://icg.citi.com/icghome/what-we-think/citigps/insights/metaverse-and-money_20220330">could be a US$13 trillion market</a>, with 5 billion users. </p>
<p>From climate change to global connection and disability access to pandemic response, the metaverse has incredible potential. Gatherings in virtual worlds have considerably lower carbon footprints than in-person gatherings. People spread all over the globe can gather together in virtual spaces. The metaverse can allow disabled people <a href="https://doi.org/10.1080/1369118X.2018.1472796">new forms of social participation through virtual entrepreneurship</a>. And during the early days of the COVID-19 pandemic, the metaverse not only <a href="https://www.draxtor.com/virtualcultures">provided people with ways to connect</a> but also served as a place where, for instance, those sharing a small apartment could be alone. </p>
<p>No less <a href="https://gizmodo.com/meta-horizon-worlds-metaverse-vr-headset-zuckerber-1849002182">monumental dangers exist as well</a>, from surveillance and exploitation to disinformation and discrimination. </p>
<p>But discussing these benefits and threats remains difficult because of confusion about what “metaverse” actually means. As a <a href="https://scholar.google.com/citations?user=uFsG9kcAAAAJ&hl=en">professor of anthropology</a> who has been researching the metaverse for almost 20 years, I know this confusion matters. The metaverse is at a virtual crossroads. Norms and standards set in the next few years are likely to structure the metaverse for decades. But without common conceptual ground, people cannot even debate these norms and standards. </p>
<p>Unable to distinguish innovation from hype, people can do little more than talk past one another. This leaves powerful companies like Meta to literally set the terms for their own commercial interests. For example, Nick Clegg, former deputy prime minister of the U.K. and now president of global affairs at Meta, attempted to control the narrative with the May 2022 essay “<a href="https://nickclegg.medium.com/making-the-metaverse-what-it-is-how-it-will-be-built-and-why-it-matters-3710f7570b04">Making the Metaverse</a>.”</p>
<h2>Categorical prototypes</h2>
<p>Most attempted definitions for metaverse include a bewildering laundry list of technologies and principles, but always included are virtual worlds – places online where real people interact in real time. Thousands of virtual worlds already exist, some gaming oriented, like <a href="https://www.epicgames.com/fortnite/en-US/home">Fortnite</a> and <a href="https://www.roblox.com/">Roblox</a>, others more open-ended, like <a href="https://www.minecraft.net/en-us">Minecraft</a> and <a href="https://animal-crossing.com/new-horizons/">Animal Crossing: New Horizons</a>. </p>
<p>Beyond virtual worlds, the list of metaverse technologies typically includes avatars, nonplayer characters and bots; virtual reality; cryptocurrency, blockchain and non-fungible tokens; social networks from Facebook and Twitter to Discord and Slack; and mobile devices like phones and augmented reality interfaces. Often included as well are principles like interoperability – the idea that identities, friendship networks and digital items like avatar clothes <a href="https://theconversation.com/what-is-the-metaverse-2-media-and-information-experts-explain-165731">should be capable of moving between virtual worlds</a>.</p>
<p>The problem is that humans don’t categorize by laundry lists. Instead, decades of research in cognitive science has shown that <a href="https://psycnet.apa.org/record/1987-97828-003">most categories are “radial,” with a central prototype</a>. One could define “bird” in terms of a laundry list of traits: has wings, flies and so on. But the prototypical bird for North Americans looks something like a sparrow. Hummingbirds and ducks are further from this prototype. Further still are flamingos and penguins. Yet all are birds, radiating out from the socially specific prototype. Someone living near the Antarctic might place penguins closer to the center. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/468857/original/file-20220614-11-ru1v1i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a graphic of a sparrow-like bird in the middle of a ring surrounded by a hummingbird, duck and chicken in a second ring, with an ostrich, kiwi, penguin and flamingo outside the second ring" src="https://images.theconversation.com/files/468857/original/file-20220614-11-ru1v1i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/468857/original/file-20220614-11-ru1v1i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468857/original/file-20220614-11-ru1v1i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468857/original/file-20220614-11-ru1v1i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468857/original/file-20220614-11-ru1v1i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468857/original/file-20220614-11-ru1v1i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468857/original/file-20220614-11-ru1v1i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">This representation of radial categories shows that the prototypical bird for most Americans is a sparrow, and that while ostrich legs are bird parts, they aren’t part of every bird.</span>
<span class="attribution"><span class="source">Tom Boellstorff</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Human creations are usually radial categories as well. If asked to draw a chair, few people would draw a dentist chair or beanbag chair.</p>
<p>The metaverse is a human creation, and the most important step to defining it is to realize it’s a radial category. Virtual worlds are prototypical for the metaverse. Other elements of the laundry list radiate outward and won’t appear in all cases. And what’s involved will be socially specific. It will look different in Alaska than it will in Addis Ababa, or when at work versus at a family gathering.</p>
<h2>Whose idea of essential?</h2>
<p>This matters because one of the most insidious rhetorical moves currently underway is to assert that some optional aspect of the metaverse is prototypical. For instance, many pundits define the metaverse as <a href="https://www.fool.com/investing/stock-market/market-sectors/information-technology/metaverse-stocks/metaverse-crypto/">based on blockchain technology</a> and cryptocurrencies. But many existing virtual worlds use means other than blockchain for confirming ownership of digital assets. Many use national currencies like the U.S. dollar, or metaverse currencies pegged to a national currency.</p>
<p>Another such rhetorical move appears when Clegg uses an <a href="https://miro.medium.com/max/1400/1*_dujMK5Pp2ZZO1EdLrvfpg.png">image of a building</a> with a foundation and two floors to argue not only that interoperability will be part of “the foundations of the building” but that it’s “<a href="https://nickclegg.medium.com/making-the-metaverse-what-it-is-how-it-will-be-built-and-why-it-matters-3710f7570b04">the common theme across these floors</a>.” </p>
<p>But Clegg’s warning that “without a significant degree of interoperability baked into each floor, the metaverse will become fragmented” ignores how interoperability isn’t prototypical for the metaverse. In many cases, fragmentation is desirable. I might not want the same identity in two different virtual worlds, or on Facebook and an online game. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/6XLk9uUjuFU?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The 13-year-old computer game Minecraft lets players build virtual worlds, which makes it a prototypical element of the metaverse.</span></figcaption>
</figure>
<p>This raises the question of why Meta – and many pundits – are fixated on interoperability. Left unsaid in Clegg’s essay is the “foundation” of Meta’s profit model: tracking users across the metaverse to <a href="https://www.markettradingessentials.com/2021/07/heres-how-zuckerberg-thinks-facebook-will-profit-by-building-a-metaverse/">target advertising and potentially sell digital goods</a> with maximum effectiveness. Recognizing “metaverse” as a radial category reveals that Clegg’s claim about interoperability isn’t a statement of fact. It’s an attempt to render Meta’s <a href="https://news.harvard.edu/gazette/story/2019/03/harvard-professor-says-surveillance-capitalism-is-undermining-democracy/">surveillance capitalism</a> prototypical, the foundation of the metaverse. It doesn’t have to be.</p>
<h2>Locking in definitions</h2>
<p>This example illustrates how defining the metaverse isn’t an empty intellectual exercise. It’s the conceptual work that will fundamentally shape design, policy, profit, community and the digital future. </p>
<p>Clegg’s essay concludes optimistically that “time is on our side” because many metaverse technologies won’t be fully realized for a decade or more. But <a href="https://www.penguinrandomhouse.com/books/97779/you-are-not-a-gadget-by-jaron-lanier/">as the VR pioneer Jaron Lanier has noted</a>, when definitions about digital technology get locked in they become difficult to dislodge. They become digital common sense.</p>
<p>With regard to the definitions that will be the true foundation of the metaverse, time is emphatically not on our side. I believe that now is the time to debate how the metaverse will be defined — because these definitions are very likely to become our digital realities.</p><img src="https://counter.theconversation.com/content/182819/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Boellstorff does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Who makes money from the metaverse, and how, comes down to what it becomes. And shaping the metaverse is, to a large degree, a matter of definitions.Tom Boellstorff, Professor of Anthropology, University of California, IrvineLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1824462022-06-01T11:53:17Z2022-06-01T11:53:17ZNFTs: how top brands like Nike and Prada are using them – and what could go wrong<figure><img src="https://images.theconversation.com/files/466409/original/file-20220531-20-x8ukck.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Forget real sneakers – soon we'll be more worried about the digital variety. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/avatars-metaverse-online-store-merchandising-via-2140674043">naratrip2</a></span></figcaption></figure><p>Luxury fashion house Prada has a scheme for customers who want something even more exclusive than its usual range of clothing and accessories. Each month, on a first-come first-served basis, the Time Capsule Collection offers ultra-limited editions of Prada products. They’re only on sale for 24 hours, with purchases delivered straight to customers’ doors. </p>
<p>For the new June edition, there’s <a href="https://www.ledgerinsights.com/prada-to-incorporate-nfts-in-time-capsule-project/">an extra twist</a>. Those who buy one of only 100 black and white button-down shirts by Cassius Hirst, son of renowned British artist Damien, will receive an NFT (non-fungible token) as part of the experience. They are GIFs of the black and white capsules that Prada uses to brand these events, and they’re also being made available to purchasers of previous editions. </p>
<p>It is the latest example of how top brands are experimenting with NFTs to add another dimension to their businesses. This has recently included everything from Nike digital sneakers to virtual collectables from sport clubs such as AC Milan. For example, <a href="https://www.esquiremag.ph/money/wealth/virtual-gucci-bag-roblox-a00304-20210526">Gucci is selling</a> a digital bag for more than its real-world equivalent (US$4,115 vs US$3,400), in a sign that the Prada NFTs could fetch a high price if they are resold. </p>
<p>Most of the media coverage around NFTs has focused on big art auctions such as <a href="https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million">Beeple’s Everydays</a>, a giant digital collage that sold for US$69 million, and the heavily hyped <a href="https://boredapeyachtclub.com/#/">Bored Ape Yacht Club</a>, 10,000 cartoon avatars of primates looking, well, bored. But clearly, the arrival of traditional brands is also a major part of the story. Total NFT sales for 2022 are heading for <a href="https://finance.yahoo.com/news/nft-market-sales-dropping-170000363.html">about £90 billion</a>, more than double 2021 despite the fact that markets are sinking right now. </p>
<p>So what are the best examples of brands operating in this space, and are there pitfalls?</p>
<h2>Early movers</h2>
<p>NFTs are online assets that double as certificates of ownership, usually of digital items such as a piece or art or a video, but potentially even physical things like an item of clothing or a car. People can buy and sell NFTs on marketplaces including <a href="https://opensea.io/">OpenSea</a>, <a href="https://looksrare.org/">LooksRare</a> or <a href="https://magiceden.io/">Magic Eden</a>, and the <a href="https://www.cnbc.com/2022/03/10/trading-in-nfts-spiked-21000percent-to-top-17-billion-in-2021-report.html">market exploded</a> in 2021 on the back of the Beeple hype and leading celebrities like Snoop Dogg and Lebron James issuing NFTs of their own. </p>
<p>Sport associations such as <a href="https://www.cbsnews.com/news/sports-nft-dapper-labs-nba-investment/">NBA</a> and <a href="https://www.cbsnews.com/news/sports-nft-dapper-labs-nba-investment/">NFL</a> were among the early movers, selling NFTs of collectable cards of sporting heroes, videos of classic moments, and even jerseys autographed by players. This is all about using NFTs to capitalise on a loyal fan base by offering them rare assets. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/466410/original/file-20220531-16-jyi8f1.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Rows of sports NFTs" src="https://images.theconversation.com/files/466410/original/file-20220531-16-jyi8f1.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/466410/original/file-20220531-16-jyi8f1.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=506&fit=crop&dpr=1 600w, https://images.theconversation.com/files/466410/original/file-20220531-16-jyi8f1.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=506&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/466410/original/file-20220531-16-jyi8f1.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=506&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/466410/original/file-20220531-16-jyi8f1.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=636&fit=crop&dpr=1 754w, https://images.theconversation.com/files/466410/original/file-20220531-16-jyi8f1.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=636&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/466410/original/file-20220531-16-jyi8f1.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=636&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Sports associations and clubs are making hay out of NFT collectables.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/avatars-metaverse-online-store-merchandising-via-2140674043">Maurice NORBERT</a></span>
</figcaption>
</figure>
<p>In the coming years, NFTs are likely to meld with the virtual worlds of the metaverse, in the sense that many will probably be usable there. Balenciaga, another luxury fashion house, has been an early pioneer in this direction, offering a collection of NFT accessories for gamers to <a href="https://www.epicgames.com/site/en-US/news/balenciaga-brings-high-fashion-to-fortnite">wear on Fortnite</a>. </p>
<p>Nike has been particularly forward-thinking, buying NFT pioneer <a href="https://news.nike.com/news/nike-acquires-rtfkt">RTFKT Studios</a> late in 2021. RTFKT made its name with a collection of Manga-style 3D NFT characters called <a href="https://opensea.io/collection/clonex?search%5BsortAscending%5D=false&search%5BsortBy%5D=LAST_SALE_DATE">CloneX</a> that now trade for tens of thousands of US dollars. In keeping with other top NFT collections like the Bored Apes, RTFKT is using the CloneX characters to craft a storyline that is gradually unfolding over time. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/466562/original/file-20220601-49160-xhye11.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="CloneX avatars on sale on OpenSea." src="https://images.theconversation.com/files/466562/original/file-20220601-49160-xhye11.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/466562/original/file-20220601-49160-xhye11.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=303&fit=crop&dpr=1 600w, https://images.theconversation.com/files/466562/original/file-20220601-49160-xhye11.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=303&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/466562/original/file-20220601-49160-xhye11.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=303&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/466562/original/file-20220601-49160-xhye11.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=381&fit=crop&dpr=1 754w, https://images.theconversation.com/files/466562/original/file-20220601-49160-xhye11.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=381&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/466562/original/file-20220601-49160-xhye11.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=381&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">CloneX avatars on sale on OpenSea.</span>
<span class="attribution"><a class="source" href="https://opensea.io/collection/clonex">OpenSea</a></span>
</figcaption>
</figure>
<p>In February, CloneX owners were airdropped NFTs of mystery digital boxes <a href="https://boardroom.tv/nike-rtfkt-mnlth-nft-collectible/">known as Mnlths</a>. The Mnlths had Nike swooshes on the side and quickly started selling for upwards of US$10,000 (£7,944) on NFT marketplaces, even though nobody knew what they contained. In April, Nike announced that owners could “burn” them to unlock a pair of digital sneakers known as <a href="https://www.voguebusiness.com/technology/nike-and-rtfkt-take-on-digital-fashion-with-first-cryptokick-sneaker">CryptoKicks</a>, plus a vial that allows users to customise them, and another mystery box called Mnlth 2. A pair of CryptoKicks has since reportedly sold <a href="https://indianexpress.com/article/technology/tech-news-technology/nike-sold-an-nft-sneaker-for-usd-134000-7944870/">for US$134,000</a>. </p>
<p>Meanwhile, online platforms are helping to make these NFTs more usable. <a href="https://www.ft.com/content/2745d50b-36e4-4c0a-abe0-e93f035b0628">Meta is creating</a> features for Facebook and Instagram that will make it possible for users to create NFTs and showcase them on their social media profiles. <a href="https://techcrunch.com/2022/05/16/spotify-new-feature-artists-promote-nfts/">Spotify is working</a> on something similar, with a view to creating new revenue streams for artists and record companies. </p>
<h2>Danger ahead?</h2>
<p>But if these are examples of NFTs’ potential for major brands, there are also serious risks. The market has <a href="https://www.theblockcrypto.com/post/146566/nft-bayc-crypto-markets-prices-ethereum-solana-cryptopunks-terra-luna#:%7E:text=The%20popular%20Bored%20Ape,ETH%20over%20the%20same%20period.">fallen substantially</a> in both prices and volumes in recent weeks in line with drops in everything from the stock market to cryptocurrencies. Many collectors will be sitting on assets that were worth a lot more several months ago. </p>
<p>A historic sports club like, say, Real Madrid might unintentionally end up undermining its fans’ financial well-being as a result. Should the club compensate these people in some way to avoid jeopardising the relationship? Or what if the fans become like day traders, flipping NFTs to try and make money. Is the club then vulnerable to being accused of enabling something close to gambling? </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/466411/original/file-20220531-18-d9x58e.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="NFT of a one-arm bandit" src="https://images.theconversation.com/files/466411/original/file-20220531-18-d9x58e.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/466411/original/file-20220531-18-d9x58e.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=495&fit=crop&dpr=1 600w, https://images.theconversation.com/files/466411/original/file-20220531-18-d9x58e.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=495&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/466411/original/file-20220531-18-d9x58e.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=495&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/466411/original/file-20220531-18-d9x58e.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=622&fit=crop&dpr=1 754w, https://images.theconversation.com/files/466411/original/file-20220531-18-d9x58e.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=622&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/466411/original/file-20220531-18-d9x58e.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=622&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The NFT casino is now open.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/roulette-machine-pixel-art-style-2161140547">Pixelart</a></span>
</figcaption>
</figure>
<p>Another danger is undesirable repercussions from a company giving control of assets to unknown third parties. How would, say, fashion label Patagonia’s customers feel about its sustainable and activist values if its NFTs ended up being flaunted by a major entrepreneur in fossil fuels?</p>
<p>For many brands it’s also not yet clear whether NFTs could cannibalise the sales of their physical products. Equally, not all brands have the same scarcity value of a Prada or Gucci. A budget retailer such as Primark might experience a lack of demand if it launched NFTs, and its image could be harmed as a result. </p>
<p>Companies launching NFTs are going to potentially need to change more than it first appears. They will need to set up a range of new roles to manage relationships with NFT owners and their corporate reputation. </p>
<p>This could become a distraction from the company’s core business. Perhaps they become like an investment house, more focused on maximising the sales of NFTs than creating value for their customers. Especially for brands with a more progressive culture such as Ben & Jerry’s or Oatly, that could raise awkward ethical issues. </p>
<p>Nonetheless, it’s going to be fascinating to see how this market develops. The companies that succeed will probably be the ones that are alert to these risks, and view NFTs as a new revenue market to explore rather than a short-term opportunity.</p><img src="https://counter.theconversation.com/content/182446/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Achilleas Boukis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>NFT sales passed US$40 billion in 2021 and now more brands want to get in on the action.Achilleas Boukis, Associate professor, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1792002022-05-23T12:23:06Z2022-05-23T12:23:06ZWhat is the metaverse, and what can we do there?<figure><img src="https://images.theconversation.com/files/464280/original/file-20220519-26-rsiass.jpg?ixlib=rb-1.1.0&rect=25%2C12%2C8616%2C3070&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What will it take for the metaverse to live up to its potential?</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>You’ve likely heard recently how the metaverse will usher in a new era of digital connectivity, virtual reality (VR) experiences and e-commerce. Tech companies are betting big on it: Microsoft’s massive <a href="https://www.bloomberg.com/news/articles/2022-01-19/microsoft-msft-activision-blizzard-atvi-deal-shows-big-tech-metaverse-push">US$68.7 billion acquisition of game developing giant Activision Blizzard</a> reflected the company’s desire to bolster its position in the interactive entertainment space. </p>
<p>Prior to this, Facebook’s parent company rebranded itself as Meta — a key pillar of founder Mark Zuckerberg’s grand ambitions to reimagine the social media platform as “<a href="https://www.theguardian.com/technology/2022/feb/15/meta-mark-zuckerberg-facebook-metaverse">a metaverse company, building the future of social connection</a>.”</p>
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Read more:
<a href="https://theconversation.com/facebooks-rebranding-is-anything-but-meta-172465">Facebook’s rebranding is anything but 'meta'</a>
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<p>But other non-tech corporations are clamouring to get in on the ground floor as well, from <a href="https://www.cnbc.com/2021/11/02/nike-is-quietly-preparing-for-the-metaverse-.html">Nike filing new trademarks to sell virtual Air Jordans</a> and Walmart preparing to <a href="https://www.cnbc.com/2022/01/16/walmart-is-quietly-preparing-to-enter-the-metaverse.html">offer virtual merchandise in online stores using its own cryptocurrency and non-fungible tokens (NFTs)</a>. </p>
<p>As a journalism professor who has been researching the future of immersive media, I agree the metaverse opens up transformative opportunities. But I also see inherent challenges in its road to mainstream adoption. So what exactly is the metaverse and why is it being hyped up as a game-changing innovation? </p>
<h2>Entering the metaverse</h2>
<p>The metaverse is “<a href="https://doi.org/10.1145/2480741.2480751">an integrated network of 3D virtual worlds</a>.” These worlds are accessed through <a href="https://theconversation.com/metaverse-five-things-to-know-and-what-it-could-mean-for-you-171061">a virtual reality headset</a> — users navigate the metaverse using their eye movements, feedback controllers or voice commands. The headset immerses the user, <a href="https://doi.org/10.3389/fpsyg.2021.628298">stimulating what is known as presence</a>, which is created by generating the physical sensation of actually being there.</p>
<p>To see the metaverse in action, we can look at popular massively multiplayer virtual reality games such as <a href="https://store.steampowered.com/app/471710/Rec_Room/">Rec Room</a> or <a href="https://www.oculus.com/horizon-worlds/">Horizon Worlds</a>, where participants use avatars to interact with each other and manipulate their environment.</p>
<p>But the wider applications beyond gaming are staggering. Musicians and entertainment labels are experimenting with <a href="https://futurism.com/facebook-concert-metaverse-flopped">hosting concerts in the metaverse</a>. The <a href="https://www.xliveglobal.com/fan-experience/major-sports-teams-join-metaverse-through-digital-venue-twins">sports industry is following suit</a>, with top franchises <a href="https://cointelegraph.com/news/manchester-city-to-build-etihad-stadium-in-the-metaverse">like Manchester City</a> <a href="https://www.forbes.com/sites/timnewcomb/2020/10/01/creating-virtual-stadiums-the-fifa-21-way/?sh=bb061d4624fd">building virtual stadiums so fans can watch games</a> and, presumably, purchase virtual merchandise. </p>
<p>Perhaps the farthest reaching opportunities for the metaverse will be in <a href="https://www.brookings.edu/wp-content/uploads/2022/02/A-whole-new-world_Education-meets-the-metaverse-FINAL-021422.pdf">online learning</a> and <a href="https://qz.com/2086353/seoul-is-developing-a-metaverse-government-platform/">government services</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/464289/original/file-20220519-15-3jkr6g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="children using laptops sit at a table with a digital dinosaur hologram in the middle" src="https://images.theconversation.com/files/464289/original/file-20220519-15-3jkr6g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/464289/original/file-20220519-15-3jkr6g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/464289/original/file-20220519-15-3jkr6g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/464289/original/file-20220519-15-3jkr6g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/464289/original/file-20220519-15-3jkr6g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/464289/original/file-20220519-15-3jkr6g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/464289/original/file-20220519-15-3jkr6g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The metaverse contains exciting new applications for education at all levels.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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</figure>
<p>This is the popular conception of the metaverse: a VR-based world independent of our physical one where people can socialize and engage in a seemingly unlimited variety of virtual experiences, <a href="https://business-reporter.co.uk/technology/the-metaverse-the-new-digital-economy">all supported with its own digital economy</a>. </p>
<h2>More than virtual reality</h2>
<p>But there are challenges to overcome before the metaverse can achieve widespread, global adoption. And one key challenge is the “virtual” part of this universe.</p>
<p>While VR is considered a key ingredient of the metaverse recipe, entrance to the metaverse is not (and should not) be limited to having a VR headset. In a sense, anyone with a computer or smartphone can tap into a metaverse experience, such as the <a href="https://secondlife.com/">digital world of Second Life</a>. Offering broad accessibility is key to making the metaverse work based on VR’s continued uphill battle to gain traction with consumers.</p>
<p>The VR market has seen remarkable innovations in a short period of time. A few years ago, people interested in home VR had to choose between expensive computer-based systems that tethered the user or <a href="https://doi.org/10.1119/1.4905824">low-cost but extremely limited smartphone-based headsets</a>.</p>
<p>Now we’ve seen the arrival of affordable, ultra high-quality, portable wireless headsets like <a href="https://www.inputmag.com/tech/meta-quest-2-headset-vr">Meta’s Quest line</a>, which has quickly become the market leader in home VR. The graphics are sensational, the content library is more robust than ever, and the device costs less than most video game consoles. So why are so few people using VR?</p>
<p>On one hand, global sales of VR headsets <a href="https://www.idc.com/getdoc.jsp?containerId=prUS48969722">have been growing</a>, with 2021 being a banner year for headset manufacturers, who had their best sales <a href="https://www.zdnet.com/article/2016s-five-best-virtual-reality-headsets/">since 2016’s flurry of big-brand VR device releases</a>. But they still only sold around 11 million devices worldwide. </p>
<p>Getting people to even use their devices can be a challenge, as it’s estimated <a href="https://findly.in/virtual-reality-statistics/#:%7E:text=28%25%20of%20VR%20set%20owners,only%201%20time%20per%20year.">only 28 per cent of people who own VR headsets use them on a daily basis</a>. As numerous <a href="https://www.nytimes.com/2020/04/30/technology/virtual-reality.html">tech critics have pointed out</a>, the VR mainstream revolution that has been <a href="https://www.polygon.com/2020/10/20/21521608/vr-headsets-pricing-comfort-virtual-reality-future">promised for years</a> has <a href="https://www.wired.com/story/virtual-reality-rich-white-kid-of-technology/">largely failed to come to fruition</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/464291/original/file-20220519-24-o01c8y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a woman wearing a vr headset with an outstretched hand" src="https://images.theconversation.com/files/464291/original/file-20220519-24-o01c8y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/464291/original/file-20220519-24-o01c8y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/464291/original/file-20220519-24-o01c8y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/464291/original/file-20220519-24-o01c8y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/464291/original/file-20220519-24-o01c8y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/464291/original/file-20220519-24-o01c8y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/464291/original/file-20220519-24-o01c8y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Virtual reality headsets are increasing in popularity, but there are challenges to their widespread adoption.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<h2>Virtual movement, physical discomfort</h2>
<p>There are a myriad factors, from <a href="https://fortune.com/longform/virtual-reality-struggle-hope-vr/">missed marketing opportunities</a> to <a href="https://www.cnet.com/tech/mobile/facebook-expects-oculus-hardware-delays-from-coronavirus/">manufacturing obstacles</a>, as to why VR hasn’t caught on in a bigger way. But it’s possible that using VR is inherently unappealing for a significant number of people, particularly for frequent use. </p>
<p>Despite impressive advancements in screen technology, VR developers are still trying to address the “<a href="https://doi.org/10.1007/978-3-030-59342-1">cybersickness</a>” — a feeling of nausea akin to motion sickness — their devices elicit in many users. </p>
<p>Studies have found that <a href="https://doi.org/10.1080/00140139.2020.1869320">neck physical discomfort</a> may present another barrier, which may remain an issue as long as VR requires the use of large headsets. There’s also research to suggest that <a href="https://doi.org/10.3389/frobt.2020.00004">women experience much higher levels of discomfort</a> because the fit of the headset is optimized for men. </p>
<p>And beyond the physical challenges of using VR is the isolating nature of it: “<a href="https://www.cbc.ca/news/opinion/vr-isolation-1.3980539">Once you put on the headset, you’re separated from the world around you</a>,” writes Ramona Pringle, a digital technology professor and researcher.</p>
<p>Certainly, some are drawn to VR to experience heightened escapism or to interact with others virtually. But this disconnection to the physical world, and the uneasy feeling of separation from people, may be a <a href="https://www.wired.com/2016/04/vr-shouldnt-just-isolating-heres-can-social/">significant hurdle in getting people to voluntarily wear a headset for hours at a time</a>.</p>
<h2>Mediated, magical worlds everywhere</h2>
<p><a href="https://www.interaction-design.org/literature/topics/augmented-reality">Augmented reality (AR) experiences</a> may hold the key for the metaverse to reach its true potential. With AR, users use their smartphone (or other device) to <a href="https://www.forbes.com/sites/bernardmarr/2019/07/19/the-important-difference-between-virtual-reality-augmented-reality-and-mixed-reality/">digitally enhance what they perceive in the physical world in real-time</a>, allowing them to tap into a virtual world while still feeling present in this one. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/X--OTv7e9e4?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">An interview with video games researcher and designer Kris Alexander on the potential of augmented reality.</span></figcaption>
</figure>
<p>A metaverse centred on augmented reality wouldn’t be a completely new digital world — it would intersect with our real world. It’s this version of the metaverse that could actually have the ability to change the way we live, argues computer scientist and tech writer Louis Rosenberg:</p>
<blockquote>
<p>“I believe the vision portrayed by many Metaverse companies of a world filled with cartoonish avatars is misleading. Yes, virtual worlds for socializing will become quite popular, but it will not be the means through which immersive media transforms society. The true Metaverse — the one that becomes the central platform of our lives — will be an augmented world. <a href="https://bigthink.com/the-future/metaverse-augmented-virtual-reality/">If we do it right, it will be magical, and it will be everywhere</a>.”</p>
</blockquote><img src="https://counter.theconversation.com/content/179200/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adrian Ma does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The metaverse is being hyped as a game-changing virtual platform that will transform our digital lives. But it has some inherent challenges to overcome in order to achieve mass adoption.Adrian Ma, Assistant Professor, Journalism, Toronto Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1779812022-03-31T12:44:06Z2022-03-31T12:44:06ZBehind the crypto hype is an ideology of social change<figure><img src="https://images.theconversation.com/files/455113/original/file-20220329-21-5ds15m.jpg?ixlib=rb-1.1.0&rect=0%2C25%2C5706%2C2737&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">For some, promoting cryptocurrencies is political activism.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/young-man-with-a-face-mask-and-a-poster-in-his-royalty-free-image/1296675280">Vasil Dimitrov/E+ via Getty Images</a></span></figcaption></figure><p>Ads for <a href="https://gizmodo.com/super-bowl-crypto-ads-feature-larry-david-lebron-james-1848531978">blockchain, NFTs and cryptocurrencies like Bitcoin</a> seem to be everywhere. Crypto technologies are being promoted as <a href="https://dl.acm.org/doi/10.1145/2594288">a replacement for banks</a>; a <a href="https://www.nytimes.com/2021/03/11/arts/design/what-is-an-nft.html">new way to buy art</a>; the <a href="https://www.youtube.com/watch?v=BH5-rSxilxo">next big investment opportunity</a>, and an essential part of <a href="https://theconversation.com/the-metaverse-is-money-and-crypto-is-king-why-youll-be-on-a-blockchain-when-youre-virtual-world-hopping-171659">the metaverse</a>. </p>
<p>To many, these technologies are <a href="https://www.theatlantic.com/technology/archive/2022/02/crypto-nft-web3-internet-future/621479/">confusing or risky</a>. But enthusiasts <a href="https://www.vice.com/en/article/88gb75/at-sxsw-a-pathetic-tech-future-struggles-to-be-born">ardently promote them</a>.</p>
<p>As a <a href="https://scholar.google.com/citations?user=ef0ApTwAAAAJ">cybersecurity and social media researcher</a>, I’ve found that behind the hype is an ideology about social change: Hardcore enthusiasts argue that <a href="https://dl.acm.org/citation.cfm?id=3359138">crypto will get people to trust in technology rather than government</a>, which they see as inherently untrustworthy. This ideology leads people to encourage its use while downplaying its risks. </p>
<h2>The true believers</h2>
<p>My colleagues and I studied almost three months of discussions on Reddit forums about cryptocurrencies to try to understand <a href="https://doi.org/10.1145/3359138">how people talk about crypto and Bitcoin</a>. The loudest voices on the forum were a group of crypto enthusiasts who called themselves “<a href="https://doi.org/10.1145/3290607.3312969">True Bitcoiners</a>.” Unlike technology enthusiasts or crypto marketers, “true bitcoiners” didn’t talk about technology, or about their own use of crypto. Instead, they talked about <a href="https://doi.org/10.1145/3359138">trust and corruption</a>. </p>
<p>These crypto enthusiasts often <a href="https://doi.org/10.1145/3359138">cite examples</a> of what they see as government corruption and corporate corruption. They recognize that society depends on governments and corporations setting and enforcing rules, and they complain that people are stuck with these “corrupt” institutions. Corruption, they say, is an inevitable flaw in humanity and leads to trying to control and mistreat others.</p>
<p>The enthusiasts see Bitcoin, blockchain and other crypto technologies as providing an alternative to the corruption. They argue that these new technologies are “<a href="https://repository.law.umich.edu/mttlr/vol25/iss1/2/">trustless</a>” and don’t depend on institutions. You can buy and sell things using bitcoin without checking with a bank or using government-issued cash. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/3xGLc-zz9cA?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Blockchain, the technology underlying cryptocurrencies, keeps records of ownership and transactions without requiring trust in anyone or any institution.</span></figcaption>
</figure>
<p>These two beliefs – that governments are corrupt and that crypto avoids that corruption – are common among the crypto enthusiasts we studied. But enthusiasts go one step further. They seek change. They want to change who has power and who doesn’t. </p>
<p>They argue that crypto is how that change will happen. For crypto enthusiasts, using crypto isn’t just a way to buy and sell things. By using crypto technologies, they argue, society will become less dependent on governments and corporations. That is, using crypto – and getting as many people as possible to use it as much as possible – is a way to change the world and <a href="https://dl.acm.org/citation.cfm?id=3359138">take power away from governments</a>.</p>
<h2>Pushing an ideology</h2>
<p>These beliefs about who should and should not have power in society embody <a href="https://www.taylorfrancis.com/chapters/edit/10.4324/9780203702444-11/media-makes-ignites-breaks-ideology-david-livingstone-smith">an ideology</a>. An important part of the crypto ideology is that this change can’t happen unless people use crypto. The technology and the ideology are tied together. </p>
<p>For many of these enthusiasts, recommending crypto to other people is not just a technology recommendation. To them, buying and selling crypto is <a href="https://doi.org/10.1145/3359138">a form of political and social activism</a>. They argue that buying crypto will remove corruption and change society to trust technology over government. </p>
<p>This ideology is a <a href="https://openyls.law.yale.edu/bitstream/handle/20.500.13051/7831/01_3YaleJL_Tech1_2000_2001_.pdf?sequence=2&isAllowed=y">more extreme version of technolibertarianism</a>, which seeks to replace government with technology. Like technolibertarians, true bitcoiners want technology to control society. But they focus on financial and economic control more than civil liberties. And because promoting crypto is part of this ideology, crypto has often been compared with <a href="https://theconversation.com/why-are-people-calling-bitcoin-a-religion-175717">a religion</a>.</p>
<h2>Crypto dangers</h2>
<p>An important aspect of any ideology is the way it emphasizes some dangers and downplays others. True bitcoiners emphasize the problems with government corruption. But they downplay the <a href="https://www.ftc.gov/news-events/blogs/data-spotlight/2021/05/cryptocurrency-buzz-drives-record-investment-scam-losses">financial risks of crypto</a>. The price of Bitcoin fluctuates wildly, and <a href="https://doi.org/10.1007/978-3-662-54970-4_33">many people have lost money</a> buying crypto. Crypto wallets are <a href="https://www.usenix.org/system/files/soups2020-mai.pdf">difficult to understand and use</a>, and fraudulent transactions are <a href="https://doi.org/10.1109/SP.2015.14">difficult to reverse</a>. </p>
<p>Crypto enthusiasts frequently downplay the technology’s risks to <a href="https://doi.org/10.1109/SP.2015.14">people</a> and <a href="https://doi.org/10.1257/jep.29.2.213">society</a>. They also dismiss the valuable role that governments and corporations play in <a href="https://pluralistic.net/2022/03/02/shadow-banking-2-point-oh/#leverage">protecting people’s money</a>, <a href="https://www.fdic.gov">providing insurance for bank accounts</a> and <a href="https://www.latimes.com/business/story/2022-02-09/bitfinex-who-will-get-crypto-back-after-arrests-in-3-6-billion-bitcoin-hack">returning money that’s been stolen</a>. </p>
<p>Beliefs in crypto’s ability to create social change are also overstated. Crypto technologies don’t necessarily eliminate corporations or avoid government control. There are <a href="https://www.ibm.com/blockchain">private, corporate blockchains</a> and many <a href="https://www.forbes.com/sites/jasonbrett/2021/12/27/in-2021-congress-has-introduced-35-bills-focused-on-us-crypto-policy/?sh=65388ccac9e8">government</a> <a href="https://www.ncsl.org/research/financial-services-and-commerce/cryptocurrency-2021-legislation.aspx">regulations</a> <a href="https://tile.loc.gov/storage-services/service/ll/llglrd/2021687419/2021687419.pdf">about cryptocurrencies</a>. As I see it, simply using the technology doesn’t necessarily lead to the social change these enthusiasts seek.</p>
<p>[<em>Science, politics, religion or just plain interesting articles:</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-checkoutweekly">Check out The Conversation’s weekly newsletters</a>.]</p><img src="https://counter.theconversation.com/content/177981/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rick Wash receives funding from the National Science Foundation and from Google. He is affiliated with Association for Computing Machinery and the USENIX Association.</span></em></p>Many people promoting cryptocurrencies are looking for something bigger than the future of financial transactions. They’re aiming to break free of governments and corporations.Rick Wash, Associate Professor of Information Science and Cybersecurity, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1752632022-03-10T11:48:43Z2022-03-10T11:48:43ZNFTs: one year after Beeple sale, non-fungible tokens have become mainstream<figure><img src="https://images.theconversation.com/files/450706/original/file-20220308-25-127wt1g.jpg?ixlib=rb-1.1.0&rect=149%2C177%2C6071%2C3970&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Beeple's NFT art sale propelled NFTs into the public consciousness.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/smartphone-beeple-everydays-first-5000-days-1934411729">mundissima / Shutterstock</a></span></figcaption></figure><p>One year ago, an artwork was sold for <a href="https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million">US$69 million</a> (£52.6 million) by the prestigious auction house <a href="https://www.christies.com/features/Monumental-collage-by-Beeple-is-first-purely-digital-artwork-NFT-to-come-to-auction-11510-7.aspx?sc_lang=en">Christie’s</a>. This was no lost Matisse or rarely seen Van Gogh. Instead, it was a composite collection of digital art by the then relatively unknown artist Beeple. </p>
<p>What makes this piece, Everydays: the First 5000 Days, truly remarkable, is that it was sold as a non-fungible token (NFT). In the year since that sale, NFTs have gone from a relatively obscure tech-world phenomenon to the mainstream. </p>
<p>NFTs are tokens that exist on a secure record-keeping system called a blockchain. These tokens are akin to certificates of ownership a gallery might give to an art collector, but for digital items. </p>
<p>Celebrities such as <a href="https://www.latimes.com/business/technology/story/2022-01-26/jimmy-fallon-nft-ape-nbc">Eminem and Jimmy Fallon</a> have helped raise the profile of NFTs through the <a href="https://boredapeyachtclub.com/#/">Bored Ape Yacht Club</a> profile picture collection. These collections have become so popular that Twitter now <a href="https://help.twitter.com/en/using-twitter/twitter-blue-fragments-folder/nft">allows users</a> to use their NFTs as their profile image. </p>
<p>For the collectors, NFTs are arguably a digital extension of benign hobbyist pursuits. In recent generations, collectors may have sought rare <a href="https://www.dicebreaker.com/games/magic-the-gathering-game/best-games/most-expensive-mtg-cards">Magic The Gathering cards</a> or obscure stamps. Today, those with an impulse to own rare items are attracted to a world where rarity can be transparently recorded and easily verified.</p>
<p>For the creators, NFTs provide a clear path toward monetisation. Artists have historically struggled to make money from their work, but NFTs are sold through marketplaces that provide creators with royalties. The Ethereum economy sustained by NFTs earned its creators <a href="https://tokenist.com/ethereum-now-processes-highest-flow-of-assets-globally-due-to-creator-economy/">US$3.5 billion</a> (£2.7 billion) in 2021.</p>
<h2>The right-click approach</h2>
<p>Despite their growing popularity, NFTs still baffle most people. This is because we are not used to the concept of owning digital art. After all, can’t I just right-click and save an image to my own computer? I could, naturally, but this would be to miss the point. </p>
<p>As with all currencies, NFTs have value because of the meaning a community ascribes to them. In the online culture NFTs belong to, “on-chain” blockchain items are meaningful – and some have more value than others.</p>
<p>The characteristic missed by the right-click perspective is that when you own an item on the blockchain, everyone in your community can see this. This can translate into prestige, for example, when outrageously wealthy entrepreneurs bid on rare NFT items, like Beeple’s work or a <a href="https://www.reuters.com/technology/cryptopunk-nft-sells-118-million-sothebys-2021-06-10/">rare cryptopunk</a>. Or it can simply be a sign to other community members that you belong.</p>
<h2>Mainstream attention</h2>
<p>Popular attention is not always positive. As NFTs grow, so has the proliferation of cash grabs and scams, especially from social media influencers. Elsewhere I have called this the <a href="https://www.coindesk.com/business/2021/11/10/the-trash-moat-when-the-media-lies-about-crypto/">trash moat</a> that surrounds legitimate projects in the cryptocurrency and NFT world. YouTubers <a href="https://cointelegraph.com/news/the-worst-influencer-and-celebrity-nft-cash-grabs-of-2021">Logan and Jake Paul</a>, in particular, are notorious for their litany of low-quality NFT “rug pulls”, when a crypto project is abandoned by their creators once the money flows in.</p>
<p>Melania Trump, to pick another example, has released several NFT projects. However, blockchain analysts were able <a href="https://www.cbsnews.com/news/melania-trump-third-nft-collection-commemorating-trump-presidency/">to uncover</a> how one of these projects was bought by none other than the creator of the NFT themselves. This practice, known as wash trading, involves NFT creators buying their own works either to save face due to a lack of interest or to generate hype around an influencer or artist and boost the price of the next sale. </p>
<figure class="align-center ">
<img alt="A hand holds a magnifying glass up to a screen showing several NFTs from the Bored Ape Yacht Club." src="https://images.theconversation.com/files/450715/original/file-20220308-19-lgb35z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/450715/original/file-20220308-19-lgb35z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/450715/original/file-20220308-19-lgb35z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/450715/original/file-20220308-19-lgb35z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/450715/original/file-20220308-19-lgb35z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/450715/original/file-20220308-19-lgb35z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/450715/original/file-20220308-19-lgb35z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Buying an NFT from the Bored Ape Yacht Club collection is like becoming part of an exclusive online club.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/kaunas-lithuania-2021-november-2-nfts-2068237091">Rokas Tenys / Shutterstock</a></span>
</figcaption>
</figure>
<p>Yet another capacity of NFTs has emerged in their potential for fundraising. In what started as a meme, <a href="https://www.theverge.com/22820563/constitution-meme-47-million-crypto-crowdfunding-blockchain-ethereum-constitution">ConstitutionDAO</a> was created by a group of cryptocurrency enthusiasts to buy a rare copy of the US constitution that was on auction at Sotheby’s. This group sold a token in exchange for the cryptocurrency Ether that was then used to bid on the constitution. Within a week, ConstitutionDAO raised <a href="https://www.theverge.com/22820563/constitution-meme-47-million-crypto-crowdfunding-blockchain-ethereum-constitution">US$47 million</a> (£35.8 million). This was not enough to win the auction, but it revealed just how financially powerful this corner of the web has become. </p>
<h2>Failure, or the future?</h2>
<p>Perhaps the harshest critiques of NFTs come from the socially conscious art world that sees the infrastructure of NFTs as the problem. NFTs mostly exist on the Ethereum blockchain, which relies on vast computational resources to function, generating a huge carbon footprint. Ethereum is transitioning away from its current mechanism to <a href="https://ethereum.org/en/upgrades/merge/">another</a>, which will hopefully alleviate this concern. </p>
<p>Perhaps the more subtle defence of NFTs resides in how they push the medium of digital art in interesting directions. Damien Hirst’s <a href="https://www.esquiresg.com/making-choice-damien-hirst-the-currency-art-nft-collection/">The Currency</a> playfully challenges the collector to choose whether to keep the NFT (the digital token) or exchange it later for a physical artwork. This forces the collector to make a bet on the future: physical or digital, which retains the most value? </p>
<p>This places NFTs in a curious spot. They appear at once a benign hobbyist pursuit, a means to value and make money from scarce digital art, a cash grab for unscrupulous influencers and celebrities, a new mechanism for online fundraising and an explored avenue for legitimate art. However you view them, NFTs have crossed fully into the mainstream and deserve our attention.</p><img src="https://counter.theconversation.com/content/175263/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Dylan-Ennis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The digital collectors items have become a multi-billion dollar industry in a matter of months.Paul Dylan-Ennis, Lecturer/Assistant Professor in Management Information Systems, University College DublinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1771122022-02-16T13:16:00Z2022-02-16T13:16:00ZSuper Bowl ads turn up the volume on cryptocurrency buzz: 6 essential reads about digital money and the promise of blockchain<p>Super Bowl 2022 was dubbed <a href="https://fortune.com/2022/02/03/crypto-super-bowl-commercials-binance/">Crypto Bowl</a> even before the game was played because of the advertising blitz cryptocurrency companies unleashed during the annual televised spectacle. The ads, <a href="https://gizmodo.com/super-bowl-crypto-ads-feature-larry-david-lebron-james-1848531978">featuring a bevy of celebrities and gimmicks</a>, aimed to convince viewers that cryptocurrencies are the wave of the future.</p>
<p>Preying on FOMO – that is, the fear of missing out – is a classic technique of both advertisers and scam artists, so you would be forgiven for being leery of the <a href="https://www.theguardian.com/culture/2022/feb/14/super-bowl-crypto-ads-are-as-predatory-as-celebs-hawking-cigarettes">cryptocurrency hype</a>. But the story is more complicated than just the latest speculation craze.</p>
<p>Here are six stories from our archive to help you understand how cryptocurrencies work, and the bigger picture of how blockchain is setting the stage for a future in which technology, rather than institutions, guarantees ownership and fosters trust.</p>
<h2>1. Digital money</h2>
<p>The first question cryptocurrencies prompt is how strings of digital bits that aren’t merely placeholders for national currencies or precious metals can be real money. Who says who owns which pieces of virtual currency, and who determines what the currency is worth? The answer is no one and everyone.</p>
<p>“A bitcoin is as ownable as dollars are when they are deposited in a bank. Skipping the stage of physical, fungible currencies, bitcoins exist by virtue of their <a href="https://theconversation.com/rise-of-cryptocurrencies-like-bitcoin-begs-question-what-is-money-46713">representations in a ledger in cyberspace</a>,” writes the University at Buffalo’s <a href="https://scholar.google.com/citations?user=LsroX8QAAAAJ&hl=en">David Koepsell</a>.</p>
<p>“What bitcoin owners own is the debt, just as those who own money in banks own debts that are recorded in bits. They do not own the bits that comprise the information representing that debt, nor the information itself, they own the social object – the money – that those bits represent.” </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/rise-of-cryptocurrencies-like-bitcoin-begs-question-what-is-money-46713">Rise of cryptocurrencies like bitcoin begs question: what is money?</a>
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</em>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/FUygWsIj_GU?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">This Super Bowl ad delivered a FOMO message: If you’re timid about cryptocurrencies you’ll lose out.</span></figcaption>
</figure>
<h2>2. Under the hood: Blockchain explained</h2>
<p>The technology that makes cryptocurrencies possible is <a href="https://theconversation.com/blockchains-focusing-on-bitcoin-misses-the-real-revolution-in-digital-trust-58125">blockchain</a>, a distributed digital ledger. In short, it’s a form of record keeping in which each record is spread across many computers and encrypted in a way that prevents it from being altered. Everyone can see a record but no one can change it.</p>
<p>“The bitcoin blockchain contains a record of every transaction in the system since its birth. This feature makes it possible to prevent account holders from reneging on transactions, even if their identities remain anonymous. Once in the ledger, a transaction is undeniable,” write <a href="https://scholar.google.com/citations?user=uf0D-uoAAAAJ&hl=en">Ari Juels</a> and <a href="https://scholar.google.com/citations?user=1oUGY7cAAAAJ&hl=en">Ittay Eyal</a>.</p>
<p>“Blockchains can be enhanced to support not just transactions, but also pieces of code known as smart contracts,” they write. “A smart contract may be viewed as playing the role of a trusted third party: Whatever task it is programmed to do, it will carry out faithfully.”</p>
<p>This capability opens up a wide range of possibilities for organizing life in the digital realm. As enticing as the Super Bowl ads made cryptocurrencies seem, broader uses of blockchain are arguably more significant. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/blockchains-focusing-on-bitcoin-misses-the-real-revolution-in-digital-trust-58125">Blockchains: Focusing on bitcoin misses the real revolution in digital trust</a>
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</em>
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<h2>3. Beyond money, part 1: Financial services</h2>
<p>Transferring money from party A to party B is just one simple type of financial transaction. Blockchain can be used for all sorts of financial services, including loans, derivatives and insurance. This capability is dubbed <a href="https://theconversation.com/what-is-decentralized-finance-an-expert-on-bitcoins-and-blockchains-explains-the-risks-and-rewards-of-defi-161479">decentralized finance</a>, or DeFi.</p>
<p>In traditional financial services, everything depends on a financial institution, writes <a href="https://scholar.google.com/citations?user=WhzTfGwAAAAJ&hl=en">Kevin Werbach</a>. “DeFi turns this arrangement on its head by re-conceiving of financial services as decentralized software applications that operate without ever taking custody of user funds.”</p>
<p>There are also downsides to DeFi. “Even highly mature, highly regulated traditional financial markets experience shocks and crashes because of hidden risks, as the world saw in 2008 when the global economy nearly melted down because of one obscure corner of Wall Street. DeFi makes it easier than ever to create hidden interconnections that have the potential to blow up spectacularly,” he writes. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-is-decentralized-finance-an-expert-on-bitcoins-and-blockchains-explains-the-risks-and-rewards-of-defi-161479">What is decentralized finance? An expert on bitcoins and blockchains explains the risks and rewards of DeFi</a>
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<h2>4. Beyond money, part 2: Art</h2>
<p>Things get interesting when you create a unique token on a blockchain and attach the token to a digital file – anything from a photo to an audio recording. The result is a file that can be uniquely identified no matter how many copies of it are made, and ownership of the file can be verified. These are <a href="https://theconversation.com/how-nonfungible-tokens-work-and-where-they-get-their-value-a-cryptocurrency-expert-explains-nfts-157489">nonfungible tokens</a>, or NFTs, and they are making it easier for artists <a href="https://www.nbcnews.com/pop-culture/viral/youtube-includes-nfts-new-creator-tools-rcna15813">to make money from digital works</a> – and providing another vehicle for financial speculation.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/446588/original/file-20220215-17-iy783w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="over-the-shoulder view of a person holding a tablet displaying an image of a painting" src="https://images.theconversation.com/files/446588/original/file-20220215-17-iy783w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/446588/original/file-20220215-17-iy783w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/446588/original/file-20220215-17-iy783w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/446588/original/file-20220215-17-iy783w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/446588/original/file-20220215-17-iy783w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/446588/original/file-20220215-17-iy783w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/446588/original/file-20220215-17-iy783w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">An Austrian gallery divided a high-resolution digital scan of the painting ‘The Kiss’ by Gustav Klimt into 10,000 tiles, turned each one into an NFT and put them up for sale for Valentine’s Day.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/AustriaGistavKlimtNFT/6975da021d5a46e395c9ae853f63a4ff/photo">Ouriel Morgensztern/Austria's Galerie Belvedere/news aktuell via AP Images</a></span>
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<p>“NFTs are frequently used to sell a wide range of virtual collectibles, including NBA virtual trading cards, music, digital images, video clips and even virtual real estate in Decentraland, a virtual world,” writes Arizona State University’s <a href="https://scholar.google.com/citations?user=axO13E4AAAAJ&hl=en">Dragan Boscovic</a>.</p>
<p>“The NFT market is likely to grow further because any piece of digital information can easily be ‘minted’ into an NFT, a highly efficient way of managing and securing digital assets.”</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-nonfungible-tokens-work-and-where-they-get-their-value-a-cryptocurrency-expert-explains-nfts-157489">How nonfungible tokens work and where they get their value – a cryptocurrency expert explains NFTs</a>
</strong>
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</p>
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<h2>5. Beyond money, part 3: Organizations</h2>
<p>In addition to mediating financial transactions, smart contracts can be used to set up and run organizations. <a href="https://theconversation.com/cryptocurrency-funded-groups-called-daos-are-becoming-charities-here-are-some-issues-to-watch-174763">Decentralized autonomous organizations</a>, or DAOs, use the contracts to allow participants to weigh in on decisions and automate organizational functions, writes <a href="https://scholar.google.com/citations?user=UsFwZekAAAAJ&hl=en">Sean Stein Smith</a>.</p>
<p>“In most, if not all, instances of for-profit DAOs – or even DAOs organized for a specific one-time purpose, such as <a href="https://www.theverge.com/22820563/constitution-meme-47-million-crypto-crowdfunding-blockchain-ethereum-constitution">attempting to purchase an original copy of the U.S. Constitution</a> – cash or appreciated property that is contributed to the organization is exchanged for governance tokens. The tokens essentially represent a fractional form of collective ownership,” he writes.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/cryptocurrency-funded-groups-called-daos-are-becoming-charities-here-are-some-issues-to-watch-174763">Cryptocurrency-funded groups called DAOs are becoming charities – here are some issues to watch</a>
</strong>
</em>
</p>
<hr>
<h2>6. Beyond money, part 4: The metaverse</h2>
<p>You could view the metaverse as the mother of all distributed autonomous organizations. The metaverse is a concept defining an interconnected set of virtual environments that could be a future iteration of the internet. Blockchain is what will <a href="https://theconversation.com/the-metaverse-is-money-and-crypto-is-king-why-youll-be-on-a-blockchain-when-youre-virtual-world-hopping-171659">make the interconnection possible</a>.</p>
<p>“As people move between virtual worlds – say from Decentraland’s virtual environments to Microsoft’s – they’ll want to bring their stuff with them. If two virtual worlds are interoperable, the blockchain will authenticate proof of ownership of your digital goods in both virtual worlds,” write Michigan State University’s <a href="https://scholar.google.com/citations?user=jE9vLG0AAAAJ&hl=en">Rabindra Ratan</a> and <a href="https://scholar.google.com/citations?user=ZDiftAQAAAAJ&hl=en">Dar Meshi</a>.</p>
<p>Blockchain could even manage how people behave in the metaverse by making it possible to assign denizens reputation scores. “If you act like a toxic misinformation-spreading troll, you may damage your reputation and potentially have your sphere of influence reduced by the system. This could create an incentive for people to behave well in the metaverse,” they write.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-metaverse-is-money-and-crypto-is-king-why-youll-be-on-a-blockchain-when-youre-virtual-world-hopping-171659">The metaverse is money and crypto is king – why you'll be on a blockchain when you're virtual-world hopping</a>
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</em>
</p>
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<p><em>Editor’s note: This story is a roundup of articles from The Conversation’s archives.</em></p><img src="https://counter.theconversation.com/content/177112/count.gif" alt="The Conversation" width="1" height="1" />
Whether the cryptocurrency hype makes you crypto curious or crypto skeptical, there are many ways your life could be affected by crypto’s underlying technology, blockchain.Eric Smalley, Science + Technology EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1716592022-01-14T13:34:39Z2022-01-14T13:34:39ZThe metaverse is money and crypto is king – why you’ll be on a blockchain when you’re virtual-world hopping<figure><img src="https://images.theconversation.com/files/440552/original/file-20220112-17-6htq2t.jpg?ixlib=rb-1.1.0&rect=15%2C0%2C5097%2C2605&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">In the metaverse, your avatar, the clothes it wears and the things it carries belong to you thanks to blockchain.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/thelastminute/51617830752/">Duncan Rawlinson - Duncan.co/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>You may think <a href="https://theconversation.com/what-is-the-metaverse-2-media-and-information-experts-explain-165731">the metaverse</a> will be a bunch of interconnected virtual spaces – the world wide web but accessed through virtual reality. This is largely correct, but there is also a fundamental but slightly more cryptic side to the metaverse that will set it apart from today’s internet: the blockchain.</p>
<p>In the beginning, Web 1.0 was the information superhighway of connected computers and servers that you could search, explore and inhabit, usually through a centralized company’s platform – for example, AOL, Yahoo, Microsoft and Google. Around the turn of the millennium, Web 2.0 came to be characterized by social networking sites, blogging and the monetization of user data for advertising by the centralized gatekeepers to “free” social media platforms, including Facebook, SnapChat, Twitter and TikTok. </p>
<p>Web 3.0 will be the foundation for the metaverse. It will consist of blockchain-enabled decentralized applications that support an economy of user-owned crypto assets and data. </p>
<p>Blockchain? Decentralized? Crypto-assets? As <a href="https://scholar.google.com/citations?user=jE9vLG0AAAAJ&hl=en">researchers</a> <a href="https://scholar.google.com/citations?user=ZDiftAQAAAAJ&hl=en">who study</a> social media and media technology, we can explain the technology that will make the metaverse possible.</p>
<h2>Owning bits</h2>
<p><a href="https://theconversation.com/blockchains-focusing-on-bitcoin-misses-the-real-revolution-in-digital-trust-58125">Blockchain</a> is a technology that permanently records transactions, typically in a decentralized and public database called a ledger. Bitcoin is the most well-known blockchain-based cryptocurrency. Every time you buy some bitcoin, for example, that transaction gets recorded to the Bitcoin blockchain, which means the record is distributed to thousands of individual computers around the world. </p>
<p>This decentralized recording system is very difficult to fool or control. Public blockchains, like Bitcoin and Ethereum, are also transparent – all transactions are available for anyone on the internet to see, in contrast to traditional banking books. </p>
<p>Ethereum is a blockchain like Bitcoin, but Ethereum is also programmable through <a href="https://www.investopedia.com/terms/s/smart-contracts.asp">smart contracts</a>, which are essentially blockchain-based software routines that run automatically when some condition is met. For example, you could use a smart contract on the blockchain to establish your ownership of a digital object, such as a piece of art or music, to which no one else can claim ownership on the blockchain — even if they save a copy to their computer. Digital objects that can be owned – currencies, securities, artwork – are <a href="https://www.feedough.com/what-is-a-cryptoasset-types-of-cryptoassets-ultimate-guide/">crypto assets</a>.</p>
<p>Items like artwork and music on a blockchain are <a href="https://theconversation.com/how-nonfungible-tokens-work-and-where-they-get-their-value-a-cryptocurrency-expert-explains-nfts-157489">nonfungible tokens</a> (NFTs). Nonfungible means they are unique and not replaceable, the opposite of fungible items like currency – any dollar is worth the same as, and can be swapped with, any other dollar.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/440536/original/file-20220112-13-1185rxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Three women stand in a room with angled walls covered with images" src="https://images.theconversation.com/files/440536/original/file-20220112-13-1185rxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/440536/original/file-20220112-13-1185rxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/440536/original/file-20220112-13-1185rxo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/440536/original/file-20220112-13-1185rxo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/440536/original/file-20220112-13-1185rxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/440536/original/file-20220112-13-1185rxo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/440536/original/file-20220112-13-1185rxo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Nonfungible tokens (NFTs) use the cryptography of blockchain to make provably unique instances of digital items, including artwork like these images shown at an exhibition in Miami Beach in November 2021.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/ArtBaselMiamiBeach/06adb44891bc4deab24c08a4e5c6a3a5/photo">AP Photo/Lynne Sladky</a></span>
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<p>Importantly, you could use a smart contract that says you are willing to sell your piece of digital art for US$1 million in ether, the currency of the Ethereum blockchain. When I click “agree,” the artwork and the ether automatically transfer ownership between us on the blockchain. There is no need for a bank or third-party escrow, and if either of us were to dispute this transaction – for example, if you claimed that I only paid $999,000 – the other could easily point to the public record in the distributed ledger. </p>
<p>What does this blockchain crypto-asset stuff have to do with the metaverse? Everything! To start, the blockchain allows you to own digital goods in a virtual world. You won’t just own that NFT in the real world, you’ll own it in the virtual world, too. </p>
<p>In addition, the metaverse isn’t being built by any one group or company. Different groups will build different virtual worlds, and in the future these worlds will be interoperable – forming the metaverse. As people move between virtual worlds – say from <a href="https://decentraland.org/">Decentraland</a>’s virtual environments to <a href="https://www.theverge.com/2021/11/2/22758974/microsoft-teams-metaverse-mesh-3d-avatars-meetings-features">Microsoft</a>’s – they’ll want to bring their stuff with them. If two virtual worlds are interoperable, the blockchain will authenticate proof of ownership of your digital goods in both virtual worlds. Essentially, as long as you are able to access your <a href="https://coinmarketcap.com/alexandria/article/10-best-crypto-hot-wallets-for-beginners">crypto wallet</a> within a virtual world, you will be able to access your crypto stuff.</p>
<h2>Don’t forget your wallet</h2>
<p>So what will you keep in your crypto wallet? You will obviously want to carry cryptocurrencies in the metaverse. Your crypto wallet will also hold your metaverse-only digital goods, such as your <a href="https://www.coindesk.com/markets/2021/08/27/why-avatars-dominate-the-nft-market/">avatars</a>, avatar clothing, avatar animations, virtual decorations and weapons. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/440540/original/file-20220112-15-hhu2o9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a cartoon image of a young bearded man wearing sunglasses and a backwards ball cap is projected on a wall in a darkened auditorium" src="https://images.theconversation.com/files/440540/original/file-20220112-15-hhu2o9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/440540/original/file-20220112-15-hhu2o9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/440540/original/file-20220112-15-hhu2o9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/440540/original/file-20220112-15-hhu2o9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/440540/original/file-20220112-15-hhu2o9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/440540/original/file-20220112-15-hhu2o9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/440540/original/file-20220112-15-hhu2o9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Avatars, like this representation of El Salvador President Nayib Bukele, are cartoonlike animations that people inhabit in the metaverse.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/ElSalvadorBitcoin/af71800fc29a4f2a8c5600d3791f4542/photo">AP Photo/Salvador Melendez</a></span>
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<p>What will people do with their crypto wallets? Among other things, shop. Just as you likely do on the web now, you will be able to purchase traditional digital goods like music, movies, games and apps. You’ll also be able to buy physical-world items in the metaverse, and you’ll be able to view and “hold” 3D models of what you are shopping for, which could help you make more informed decisions.</p>
<p>Also, just like you can use ye old leather wallet to carry your ID, crypto wallets will be linkable to real-world identities, which could help facilitate transactions that require legal verification, such as buying a real-world car or home. Because your ID will be linked to your wallet, you won’t need to remember login information for all the websites and virtual worlds that you visit – just connect your wallet with a click and you are logged in. ID-associated wallets will also be useful for controlling access to age-restricted areas in the metaverse.</p>
<p>Your crypto wallet could also be linked to your contacts list, which would allow you to bring your social network information from one virtual world to another. “Join me for a pool party in FILL IN THE BLANK-world!” </p>
<p>At some point in the future, wallets could also be associated with reputation scores that determine the permissions you have to broadcast in public places and interact with people outside of your social network. If you act like a toxic misinformation-spreading troll, you may damage your reputation and potentially have your sphere of influence reduced by the system. This could create an incentive for people to behave well in the metaverse, but platform developers will have to prioritize these systems. </p>
<h2>Big business</h2>
<p>Lastly, if the metaverse is money, then companies will certainly want to play too. The decentralized nature of blockchain will potentially reduce the need for gatekeepers in financial transactions, but companies will still have many opportunities to generate revenue, possibly even more than in current economies. Companies like Meta will provide large platforms where people will <a href="https://www.oculus.com/workrooms/">work</a>, <a href="https://www.oculus.com/facebook-horizon/">play</a> and <a href="https://www.facebook.com/VenuesOculus/">congregate</a>. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/uIllSiXVfmI?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The metaverse doesn’t exist yet, but that hasn’t stopped a land rush as people and businesses grab virtual real estate.</span></figcaption>
</figure>
<p>Major brands are also getting into the NFT mix, including <a href="https://unxd.com/drops/dolce-gabbana-collezione-genesi?selected=all">Dolce & Gabbana</a>, <a href="https://www.coca-colacompany.com/news/coca-cola-nft-auction-fetches-more-than-575000">Coca-Cola</a>, <a href="https://www.adidas.com/into_the_metaverse/mint">Adidas</a> and <a href="https://news.nike.com/news/nike-acquires-rtfkt">Nike</a>. In the future, when you buy a physical world item from a company, you might also gain ownership of a linked NFT in the metaverse. </p>
<p>For example, when you buy that coveted name-brand outfit to wear to the real-world dance club, you might also become the owner of the crypto version of the outfit that your avatar can wear to the virtual Ariana Grande concert. And just as you could sell the physical outfit secondhand, you could also sell the NFT version for someone else’s avatar to wear. </p>
<p>These are a few of the many ways that metaverse business models will likely overlap with the physical world. Such examples will get more complex as <a href="https://theconversation.com/what-is-augmented-reality-anyway-99827">augmented reality</a> technologies increasingly come into play, further merging aspects of the metaverse and physical world. Although the metaverse proper isn’t here yet, technological foundations like blockchain and crypto assets are steadily being developed, setting the stage for a seemingly ubiquitous virtual future that is coming soon to a ‘verse near you. </p>
<p>[<em>Understand new developments in science, health and technology, each week.</em> <a href="https://memberservices.theconversation.com/newsletters/?nl=science&source=inline-science-understand">Subscribe to The Conversation’s science newsletter</a>.]</p><img src="https://counter.theconversation.com/content/171659/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rabindra Ratan conducts consulting work on the metaverse and other media technologies. His university research has received funding support from companies, including Meta, as well as government organizations, including the National Science Foundation. He also invests personally in cryptoassets, including Ethereum. </span></em></p><p class="fine-print"><em><span>Dar Meshi receives funding for research from the European Commission's Horizon 2020 Research and Innovation Program. He also owns various cryptoassets, including ether.</span></em></p>For the metaverse to work, people need to own their virtual bodies and possessions and be able to spend money. The same cryptographic technology behind bitcoin will make that possible.Rabindra Ratan, Associate Professor of Media and Information, Michigan State UniversityDar Meshi, Assistant Professor of Communication Arts and Sciences, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1744622022-01-13T01:33:24Z2022-01-13T01:33:24ZNFTs, an overblown speculative bubble inflated by pop culture and crypto mania<figure><img src="https://images.theconversation.com/files/439935/original/file-20220110-26-xvs5yd.jpg?ixlib=rb-1.1.0&rect=0%2C720%2C4500%2C2270&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Comedian Robin Williams once called cocaine “God’s way of telling you you are making too much money”. This role may now have been overtaken by non-fungible tokens, the blockchain-based means to claim unique ownership of easily copied digital assets.</p>
<p>The latest NFT mania involves fantastic amounts of money being paid for “Bored Apes”, 10,000 avatars featuring variants of a bored-looking cartoon ape. Last month rapper Eminem (real name Marshall Mathers) <a href="https://fortune.com/2022/01/03/eminem-nft-bored-ape-yacht-club/">paid about US$450,000</a> in Ethereum cryptocurrency to acquire Bored Ape No. 9055 – nicknamed EminApe, because its khaki and gold chain resembles what Eminem wears. It purportedly joins <a href="https://news.bitcoin.com/eminem-purchases-bored-ape-yacht-club-9055-for-452k-shadys-portfolio-holds-166-nfts/">more than 160 other NFTs</a> in the rapper’s collection. </p>
<p>The Bored Ape character seems derivative of the drawings of <a href="https://www.theguardian.com/music/gallery/2017/nov/07/gorillaz-oxfam-and-a-tarot-fool-art-by-jamie-hewlett-in-pictures">Jamie Hewlett</a>, the artist who drew Tank Girl and virtual band <a href="https://www.officialcharts.com/artist/9975/gorillaz/">Gorillaz</a>. According to the creators, each variant is “generated from over 170 possible traits, including expression, headwear, clothing, and more”. They say every ape is unique “<a href="https://boredapeyachtclub.com">but some are rarer than others</a>”.</p>
<p>So what does Eminem now own? He has an electronic version of an image, which he is using for his <a href="https://twitter.com/Eminem?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor">Twitter profile</a>. But then so does anyone who copies it from the internet. The only difference is that he has a record in a blockchain that shows he bought it. He also gets to be a member of the “<a href="https://boredapeyachtclub.com/#/">Bored Ape Yacht Club</a>” a members-only online space whose benefits and purpose beyond being a marketing gimmick are unclear.</p>
<hr>
<figure class="align-center ">
<img alt="Eminem's Bored Ape avatar on his Twitter profile." src="https://images.theconversation.com/files/440389/original/file-20220112-21-4mllrq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/440389/original/file-20220112-21-4mllrq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/440389/original/file-20220112-21-4mllrq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/440389/original/file-20220112-21-4mllrq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/440389/original/file-20220112-21-4mllrq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/440389/original/file-20220112-21-4mllrq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/440389/original/file-20220112-21-4mllrq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Eminem’s ‘Bored Ape’ avatar on his Twitter profile.</span>
<span class="attribution"><span class="source">Twitter</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>That’s about it. The intellectual property (such as it is) remains with the creators. He is not entitled to any share of merchandising revenue from the character. He can only profit from his purchase if he can find a “<a href="https://www.scienceabc.com/social-science/greater-fool-theory-bitcoin-definition-examples.html">greater fool</a>” willing to pay even more for the NFT. </p>
<p>Which is unlikely. While publicity given to the rapper’s purchase certainly seems to have boosted demand, the average price paid for Bored Ape NFTs so far in 2022 is about <a href="https://opensea.io/collection/boredapeyachtclub?tab=activity">83 Ether</a> (currently about US$280,000). Eminem may have been prepared to pay much more for the one that looked more like him; but would anyone else?</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/440564/original/file-20220113-27-1oyr3wc.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="'Bored Ape' sales activity from NFT marketplace OpenSea. Prices are in 'ether', the currency unit of the Ethereum blockchain platfrom." src="https://images.theconversation.com/files/440564/original/file-20220113-27-1oyr3wc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/440564/original/file-20220113-27-1oyr3wc.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=286&fit=crop&dpr=1 600w, https://images.theconversation.com/files/440564/original/file-20220113-27-1oyr3wc.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=286&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/440564/original/file-20220113-27-1oyr3wc.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=286&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/440564/original/file-20220113-27-1oyr3wc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=360&fit=crop&dpr=1 754w, https://images.theconversation.com/files/440564/original/file-20220113-27-1oyr3wc.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=360&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/440564/original/file-20220113-27-1oyr3wc.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=360&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">‘Bored Ape’ sales activity from NFT marketplace OpenSea. Prices are in ‘ether’, the currency unit of the Ethereum blockchain platfrom.</span>
<span class="attribution"><a class="source" href="https://opensea.io/collection/boredapeyachtclub">OpenSea</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<hr>
<p>NFTs are a highly speculative purchase. The basis of the market is proof of unique ownership, which only really matters for bragging rights and the prospect of selling the NFT in the future. NFT mania arguably combines the most tawdry and avaricious aspects of collectibles and blockchain markets with celebrity culture. </p>
<h2>The rise of the celebrity influencer</h2>
<p>Eminem’s monster payment in particular has lent credibility to the idea these NFTs have value. But he is not the only celebrity who has helped attract attention to the Bored Ape NFTs. </p>
<p>Others to <a href="https://nftnow.com/lists/celebrities-who-have-bored-ape-yacht-club-nfts/">buy into the hype</a> include basketball stars Shaquille O’Neal and Stephen Curry, billionaire Mark Cuban, electronic dance music DJ Steve Aoki, YouTuber Logan Paul and late-night television host Jimmy Fallon.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/440568/original/file-20220113-25-dgvi0t.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Jimmy Fallon's tweet about his Bored Ape purchase." src="https://images.theconversation.com/files/440568/original/file-20220113-25-dgvi0t.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/440568/original/file-20220113-25-dgvi0t.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=762&fit=crop&dpr=1 600w, https://images.theconversation.com/files/440568/original/file-20220113-25-dgvi0t.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=762&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/440568/original/file-20220113-25-dgvi0t.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=762&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/440568/original/file-20220113-25-dgvi0t.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=958&fit=crop&dpr=1 754w, https://images.theconversation.com/files/440568/original/file-20220113-25-dgvi0t.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=958&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/440568/original/file-20220113-25-dgvi0t.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=958&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Jimmy Fallon’s tweet about his Bored Ape purchase.</span>
<span class="attribution"><a class="source" href="https://twitter.com/jimmyfallon/status/1459164143626424321?lang=en">Twitter</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>These well-publicised purchasers effectively act as a form of celebrity endorsement – a tried and true marketing tactic. It is a graphic example of the power of media culture to stoke “irrational exuberance” in financial markets.</p>
<p>There has been a shift away from traditional investments and sources of investment advice. With prices disconnected from any future cash flows, there is less interest in forecasts from technical experts. Instead people turn to social media and “doing their own research”. </p>
<p>One <a href="https://www.fool.com/research/gen-z-millennial-investors-tools/">survey</a> in mid-2021 (polling 1,400 investors aged 18 to 40) suggested about a third of Gen Z investors regard <a href="https://www.tiktok.com/@cannolicrypto/video/6844644996675554566?u_code=d2h683mke5abmh&preview_pb=0&language=en&_d=dd5ggij5mh8mi8&share_item_id=6844644996675554566&timestamp=1594017582&utm_campaign=client_share&app=musically&utm_medium=ios&user_id=6612763001102696454&tt_from=sms&utm_source=sms&source=h5_m">TikTok videos</a> as a source of trustworthy investment advice. </p>
<p>This has opened up the field for celebrity influencers. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/fintok-and-finfluencers-are-on-the-rise-3-tips-to-assess-if-their-advice-has-value-161406">FinTok and 'finfluencers' are on the rise: 3 tips to assess if their advice has value</a>
</strong>
</em>
</p>
<hr>
<h2>A lot like Ponzi schemes</h2>
<p>While not illegal, many NFT marketing ventures have some <a href="https://www.ft.com/content/83a14261-598d-4601-87fc-5dde528b33d0">similarities</a> with <a href="https://moneysmart.gov.au/investment-warnings/ponzi-schemes">Ponzi schemes</a>, such as that operated by <a href="https://www.theguardian.com/us-news/2021/apr/14/bernie-madoff-dies-prison-ponzi-scheme">Bernie Madoff</a> (who sustained his fraud for decades by paying high “dividends” from the deposits of new investors). </p>
<p>Cryptocurrency markets work in essentially the same manner. For existing investors to profit, <a href="https://www.ft.com/content/26283f09-c3df-4c7e-814c-65083b063d8a">new buyers</a> have to be drawn into the market. So too NFTs, with something illusory attached to the digital assets.</p>
<p>Some light on the worth of this attachment compared to the economics of NFTs themselves may come from the interesting (and also highly profitable) experiment by the (now not so) “young British artist” Damien Hirst – himself a <a href="https://theconversation.com/the-art-market-not-a-pretty-picture-41822">master self-promoter</a>.</p>
<p>Hirst’s well-publicised “The Currency” project has involved selling NFTs for 10,000 similar but unique dot paintings. The twist is that at the end of a 12-month period those who have bought the NFT must decide if they want the digital token or the physical artwork. If they keep the NFT the artwork will be destroyed.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=215&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=215&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=215&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=270&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=270&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=270&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">These two Damien Hirst ‘Currency’ works sold within a hour of each other. ‘5083. Yeah, come on for a ride’, left, sold for US$45,966. ‘6307. We shall bring our own children’, right, sold for US$26,285.</span>
<span class="attribution"><a class="source" href="https://currency.nft.heni.com/stats">HENI</a></span>
</figcaption>
</figure>
<hr>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/damien-hirsts-dotty-currency-art-makes-as-much-sense-as-bitcoin-166958">Damien Hirst's dotty 'currency' art makes as much sense as Bitcoin</a>
</strong>
</em>
</p>
<hr>
<h2>No fundamental value</h2>
<p>There’s virtually nothing humans can’t turn into a market. But increasingly there are speculative bubbles in things with absolutely no fundamental value. NFTs have joined Bitcoin and celebrity meme-based cryptocurrencies such as <a href="https://theconversation.com/after-gamestop-the-rise-of-dogecoin-shows-us-how-memes-can-move-markets-154470">Dogecoin</a> and <a href="https://www.fxempire.com/education/article/what-is-shiba-inu-the-meme-coin-designed-to-kill-dogecoin-804989">Shiba Inu</a> as examples of tokens with no intrinsic worth, which speculators just buy in the hope the price will keep rising. </p>
<p>Even <a href="https://theconversation.com/after-gamestop-the-rise-of-dogecoin-shows-us-how-memes-can-move-markets-154470">Dogecoin</a>, started as a satire on these excesses, is now valued at <a href="https://coinmarketcap.com/currencies/dogecoin/">US$20 billion</a> and promoted in <a href="https://www.ft.com/content/025ea33f-7351-4d86-a1ca-b6c268f5b042">Ponzi-like ways</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-is-bitcoins-fundamental-value-thats-a-good-question-171387">What is Bitcoin's fundamental value? That's a good question</a>
</strong>
</em>
</p>
<hr>
<p>Some studies have suggested <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2782236">tweets</a> or <a href="https://reader.elsevier.com/reader/sd/pii/S1544612318301326?token=59D9447B0D87B50CD42DB7D10454D35453B594ED7F6B115547A4424AD48FF2CB1603C8F7A408882E39EE81B837C6AE47&originRegion=us-east-1&originCreation=20220106032009">Facebook posts</a> can now drive stock prices. <a href="https://www.vox.com/recode/2021/5/18/22441831/elon-musk-bitcoin-dogecoin-crypto-prices-tesla">Elon Musk’s tweets</a> certainly seem to have a large impact on cryptocurrency prices. </p>
<p>We now appear to be in the monster of all speculative bubbles. The creators of assets like NFTs will do well. It is not so clear about the holders.</p>
<p>Nor will the impact of NFT crashes be restricted just to the NFT market. Speculators, particularly if they have borrowed heavily, may need to liquidate other assets as well. This is all likely to make all financial markets more volatile. </p>
<p>The larger the bubble becomes, the wider the contagion when it bursts.</p><img src="https://counter.theconversation.com/content/174462/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This article is part of a series on financial and economic literacy funded by Ecstra Foundation.</span></em></p>The craze among celebrities for Bored Ape NFTs suggests speculation has become completely detached from any idea of fundamental value.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1669582021-08-31T02:13:03Z2021-08-31T02:13:03ZDamien Hirst’s dotty ‘currency’ art makes as much sense as Bitcoin<figure><img src="https://images.theconversation.com/files/418351/original/file-20210830-27-hhs2y3.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4493%2C2297&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>“<a href="https://www.bookdepository.com/search?searchTerm=%22art+of+making+money%22&search=Find+book">The Art of Making Money</a>” is the sort of book title you might see in an airport bookshop. But the (now not so) “<a href="https://www.tate.org.uk/art/art-terms/y/young-british-artists-ybas">Young British Artist</a>” Damien Hirst has taken it rather literally. </p>
<p>Hirst’s latest art project, called <a href="https://www.heni.com/">The Currency</a>, comprises 10,000 A4 sized pieces of handmade paper covered in very similar but not identical coloured spots. The back of each is numbered and signed by the artist with an arty title. Like actual contemporary bank notes, each also has a watermark, a microdot and a hologram to make it hard to forge. </p>
<p>The interesting twist is that Hirst has made this into an interesting experiment in the highly irrational economics of collectibles and blockchain technology.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-token-sale-christies-to-auction-its-first-blockchain-backed-digital-only-artwork-155738">A token sale: Christie's to auction its first blockchain-backed digital-only artwork</a>
</strong>
</em>
</p>
<hr>
<p>Each painting has a digital certificate of ownership — a so-called non-fungible token (NFT). In fact, the buyers of each work have paid US$2,000 for the electronic token only. If they want the physical artwork, they must choose by July 21 2022 to trade in their token. If they do so the token will be destroyed. If they decide to keep the token, the artwork will be destroyed. They cannot have both. </p>
<p>Adding to the fun is the secondary trade in the NFTs — highlighting just how much of the art market is driven by money rather than love. The sale of all 10,000 works is worth $US20 million. But over the past month, since the artworks went on sale, there have been more than 1,800 resales, for almost US$40 million. The highest price paid so far is US$120,000, for No. 6272, titled “Yes”.</p>
<p>These secondary sales already give us some insight as to whether buyers will treat the artworks as essentially homogenous (or “fungible” in economic jargon). But other questions remain. How many buyers will prefer to have the physical artwork or the digital token? Will this preference differ between art lovers and speculators? Will the buyers wait until the last possible days to decide whether to convert to preserve the “<a href="https://www.oecd-ilibrary.org/environment/cost-benefit-analysis-and-the-environment/quasi-option-value_9789264010055-11-en">option value</a>”? </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/damien-hirsts-the-currency-what-well-discover-when-this-nft-art-project-is-over-164724">Damien Hirst's 'The Currency': what we'll discover when this NFT art project is over</a>
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</em>
</p>
<hr>
<p>On one question, though, we can be most confident of the answer. Despite the art project’s name, these artworks don’t make very good currency. </p>
<h2>What makes a currency?</h2>
<p>For one thing they are not divisible. It would be hard to buy something worth a lot less than one of the paintings with them. One could rip a a sheet in half but, as with half a bank note, it’s unlikely anyone would consider the value of the two pieces anywhere near the original.</p>
<p>So while Hirst’s works have many of the attributes of actual currency, they still lack attributes critical to work as currency. In this sense they are similar to so-called “cryptocurrencies”. Even the two best-known, Bitcoin and Dogecoin, can barely be used to buy anything, because few merchants accept them. The <a href="https://coinmarketcap.com/">thousands</a> of less well-known cryptocurrencies are even more useless for making payments. </p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/vEsVJJy1od4?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
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<h2>The market for ‘the currency’</h2>
<p>The original sale of the artworks worked like an initial public offering of shares. Aspiring buyers could register and say how many they wanted (but not nominate which individual work). The offering was over-subscribed, as more than 30,000 people wanted more than 60,000 tokens (that is, three time the available number). </p>
<p>This demand has spilled over into a secondary electronic marketplace (managed by HENI, the company that handled the initial sales). The graph below shows these sales.</p>
<hr>
<p><strong>Secondary sales of Damien Hirst’s ‘Currency’ art works</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/418378/original/file-20210830-15-l9nvxq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418378/original/file-20210830-15-l9nvxq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=390&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418378/original/file-20210830-15-l9nvxq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=390&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418378/original/file-20210830-15-l9nvxq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=390&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418378/original/file-20210830-15-l9nvxq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=490&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418378/original/file-20210830-15-l9nvxq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=490&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418378/original/file-20210830-15-l9nvxq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=490&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://currency.nft.heni.com/stats">HENI</a></span>
</figcaption>
</figure>
<hr>
<p>Almost 500 are currently listed for sale. Most of the recent sales were for about US$50,000, more than 20 times the original asking price. What makes one work worth more than another? That’s hard to say, though titles appear to play a big part. “Yes”, which exchanged hands for US$120,000, for example, is one of the few works with a one-word title.</p>
<h2>Valuing collectables</h2>
<p>Hirst’s experiment already highlights the strange economics of pricing collectables.</p>
<p>In economics the standard valuation technique “discounts” future values. It assumes a bird in the hand is worth more than one in the bush.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=215&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=215&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=215&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=270&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=270&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418368/original/file-20210830-31-1nz5tu6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=270&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">These two Damien Hirst ‘Currency’ works sold within a hour of each other. ‘5083. Yeah, come on for a ride’, left, sold for US$45,966. ‘6307. We shall bring our own children’, right, sold for US$26,285.</span>
<span class="attribution"><a class="source" href="https://currency.nft.heni.com/stats">HENI</a></span>
</figcaption>
</figure>
<hr>
<p>But art works and similar collectables are different. While some buy for love, speculators buy for money — on the assumption the value will be more in the future. The rationale is essentially the “<a href="https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/greater-fool-theory/">greater fool theory</a>” — the hope they can sell to another speculator at a higher price. That buyer in turn must expect someone else will pay even more. And so it goes on. Hirst’s experiment has so far demonstrated this graphically.</p>
<p>This often leads to a speculative bubble, which usually ends in tears. The price may collapse. As Isaac Newton ruefully remarked after after losing £20,000 in the South Sea Bubble of 1720: “I can calculate the motions of heavenly bodies, but not the madness of people.”</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/nfts-hit-the-big-league-but-not-everyone-will-win-from-this-new-sports-craze-158762">NFTs hit the big league, but not everyone will win from this new sports craze</a>
</strong>
</em>
</p>
<hr>
<p>By coincidence, Hirst’s artworks are currently trading around the same price as one Bitcoin. </p>
<p>I think the paintings are at least pretty. And there’s the option at least to swap the NFT into a physical form the owner can hang on their wall. There are enough people who would like to do that to give this artful “currency” some underlying fundamental value. </p>
<p>That can’t be said of cryptocurrencies.</p><img src="https://counter.theconversation.com/content/166958/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins does not own any of 'the currency'. </span></em></p>Like cryptocurrency, Damien Hirst ‘Currency’ artworks have many of the attributes of actual money.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1664452021-08-24T09:28:52Z2021-08-24T09:28:52ZWhen you buy an NFT, you don’t completely own it – here’s why<figure><img src="https://images.theconversation.com/files/417198/original/file-20210820-25-1j3afhs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Welcome to the world of digital property.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/cryptopunk-nft-blockchain-non-fungible-1953803149">CreatorsTempe</a></span></figcaption></figure><p>NFTs or non-fungible tokens first captured the public imagination when a digital collage by an artist named <a href="https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million">Beeple</a> sold for US$69 million (£51 million) at Christie’s in March 2021. Since then, there has been an explosion in the use of these units for storing digital content, which are bought and sold using online ledgers known as blockchains.</p>
<p>Since that initial connection with art, we are seeing NFTs being used in numerous other ways. Notably, many are being traded as collectables on exchanges like <a href="https://opensea.io/">OpenSea</a> and <a href="https://rarible.com/">Rarible</a>. Lately, for example, a series of 8,888 adorable “<a href="https://cryptonews.com/news/adorable-penguins-are-taking-over-the-nft-scene-11427.htm">Pudgy Penguins</a>” made a splash, each reflecting its own unique characteristic, with one selling for a record 150 ethereum (about US$500,000). </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/417199/original/file-20210820-25-1nyvvfh.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Pudgy Penguins for sale on OpenSea" src="https://images.theconversation.com/files/417199/original/file-20210820-25-1nyvvfh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/417199/original/file-20210820-25-1nyvvfh.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=282&fit=crop&dpr=1 600w, https://images.theconversation.com/files/417199/original/file-20210820-25-1nyvvfh.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=282&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/417199/original/file-20210820-25-1nyvvfh.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=282&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/417199/original/file-20210820-25-1nyvvfh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=355&fit=crop&dpr=1 754w, https://images.theconversation.com/files/417199/original/file-20210820-25-1nyvvfh.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=355&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/417199/original/file-20210820-25-1nyvvfh.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=355&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Pssst, fancy a penguin?</span>
<span class="attribution"><a class="source" href="https://opensea.io/collection/pudgypenguins">OpenSea</a></span>
</figcaption>
</figure>
<p>Yet whether it is a remarkable piece of digital artwork or a cute digital penguin, NFTs are essentially tradeable jpegs or gifs. Unlike physical collectables, an NFT owner will not be able to display the asset in their home – except on a screen. They might think they could display it on a website, but this isn’t necessarily the case. So what is someone actually getting when they buy an NFT, and what do they truly own from a legal perspective?</p>
<h2>The new frontier</h2>
<p>To understand NFTs, it is important to understand what is meant by “fungible”. Fungible is derived from the Latin verb <a href="https://www.merriam-webster.com/dictionary/fungible"><em>fungi</em></a>, meaning to perform. In the broader context, this means interchangeable and relates to whether something can be exchanged. </p>
<p>Money is fungible, in the sense that you can buy a commodity worth £10 with any £10 note; it doesn’t matter which one you use. On the other hand, NFTs cannot be exchanged like for like with another. They are each one of a kind, or one of a limited edition. </p>
<p>Content sold as NFTs can be created in many ways. It can be computer-generated, which was the basis for the production of <a href="https://www.larvalabs.com/cryptopunks">10,000 unique CryptoPunks</a> in 2017. </p>
<p>It can reflect a collaborative work, such as the English singer-songwriter Imogen Heap’s series of <a href="https://musically.com/2021/04/28/imogen-heap-teams-up-with-endlesss-for-her-first-series-of-nfts/">music NFTs, “Firsts”</a>. These involved her improvising alongside visuals provided by artist Andy Carne. Or NFTs can represent a single work, such as Beeple’s artwork; or a series of items, such as the <a href="https://www.rollingstone.com/pro/news/kings-of-leon-when-you-see-yourself-album-nft-crypto-1135192/">Kings of Leon’s “NFT Yourself”</a> series in which the assets on offer included music albums with unique features and special concert tickets.</p>
<h2>Limited rights</h2>
<p>NFTs allow the owner of a limited work or collection to reach their audience directly. Whereas previously it was not possible to sell something like the <a href="https://www.theverge.com/2021/3/22/22344937/jack-dorsey-nft-sold-first-tweet-ethereum-cryptocurrency-twitter">first ever tweet</a>, or a <a href="https://www.theverge.com/2021/3/8/22319868/taco-bell-nfts-gif-tacos-sell">taco-themed gif</a>, or indeed a piece of art online, now individuals, companies or cultural organisations can do so as long as they are the rightful owner.</p>
<p>The creator can do this because, according to <a href="https://www.legislation.gov.uk/ukpga/1988/48/section/9">UK copyright law</a>, copyright arises automatically when a work is created – as long as it reflects the “author’s own intellectual creation”. This means that the creator of a work is the owner of the copyright, and can do what they want with it.</p>
<p>When someone buys an NFT from the creator, they obtain ownership in the sense that it becomes their property. After all, an NFT is a digital certificate of ownership representing the purchase of a digital asset, traceable on the blockchain. </p>
<p>But the NFT holder does not have any other rights to the work. This includes those offered under <a href="https://www.gov.uk/topic/intellectual-property/copyright">copyright</a> law, <a href="https://www.gov.uk/copyright">such as</a> the right of communication to the public (in other words, making the asset available to the world at large), or the rights of adaptation or reproduction.</p>
<p>The situation is the same if you buy a physical collectable. Owning a painting does not automatically give you the right to display it in public. It also doesn’t give you the right to sue for infringement of copyright if someone reproduces the image in the painting without permission. To obtain such rights, you either need to be the copyright owner of the work or have the copyright assigned to you by the creator (in writing and signed).</p>
<p>The trouble with online content is that, by virtue of its digital nature, it is easy to share, copy and reproduce. Buyers of NFTs need to understand that they would be infringing the copyright if they engage in such activities without the permission of the right holder. The only way such rights can be transferred is through the terms embedded in the NFT, in the form of a licence.</p>
<p>There have been some NFTs where the buyer has been granted the right to use the copyright in a limited way. For example, owners of CryptoKitties NFTs have been allowed to make up to US$100,000 in gross revenues from them each year. In other cases, creators have specifically restricted all commercial use of the work. For example, the <a href="https://d3mso81baheq3.cloudfront.net/tos.pdf">Kings of Leon</a> stipulated that their NFT music was for personal consumption only. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/417423/original/file-20210823-16-772f59.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A picture of a CryptoKitty" src="https://images.theconversation.com/files/417423/original/file-20210823-16-772f59.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/417423/original/file-20210823-16-772f59.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=526&fit=crop&dpr=1 600w, https://images.theconversation.com/files/417423/original/file-20210823-16-772f59.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=526&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/417423/original/file-20210823-16-772f59.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=526&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/417423/original/file-20210823-16-772f59.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=661&fit=crop&dpr=1 754w, https://images.theconversation.com/files/417423/original/file-20210823-16-772f59.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=661&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/417423/original/file-20210823-16-772f59.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=661&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">CryptoKitties allow owners to make up to US$100,000 a year from them.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/adorable-virtual-kittie-thinking-about-digital-776010871">Vector Factory</a></span>
</figcaption>
</figure>
<p>Buyers therefore need to be clear that the main reasons to buy an NFT are the <a href="https://caia.org/blog/2021/05/25/investing-in-nfts-why-it-matters">speculative investment</a> and the pleasure of having something unique from an admired artist, brand, sports team, or whatever. Unless the terms allow it, buyers will only have a limited ability to share the creative work on public platforms or to reproduce it and make it available for others.</p>
<p>Incidentally, buyers should also be aware that the blockchain cannot absolutely know whether a creative work <a href="https://shkspr.mobi/blog/2018/06/how-i-became-leonardo-da-vinci-on-the-blockchain/">is authentic</a>. Someone can take another person’s work and <a href="https://twitter.com/CorbinRainbolt/status/1369433485086195717">tokenise it</a> as an NFT, thereby infringing the rights of the copyright owner. You need to be sure that you are buying something that originated from the creator. </p>
<p>In short, NFTs are probably here to stay, but they clearly raise ownership questions relating to copyright law. This may not be immediately clear to most people, and it’s important that you understand the limits of what you are getting for your money.</p><img src="https://counter.theconversation.com/content/166445/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dinusha Mendis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There’s a difference between owning property and owning the copyright in that property.Dinusha Mendis, Professor of Intellectual Property and Innovation Law and Acting Deputy Dean (Research), Faculty of Media and Communication, Bournemouth UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1587622021-05-05T07:08:24Z2021-05-05T07:08:24ZNFTs hit the big league, but not everyone will win from this new sports craze<p>Some buy sporting memorabilia for love. Others for money. </p>
<p>The world record for most money paid for a sports-related item goes to the original Olympic manifesto written in 1892 by International Olympic Committee founder Pierre de Coubertin. It changed hands <a href="https://www.abc.net.au/news/2019-12-19/the-original-olympic-manifesto-breaks-sports-memorabilia-record/11815830">in 2019 for US$8.8 million</a>. In second place is the New York Yankees jersey worn by legendary American baseball player Babe Ruth, sold <a href="https://www.espn.com/mlb/story/_/id/7953437/babe-ruth-jersey-sells-record-44-million">in 2012 for USA$4.4 million</a>.</p>
<p>As in all markets for collectibles, scarcity equals value. </p>
<p>Which is why sport organisations, memorabilia sellers and collectors are getting excited about non-fungible tokens – or NFTs – a blockchain-enabled technology that proves unique ownership of digital content. </p>
<p>NFTs open up a huge new market to sell limited-edition images, videos and artwork. They also enable the original licensees – be it sports organisations or individual athletes – to share in resale profits.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/398796/original/file-20210505-23-7licjf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Beeple’s collage 'Everydays: The First 5000 Days', sold at Christie’s for US$69 million." src="https://images.theconversation.com/files/398796/original/file-20210505-23-7licjf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/398796/original/file-20210505-23-7licjf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/398796/original/file-20210505-23-7licjf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/398796/original/file-20210505-23-7licjf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/398796/original/file-20210505-23-7licjf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/398796/original/file-20210505-23-7licjf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/398796/original/file-20210505-23-7licjf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Beeple’s collage ‘Everydays: The First 5000 Days’ sold at Christie’s for US$69 million.</span>
<span class="attribution"><span class="source">Christie's/AP</span></span>
</figcaption>
</figure>
<p>NFTs are already sweeping the art market. In March, auction house Christie’s sold an NFT of a work by American digital artist <a href="https://www.beeple-crap.com/">Mike Winkelmann</a>, known as Beeple, for US$69 million. Auction house Sotheby’s last month sold <a href="https://www.abc.net.au/news/2021-04-15/digital-art-single-pixel-nft-sold-more-1-million/100070810">a single pixel</a> for $US1.36 million.</p>
<p>Could we see similar NFT values in the sports collectibles market? Quite possibly. </p>
<p>Though tangible items such as uniforms, balls and bats will likely continue to be prized collectibles, collectors are already paying big bucks for digital versions of old favourites such as trading cards. </p>
<p>Leading the game is the US National Basketball Association, which began selling limited-edition “Top Shots” – digitally packaged and NFT-authenticated video highlight clips – <a href="https://www.foxsports.com.au/basketball/nba/nba-top-shot-news-cryptocurrency-bitcoin-what-is-top-shot-lebron-james-moments-explainer/news-story/6ea4a4120632080f8df9624981ac0372">in October 2020</a>. Like traditional trading cards, these are sold in “packs”. Some videos are common, others rare. One such rare “moment” – in reality about half a moment – of basketball superstar LeBron James dunking reportedly changed hands in April <a href="https://www.si.com/nba/pacers/news/lebron-james-nba-top-shot-sells-for-over-387000">for US$387,000</a>.</p>
<p>Who knows what someone might pay for that moment in decades to come? </p>
<p>It might be millions more. Or much much less. Because this market, for all its early promises of rich rewards, is not without its downsides, with potential for significant environmental and social costs.</p>
<h2>What are non-fungible tokens (NFTs)?</h2>
<p>Something is fungible when it has a standardised and interchangeable value. It is replaceable by something else just like it. Cash is the obvious example. Non-fungible essentially means something unique, non-replaceable.</p>
<p>So <a href="https://theconversation.com/nfts-explained-what-they-are-why-rock-stars-are-using-them-and-why-theyre-selling-for-millions-of-dollars-156389">NFTs</a> are essentially digital certificates, secured with blockchain technology, that authenticate an item’s provenance – that it is a limited edition or one of kind – and enable it to be bought and sold as such. </p>
<p>An NFT provides scarcity of digital content that can be relatively easily copied – a photo of Indian cricket great Sachin Tendulkar making a world-record score, for example, or a video of tennis No. 1 Ash Barty winning at Wimbledon.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/398518/original/file-20210504-23-1nwzlzs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Sports trading cards for sale in a department store in California." src="https://images.theconversation.com/files/398518/original/file-20210504-23-1nwzlzs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/398518/original/file-20210504-23-1nwzlzs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/398518/original/file-20210504-23-1nwzlzs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/398518/original/file-20210504-23-1nwzlzs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/398518/original/file-20210504-23-1nwzlzs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/398518/original/file-20210504-23-1nwzlzs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/398518/original/file-20210504-23-1nwzlzs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Sports trading cards for sale in a department store in California.</span>
<span class="attribution"><span class="source">TonelsonProductions/Shutterstock</span></span>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-are-nfts-and-why-are-people-paying-millions-for-them-157035">What are NFTs and why are people paying millions for them?</a>
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</em>
</p>
<hr>
<h2>There are big opportunities</h2>
<p>The potential riches are evident from the NBA’s <a href="https://www.si.com/nba/2021/03/17/nba-top-shot-crypto-daily-cover">Top Shot</a> sales, which accounted for <a href="https://www.forbes.com/sites/ninabambysheva/2021/04/20/amid-slowing-nft-demand-nba-top-shot-creator-raises-capital-again-tripling-valuation/?sh=7a976b0c7611">US$500 million in transactions</a> in the first three months of the year. This was a third of the total US$1.5 billion in NFT transactions, <a href="https://dappradar.com/blog/dapp-industry-report-q1-2021-overview">according to DappRadar</a>, which tracks blockchain markets.</p>
<p>Last month San Francisco-based NBA team the Golden State Warriors was the first US professional sports team to issue its own NFT collection, which includes limited-edition digital versions of <a href="https://www.espn.com.au/nba/story/_/id/31344010/golden-state-warriors-become-first-pro-team-launch-nft-collection">championship rings and ticket stubs</a>.</p>
<p>Individual athletes are also selling their own branded items in NFT form. NFL quarterback Patrick Mahomes, for example, is selling <a href="https://www.espn.com.au/nfl/story/_/id/31078049/kansas-city-chiefs-patrick-mahomes-enters-world-nfts">signed digital artwork</a>. Champion skateboarder Mariah Duran and paralympian Scout Bassett are among a group of elite women athletes who will <a href="https://www.sportico.com/business/commerce/2021/uswnt-wnba-olympic-athletes-nft-collection-1234627493/">release NFTs this month</a>. Expect to see many more selling NFTs in the wake of the Toyko Olympics.</p>
<h2>There are also risks</h2>
<p>But there are some big downsides. </p>
<p>The first is environmental – because of the energy used in blockchain verification processes. </p>
<p>Of course, making and transporting physical goods has a range of environmental impacts, but by one calculation the carbon footprint of selling an NFT artwork is almost <a href="https://qz.com/1987590/the-carbon-footprint-of-creating-and-selling-an-nft-artwork/">100 times that</a> of selling and transporting a print version. In February, French digital artist Joanie Lemercier cancelled the sale of six works, and <a href="https://twitter.com/joanielemercier/status/1363085114176122880?lang=en">urged others to do the same</a>, after calculating those sales would use the same amount of electricity in ten seconds as his studio used in two years. </p>
<p>Eliminating this downside of NFTs will depend on more efficient technology and more renewable energy. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/nfts-why-digital-art-has-such-a-massive-carbon-footprint-158077">NFTs: why digital art has such a massive carbon footprint</a>
</strong>
</em>
</p>
<hr>
<p>The second is social – of people only seeing NFTs as a way to make money. </p>
<p>As in any market where prices are rising rapidly, there is the danger of a speculative bubble. Here, the risk is that buyers spend big on virtual items that may end up being virtually worthless when the bubble bursts. </p>
<p>Last year also saw large and continuing market growth in traditional sport collectibles <a href="https://www.forbes.com/sites/tommybeer/2021/02/11/ebay-reports-increase-of-4-million-trading-cards-sold-in-2020/?sh=3846e8931963">such as trading cards</a>, along with retail investment in cryptocurrencies and stock markets more generally. So, while the value attached to NFTs may prove to be enduring, it is possible some part of the early interest in sport NFTs is driven by “irrational exuberance” and patterns of people spending more time and money online due to the COVID pandemic.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/nfts-are-much-bigger-than-an-art-fad-heres-how-they-could-change-the-world-159563">NFTs are much bigger than an art fad – here's how they could change the world</a>
</strong>
</em>
</p>
<hr>
<p>There are likely to be many more sport organisations and athletes peddling their digital wares in the near future. It is though, difficult to predict whether sales will continue this trajectory, how and when this trend might “normalise”, or if NFTs indeed represent a speculative bubble.</p>
<p>Particularly for fans playing in this market, care should be taken to not let emotions trump prudence and good judgment.</p><img src="https://counter.theconversation.com/content/158762/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Adam Karg consults to and conducts research for a number of organisation across Australia and globally. His research has received funding from organisations including the Australian Research Council, Victorian Government, leisure and sport technology companies and professional leagues and/or teams spanning the Australian Football League, Big Bash League (Cricket Australia), National Rugby League, Super Rugby, National Basketball League and the A-League.</span></em></p><p class="fine-print"><em><span>Kathleen Wilson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>NFTs are revolutionising the sports memorabilia market. There are huge opportunities to make money, but also big risks.Adam Karg, Associate Professor, Business School, Swinburne University of TechnologyKathleen Wilson, Lecturer, Business School, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1584062021-04-30T12:15:56Z2021-04-30T12:15:56ZFrom tulips and scrips to bitcoin and meme stocks – how the act of speculating became a financial mania<figure><img src="https://images.theconversation.com/files/397946/original/file-20210429-18-16ru4p9.jpg?ixlib=rb-1.1.0&rect=76%2C30%2C5016%2C3145&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Financial bubbles are frequently depicted as manias. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/wall-street-bubbles-always-the-same-j-pierpont-morgan-news-photo/646470006">Photo12/Universal Images Group via Getty Images</a></span></figcaption></figure><p>In the late 1990s, America experienced a <a href="http://pages.stern.nyu.edu/%7Eeofek/DotComMania_JF_Final.pdf">dot-com mania</a>. In the 2000s, the <a href="https://www.federalreservehistory.org/essays/subprime-mortgage-crisis">housing</a> market went wild. </p>
<p>Today, there are manias in everything from <a href="https://www.cnbc.com/2021/03/24/blockchain-com-rides-bitcoin-mania-to-a-5-2-billion-valuation.html">bitcoin</a> and <a href="https://www.nytimes.com/2021/03/11/arts/design/nft-auction-christies-beeple.html">nonfungible tokens</a> to <a href="https://seekingalpha.com/article/4418535-reits-jump-into-spac-mania">SPACs</a> and <a href="https://www.bloomberg.com/news/articles/2021-04-03/as-meme-stock-mania-fizzles-wall-street-sees-big-reckoning">meme stocks</a> – obscure corners of the market that are getting increased attention. Whether these are the next bubbles to burst remains to be seen. </p>
<p>The sudden rise of all these relatively new <a href="https://www.investopedia.com/terms/a/assetclasses.asp">asset classes</a> – or the <a href="https://www.nytimes.com/2021/03/13/technology/crypto-art-NFTs-trading-cards-investment-manias.html">astronomical heights they’ve reached</a> – may seem irrational or even enchanted. Describing them as speculative manias implies that individuals are lost in forces beyond their control and needn’t take responsibility for the actions of the crowd. </p>
<p>But, as I learned while researching my book “<a href="http://cup.columbia.edu/book/speculation/9780231200219">Speculation: A Cultural History from Aristotle to AI</a>,” which will be published in June 2021, financial speculation hasn’t always been understood as a widespread craze – or even outside of individual choice. </p>
<h2>Adam Smith and the rise of financial speculation</h2>
<p>From ancient times until the late 1700s, the term “speculation” was used mainly by philosophers, scientists and authors to describe conjectures about the future. When speaking of traders who manipulated the prices of an asset to make an outsize profit, <a href="https://fee.org/articles/speculators-adam-smith-revisited/">financial writers</a> instead used terms like “engrossing” or “cornering” the market. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/397876/original/file-20210429-21-8os759.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="An illustration of Gen. George Washington on a horse holding his hat as he leads his men in a battle in 1777" src="https://images.theconversation.com/files/397876/original/file-20210429-21-8os759.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/397876/original/file-20210429-21-8os759.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=726&fit=crop&dpr=1 600w, https://images.theconversation.com/files/397876/original/file-20210429-21-8os759.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=726&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/397876/original/file-20210429-21-8os759.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=726&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/397876/original/file-20210429-21-8os759.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=913&fit=crop&dpr=1 754w, https://images.theconversation.com/files/397876/original/file-20210429-21-8os759.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=913&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/397876/original/file-20210429-21-8os759.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=913&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">George Washington thought financial speculators would ruin the country.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/WashingtonBattleOfPrinceton1777/f5c9512737be4401b4d57eec415bd9af/photo?Query=George%20AND%20washington&mediaType=photo&sortBy=arrivaldatetime:asc&dateRange=Anytime&totalCount=20709&currentItemNo=2">AP Photo</a></span>
</figcaption>
</figure>
<p>After a <a href="https://www.jstor.org/stable/2598492?seq=1">series of international credit scandals</a> in the 1770s, though, “speculation” became the favored descriptor for high-risk financial gambling. Political economist Adam Smith used the term extensively in “<a href="https://archive.org/details/in.ernet.dli.2015.207956">Wealth of Nations</a>,” published in 1776, after seeing it used to describe lotteries and smuggling. He saw in it a perfect term for how traders were trying to capitalize exponentially on the inherent risks and unknowns of the future. </p>
<p><a href="https://founders.archives.gov/documents/Washington/03-20-02-0631">George Washington even warned in 1779 that speculators</a> “are putting the rights & liberties of this Country into the most eminent danger.” </p>
<p>Yet Smith, Washington and others still saw speculators of all types as individuals making calculated decisions, not as part of some maniacal collective or epidemic contagion. </p>
<h2>Alexander Hamilton’s ‘scripomania’ takes hold</h2>
<p>That began to change thanks largely to the early American physician and thinker Benjamin Rush. </p>
<p>As surgeon general of the Continental Army and a prolific publisher of studies of mental illness, Rush <a href="https://books.google.com/books?id=KQf4CAAAQBAJ&newbks=1&newbks_redir=0&printsec=frontcover#v=onepage&q&f=false">penned a widely circulated article</a> in 1787, “On the Different Species of Mania.” In it, he characterized speculative gambling alongside 25 other types of “manias” that he wrote had become pronounced in American life, including “land mania,” “horse mania,” “machine mania” and “monarchical mania.” </p>
<p>For Rush, speculation was a disease of the mind that spread from one to many and threatened the health of a young democracy that relied on rational decision-making by voters and politicians. The “spirit of speculation,” he foresaw, was not a good-hearted “spirit” of nation building, but rather could “destroy patriotism and friendship in many people.” </p>
<p>Rush’s terminology and his way of thinking caught on quickly. In the summer of 1791, <a href="https://globalfinancialdata.com/the-panic-of-1792">“Scripomania” took hold</a> as Alexander Hamilton sold the rights to buy shares – known as scrips for “subscriptions” – in the newfound Bank of the United States to shore up the nation’s finances following the Revolutionary War. Demand for the scrips soared; the <a href="https://www.loc.gov/item/sn83025889">Philadelphia General Advertiser declared</a> that “an inveterate madness for speculation seems to possess this country!”</p>
<figure class="align-center ">
<img alt="In an illustration, cats are representing humans and buying tulips on display" src="https://images.theconversation.com/files/397879/original/file-20210429-22-19tt2zz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/397879/original/file-20210429-22-19tt2zz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=491&fit=crop&dpr=1 600w, https://images.theconversation.com/files/397879/original/file-20210429-22-19tt2zz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=491&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/397879/original/file-20210429-22-19tt2zz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=491&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/397879/original/file-20210429-22-19tt2zz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=617&fit=crop&dpr=1 754w, https://images.theconversation.com/files/397879/original/file-20210429-22-19tt2zz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=617&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/397879/original/file-20210429-22-19tt2zz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=617&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A satire of the Dutch tulip ‘mania,’ which didn’t get that label until many years later.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/satire-of-the-folly-of-the-tulip-mania-news-photo/157370637">Art Images/Hulton Fine Art Collection via Getty Images</a></span>
</figcaption>
</figure>
<h2>Calculated risk – minus the calculation</h2>
<p>After that, the tie between “speculation” and “mania” spread and became inextricable – and it hasn’t been severed since. The Scottish journalist <a href="https://archive.org/details/memoirsofextraor01mack">Charles Mackay sealed this connection</a> in 1841 with his influential “Extraordinary Popular Delusions and the Madness of Crowds.” Since then, virtually every bubble, every rush in commodities and every market panic that has ensued has been called a “mania.” </p>
<p>The term has even been used retrospectively to refer to the behaviors that led to speculative bubbles in the distant past. The famous <a href="https://theconversation.com/tulip-mania-the-classic-story-of-a-dutch-financial-bubble-is-mostly-wrong-91413">Dutch tulip bubble</a> of 1637, for instance, was seen in its day as foolish and dangerous, but only after Mackay’s book was it labeled a “mania.”</p>
<p>The trouble with talking about wild financial events in this way is that society begins to confuse and distort the responsibility and nature of bubbles that inevitably crash, leaving ruin in their wake. </p>
<p>To speculate, at its core, is to make a bet about the future based on individual calculations of the risks of tomorrow. There’s nothing inherently contagious or mad about it. In fact, computers <a href="https://mitsloan.mit.edu/ideas-made-to-matter/does-statistical-trading-make-markets-less-or-more-efficient">are often speculating</a> now in place of human minds.</p>
<p>What we call a “mania” is just shorthand for saying that a lot of people – and machines – made the same bet, as happened in January when <a href="https://theconversation.com/robinhood-app-makes-wall-street-feel-like-a-game-to-win-instead-of-a-place-where-you-can-lose-your-life-savings-in-a-new-york-minute-156013">day traders</a> – many of them inexperienced – drove up the price of GameStop. Maybe they were all acting rationally and in concert. Maybe they were duped by insiders or weren’t fully calculating those risks.</p>
<p>Whatever the explanation, using the term “mania” tells us only a small and potentially misleading part of the story. </p>
<p>[<em>Over 104,000 readers rely on The Conversation’s newsletter to understand the world.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=100Ksignup">Sign up today</a>.]</p><img src="https://counter.theconversation.com/content/158406/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gayle Rogers does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Until the late 1800s, moments of widespread high-risk financial gambling weren’t considered manias but the results of individual actors, who bore responsibility for the disastrous results.Gayle Rogers, Professor and chair of English, University of PittsburghLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1595632021-04-26T10:24:52Z2021-04-26T10:24:52ZNFTs are much bigger than an art fad – here’s how they could change the world<figure><img src="https://images.theconversation.com/files/396590/original/file-20210422-21-1ovoydj.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Homes fit for zeroes (and ones).</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/3d-illustration-abstract-background-real-estate-1933952156">Julien Tromeur</a></span></figcaption></figure><p>Sotheby’s has become the latest establishment name in art to dive into NFTs (non-fungible tokens) through its collaboration with anonymous <a href="https://www.one37pm.com/nft/art/meet-murat-pak-digital-artist">digital artist Pak</a> and NFT marketplace <a href="https://niftygateway.com/">Nifty Gateway</a>. </p>
<p>The auction house sold <a href="https://www.sothebys.com/en/digital-catalogues/the-fungible-collection-by-pak?locale=en&cmp=actn_CTP_gg_sea_tffc_onl_nft_pak_fungible_en_04-2021_int__ovr_searesp___general&s_kwcid=AL!13028!3!513206057188!p!!g!!sotheby%27s%20nft%20auction">The Fungible Collection</a>, a “novel collection of digital art redefining our understanding of value”, for more than <a href="https://www.sothebys.com/en/articles/17-million-realized-in-sothebys-first-nft-sale-with-digital-creator-pak?locale=en">US$17 million</a> (£12 million). </p>
<p>Some pieces, such as “The Switch”, a monochrome 3D construction that is going to be changed by the artist at some unspecified moment in the future, received bids well in excess of <a href="https://niftygateway.com/itemdetail/primary/0xc7cc3e8c6b69dc272ccf64cbff4b7503cbf7c1c5/2">US$1 million</a>.</p>
<p><a href="https://theconversation.com/what-are-nfts-and-why-are-people-paying-millions-for-them-157035">For the uninitiated</a>, NFTs are tokenised versions of assets that can be traded on a blockchain, the digital ledger technology behind cryptocurrencies like bitcoin and ethereum. Whereas one bitcoin is directly interchangeable with another, meaning they are fungible, NFTs are the opposite because the underlying assets are unique in some way and can’t be exchanged like for like. </p>
<p>This uniqueness enabled Christie’s to sell digital artist Beeple’s
<a href="https://www.cnbc.com/2021/03/11/most-expensive-nft-ever-sold-auctions-for-over-60-million.html">“Everydays”</a> NFT in March for an eye-watering US$68 million. For those that don’t have that sort of money, NFTs are also being used for trading collectables like <a href="https://www.sportspromedia.com/news/topps-mlb-baseball-card-nfts-digital-collectibles">baseball cards</a> and <a href="https://www.financemagnates.com/cryptocurrency/news/nfts-are-creating-robust-economies-in-online-gaming-heres-how/">computer gaming items</a> like swords and avatar skins. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/396517/original/file-20210422-23-ye7ltk.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The Switch, by Pak" src="https://images.theconversation.com/files/396517/original/file-20210422-23-ye7ltk.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396517/original/file-20210422-23-ye7ltk.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=572&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396517/original/file-20210422-23-ye7ltk.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=572&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396517/original/file-20210422-23-ye7ltk.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=572&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396517/original/file-20210422-23-ye7ltk.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=719&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396517/original/file-20210422-23-ye7ltk.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=719&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396517/original/file-20210422-23-ye7ltk.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=719&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Switch, by Pak.</span>
<span class="attribution"><a class="source" href="https://www.sothebys.com/en/digital-catalogues/the-fungible-collection-by-pak">Sotheby's</a></span>
</figcaption>
</figure>
<h2>Bubble trouble?</h2>
<p>The excitement around NFTs feeds a similar narrative to other recent price surges such as <a href="https://theconversation.com/gamestop-hedge-fund-attacks-have-opened-up-powerful-new-front-against-wall-street-154284">GameStop</a> and <a href="https://theconversation.com/after-gamestop-the-rise-of-dogecoin-shows-us-how-memes-can-move-markets-154470">dogecoin</a>, in that these are <a href="https://www.cnbc.com/video/2021/03/22/lse-law-professor-on-nft-craze-this-is-a-huge-bubble.html">speculative bubbles</a> brought about by <a href="https://www.bloomberg.com/news/articles/2021-04-03/nft-price-crash-stirs-debate-on-whether-stimulus-led-fad-is-over?sref=jKx7unHh">stimulus cheques</a> in the US, lockdown boredom and low interest rates. </p>
<p>Look no further than <a href="https://www.msn.com/en-gb/money/technology/nfts-how-celebrities-sell-crypto-digital-artworks-for-millions-and-why-people-are-angry-about-them/ar-BB1e9OJQ">celebrities like</a> music star Grimes and YouTuber Logan Paul releasing their own flagship NFTs to ride the wave. Even Vignesh Sundaresan, the entrepreneur who bought Beeple’s record-breaking artwork, <a href="https://www.cnbc.com/2021/04/07/buyer-of-69-million-dollar-beeple-art-metakovan-on-nfts.html">sees investing</a> in NFTs as a “huge risk” and “even crazier than investing in crypto”.</p>
<p>But history also tells us to be careful about dismissing NFTs as a passing fad, since the importance of technological innovations often becomes clearer once the hype dies down. Many commentators dismissed the influx of tech companies around the dotcom bubble of the late 1990s, and the first wave of mass cryptocurrency enthusiasm in 2017, only to be proven hopelessly wrong when Amazon and bitcoin re-emerged. </p>
<p>NFTs themselves are actually well down from their highs, with a <a href="https://www.bloomberg.com/news/articles/2021-04-03/nft-price-crash-stirs-debate-on-whether-stimulus-led-fad-is-over">70% drop</a> in average price since February. Perhaps this is less the bursting of a bubble than a “weeding out” of gimmicky tokens now that the initial hype has begun to die down. </p>
<p>This phenomenon is captured well in US consultancy Gartner’s <a href="https://www.gartner.com/en/research/methodologies/gartner-hype-cycle">hype cycle</a>, which illustrates the typical progression of a new technology. With NFTs, we are probably emerging from the “peak of inflated expectations” on a journey towards the same “plateau of productivity” that Amazon reached a long time ago. </p>
<p><strong>Gartner’s hype cycle</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/396539/original/file-20210422-17-lyco96.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Gartner's hype cycle" src="https://images.theconversation.com/files/396539/original/file-20210422-17-lyco96.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396539/original/file-20210422-17-lyco96.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396539/original/file-20210422-17-lyco96.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396539/original/file-20210422-17-lyco96.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396539/original/file-20210422-17-lyco96.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=509&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396539/original/file-20210422-17-lyco96.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=509&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396539/original/file-20210422-17-lyco96.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=509&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.gartner.com/en/research/methodologies/gartner-hype-cycle">Gartner</a></span>
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<p>This ties in with what Austrian economist Joseph Schumpeter said about why capitalism works. Schumpeter viewed capitalism as a relentless churn of old into new, as the latest and most innovative enterprises replace those that came before – he called this “<a href="https://www.investopedia.com/terms/c/creativedestruction.asp">creative destruction</a>”. </p>
<p>In this light, NFTs are the newcomers challenging how we perceive and register ownership of assets. And the tension between <a href="https://academic.oup.com/spp/article-abstract/46/4/632/5396727?redirectedFrom=fulltext">innovation and incumbency</a> also <a href="https://www.weforum.org/agenda/2016/07/why-do-people-resist-new-technologies-history-has-answer/">contributes to</a> the scepticism that always surrounds such new technologies. </p>
<h2>What happens next</h2>
<p>NFTs create opportunities for new business models that didn’t exist before. Artists can attach stipulations to an NFT that ensures they get some of the proceeds every time it gets resold, meaning they benefit if their work increases in value. Admittedly football teams have <a href="https://theathletic.co.uk/2134724/2020/10/14/sell-on-fees-ollie-watkins-ben-godfrey-exeter-york/">been using</a> similar contractual clauses when selling on players for a while, but NFTs remove the need to track an asset’s progress and enforce such entitlements on each sale. </p>
<p>New art platforms, such as <a href="https://www.niio.com/site/">Niio Art</a>, are able to demonstrate in a really simple way that they own digital works. When customers borrow or buy art from the platform, they can display it on a screen in the knowledge that there is no issue with copyright or originality because the NFT and blockchain ensures that ownership is authentic. </p>
<p>NFTs give musicians the potential <a href="https://www.rollingstone.com/pro/news/kings-of-leon-when-you-see-yourself-album-nft-crypto-1135192/">to provide</a> enhanced media and special perks to their fans. And with sports memorabilia, <a href="https://www.nbcnews.com/news/us-news/foul-ball-did-nj-man-get-duped-buying-100k-bogus-n1019676">between 50% and 80%</a> of items are thought to be fake. Putting these items into NFTs with a clear transaction history back to the creator could overcome this counterfeiting problem. </p>
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<p>But beyond these fields, the potential of NFTs goes much further because they completely change the rules of ownership. Transactions in which ownership of something changes hands have usually depended on layers of middlemen to establish trust in the transaction, exchange contracts and ensure that money changes hands. </p>
<p>None of this will be necessary in future. Transactions recorded on blockchains are reliable because the information cannot be changed. Smart contracts can be used in place of lawyers and escrow accounts to automatically ensure that money and assets change hands and both parties honour their agreements. NFTs convert assets into tokens so that they can move around within this system. </p>
<p>This has the potential to completely transform markets like property and vehicles, for instance. NFTs could also be part of the solution in resolving issues with <a href="https://www.chicagotribune.com/news/ct-xpm-2006-08-27-0608270297-story.html">land ownership</a>. Only <a href="https://blogs.worldbank.org/voices/7-reasons-land-and-property-rights-be-top-global-agenda">30% of</a> the global population has legally registered rights to their land and property. Those without clearly defined rights find it much harder to access finance and credit. Also, if more of our lives are spent in <a href="https://decentraland.org/">virtual worlds</a> in future, the things that we buy there will probably be bought and sold as NFTs too. </p>
<p>There will be many other developments in this decentralised economy that have yet to be imagined. What we can say is that it will be a much more transparent and direct type of market than what we are used to. Those who think they are seeing a flash in the pan are unlikely to be prepared when it arrives.</p><img src="https://counter.theconversation.com/content/159563/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Where some see a bubble waiting to burst, others see a reinvention of the way we handle ownership of assets.James Bowden, Lecturer in Financial Technology, University of Strathclyde Edward Thomas Jones, Lecturer in Economics, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1575572021-04-12T20:19:41Z2021-04-12T20:19:41ZNFT performance art: Corporations could capitalize on protest<figure><img src="https://images.theconversation.com/files/394134/original/file-20210408-17-x8at4n.jpg?ixlib=rb-1.1.0&rect=0%2C40%2C5400%2C3136&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nike ad in New York in 2018, showing former San Francisco 49ers quarterback Colin Kaepernick after his 2016 kneeling protest. Could a corporation sell an act like Kaepernick's 'kneel' as an NFT? </span> <span class="attribution"><span class="source">(AP Photo/Mark Lennihan)</span></span></figcaption></figure><p>Russian <a href="https://www.theguardian.com/artanddesign/2018/sep/03/roadkill-radical-art-group-apolitical">artist Petr Davydtchenko</a> made what what he claims was the <a href="https://www.theartnewspaper.com/news/could-this-video-of-a-man-eating-a-bat-be-the-first-performance-art-nft">first performance art NFT</a> in February. According to an article in <em>The Art Newspaper</em>, in a digital recording, Davydtchenko “eats a live bat in front of the European Parliament in Brussels.” </p>
<p>An NFT, or non-fungible token, is a digital record of the stake in ownership of a digital object (but not the copyright), often an artwork. This digital certificate says, “I paid for this special thing, now it’s mine!” </p>
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Read more:
<a href="https://theconversation.com/what-are-nfts-and-why-are-people-paying-millions-for-them-157035">What are NFTs and why are people paying millions for them?</a>
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<p><em>The Art Newspaper</em> reports Davydtchenko’s “performance” had received only one bid of 2.5 <a href="https://www.coinspeaker.com/guides/what-is-wrapped-ethereum-weth/">wrapped ethereum</a>, valued <a href="https://www.theartnewspaper.com/news/could-this-video-of-a-man-eating-a-bat-be-the-first-performance-art-nft">at $3,848</a> when the story was published on Feb. 26. But <a href="https://www.cbc.ca/news/business/nft-analysis-explainer-1.5933536">profits for some NFTs go into the millions</a>. </p>
<p>Davydtchenko says the <a href="https://www.brusselstimes.com/news/belgium-all-news/155740/activist-who-ate-live-bat-in-front-of-european-parliament-brussels-belgium-taken-into-police-custody-released/">event was a protest</a> against pharmaceutical companies. Davydtchenko’s <a href="https://www.bps22.be/en/exhibitions/petr-davydtchenko">performance art references vaccines and COVID-19</a>. </p>
<p>As a scholar of communication and performance studies, what interests me is how NFTs are redrawing parts of the art world in <a href="https://www.openculture.com/?p=1087781">radical ways</a> by raising questions about how artists, audiences and critics understand performance, criticism or protest in a capitalist society. </p>
<p>We should keep an ear open not only to <a href="https://www.theartnewspaper.com/comment/the-nft-craze-encapsulates-the-absurdity-of-the-art-world-and-its-obsession-with-authenticity">questions about authenticity and who profits</a> but also about what these kinds of transactions mean for us as spectators, virtual audience members and human beings. </p>
<h2>Performance check on war</h2>
<p>NFT art may seem new and bizarre, but can rightly be seen as part of a longer tradition of performance art and cultural criticism. </p>
<p>As a response to the trauma of the First World War, <a href="https://www.tate.org.uk/art/art-terms/d/dada">the Dada art movement</a> formed in Zurich, Switzerland. In 1916, performance artist Hugo Ball drafted a <a href="https://doi.org/10.1080/00168890.2016.1223488">Dada manifesto</a>. </p>
<p>Ball’s work used nonsense words and costumes, <a href="https://www.theartstory.org/artist/ball-hugo/artworks">as he said, to challenge “the rationalized language of modernity,” emblematic of the “agony and death throes” of the age</a>.
Into the 1920s, <a href="https://books.google.ca/books/about/Dada_Performance.html?id=jLbWAAAAMAAJ&redir_esc=y">performers continued to reflect on the violence</a> seen in Europe and the excesses of the roaring ‘20s. </p>
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<figcaption><span class="caption">‘The Case for Performance Art,’ PBS video featuring Hugo Ball.</span></figcaption>
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<p>In the 1960s and ‘70s, <a href="https://www.theartstory.org/movement/fluxus/">the Fluxus movement</a>, a revival of many Dadaist ideas, used performance in a similar way. One pioneering example of this was <a href="https://artsolido.com/2017/02/18/yoko-ono-the-cut-piece-that-changed-forever-the-relationship-between-artist-and-audience/">Yoko Ono’s “Cut Piece”</a> first performed in <a href="https://www.moma.org/learn/moma_learning/yoko-ono-cut-piece-1964/">Kyoto, Japan, in 1964</a>. </p>
<p>Ono sat on a stage and instructed audiences to use scissors to remove parts of her clothing. Ono told Reuters <a href="https://muse.jhu.edu/article/244759/figure/img03">39 years after the first performance that she did the performance “against ageism, against racism, against sexism and against violence</a>.” Some critics <a href="https://direct.mit.edu/pajj/article/30/3%20(90)/81/55361/Yoko-Ono-s-Cut-Piece-From-Text-to-Performance-and">suggested the performance was also a comment on the conflict in Vietnam</a>. </p>
<h2>Role of spectator, purchaser</h2>
<p>“Cut Piece,” and similar performances are living moments of shared human connection and meaning that are time-and-place specific. One can imagine that meanings understood by audience members of “Cut Piece” in Japan 1964 or in France 2003 could differ for many reasons. </p>
<p>Such site-specific resonances are challenged when a performance is tokenized as an NFT. Is Davydtchenko’s “performance” the eating of the bat? Or is it the NFT pointing to a recording of that event? Or is the performance would-be bidders or critics engaging in a public debate about devouring an animal whose species is associated with COVID-19? Davydtchenko’s work raises questions about what is being bought and sold, and the role of the purchaser or spectator. </p>
<p>Performance studies pioneer Peggy Phelan argued <a href="https://www.routledge.com/Unmarked-The-Politics-of-Performance/Phelan/p/book/9780415068222">that performance can disrupt and challenge the capitalist art market that creates value often disconnected</a> from relationships between artists and audiences. From a Marxist perspective, this disconnected “extra” meaning is “<a href="https://www.marxists.org/archive/vygodsky/unknown/surplus_value.htm">surplus value</a>,” the value that exceeds the money a worker earns for their labour.</p>
<figure class="align-center ">
<img alt="Yoko Ono and audience member onstage." src="https://images.theconversation.com/files/393259/original/file-20210402-15-11qpmy1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393259/original/file-20210402-15-11qpmy1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=632&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393259/original/file-20210402-15-11qpmy1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=632&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393259/original/file-20210402-15-11qpmy1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=632&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393259/original/file-20210402-15-11qpmy1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=795&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393259/original/file-20210402-15-11qpmy1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=795&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393259/original/file-20210402-15-11qpmy1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=795&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Yoko Ono performs ‘Cut Piece’ in Paris, 2003.</span>
<span class="attribution"><span class="source">(LoveMattersMost/Flickr)</span></span>
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<h2>Changing the 'aura’ of art</h2>
<p>Phelan’s analysis suggests how NFTs follow a tradition of art criticism that has questioned moral responsibility in the age of mass production and mass media consumption.</p>
<p>In 1936, German critic and philosopher <a href="https://plato.stanford.edu/entries/benjamin/">Walter Benjamin</a>, of the famed <a href="https://plato.stanford.edu/entries/critical-theory/">Frankfurt School for Social Research</a>, applied Marxist ideas about how manufacturing workers become alienated from their labour <a href="https://www.marxists.org/reference/subject/philosophy/works/ge/benjamin.htm">and applied them to art</a>. </p>
<p>Performance scholar Philip Auslander has explained how in a capitalist society alienation means “<a href="https://www.almutadaber.com/books/book1_13905.pdf">workers become commodities when they must sell their alienated labour in the marketplace, just as other goods are sold</a>.”</p>
<p>Benjamin suggested new media technologies “demystified” art. The reproduction of <a href="https://eric.ed.gov/?id=ED482090">art challenged what he called its “aura</a>,” or its unique originality. Reproducing visual art, for example, through printing, freed it from the precious spaces of the museum and made it accessible to the working classes. No more would a person need to travel to see the Mona Lisa: It was now available on a postcard or T-shirt.</p>
<p>The problem, argued Benjamin, is that “aura” is also a relationship to meaning. Once the “aura” is gone, artwork can be repurposed for purely economic, and even dangerously political ends. Indeed, the Nazis used symbols, artworks <a href="https://www.phaidon.com/store/design/iron-fists-9780714861098/">and mass branding to legitimize and circulate Fascist ideologies</a>. </p>
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Read more:
<a href="https://theconversation.com/how-nazis-twisted-the-swastika-into-a-symbol-of-hate-83020">How Nazis twisted the swastika into a symbol of hate</a>
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<p>Culture critic Jonathan Beller notes Benjamin recognized how new media could be used to preserve and advance ancient “cultic values” such as genius, mystery and authenticity, <a href="https://www.coindesk.com/fascism-blockchain-art-nfts">and understood fascism as advancing “the introduction of esthetics into political life” to promote “cult worship through mass entertainment.”</a> So far, we haven’t seen NFTs directly associated with fascism, but as Beller notes, through NFTs, political manipulation through art could be a possibility.</p>
<h2>Instability of dissent?</h2>
<p>Such questions of manipulation can be explored through considering Davydtchenko’s performance.</p>
<p>Is Davydtchenko’s bat eating an act of political dissent, as he claims, or <a href="https://www.brusselstimes.com/belgium/155438/russian-performance-artist-activist-petr-davydtchencko-will-eat-a-live-bat-outside-brussels-belgium-eu-parliament/">simply a cruel event</a>? What of those who pay for it or share the publicity: Have they been manipulated into amplifying something grotesque? </p>
<p>There is also the question of the stability of digital work itself. An NFT’s <a href="https://www.theverge.com/2021/3/25/22349242/nft-metadata-explained-art-crypto-urls-links-ipfs">link to a digital file is based purely on trust and potentially error-prone technology</a>. But what if stolen NFTs could surface in strange places? The site <em>Hyperallergic</em> reports that some buyers say “<a href="https://hyperallergic.com/629328/reports-of-stolen-art-on-nft-marketplace-raise-issues-for-crypto-collectors">hackings have exposed holes in a technology often touted as a foolproof record of ownership</a>.” Could NFTs become the next forms of cybercrime or hate crimes, akin to defacing a public mural, or Zoom-bombing a performance?</p>
<h2>When corporations seek to capitalize</h2>
<p>Applying performance and cultural critiques to NFTs helps us consider how political resistance may be either amplified or co-opted when corporations seek to capitalize on political actions. </p>
<p>As I have <a href="https://doi.org/10.1386/post.5.1.29_1">written before</a>,
Nike quickly sought to capitalize on NFL player Colin Kaepernick’s <a href="https://globalnews.ca/news/7035746/colin-kaepernick-timeline/">2016 kneeling</a> during the U.S. national anthem, an act of protest against police brutality and racial injustice. Could Nike look to sell the “kneel,” or other similar acts, as an NFT? </p>
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<figcaption><span class="caption">CNBC video: How Nike turns controversy into dollars.</span></figcaption>
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<p>When we see <a href="https://mashable.com/article/nyan-cat-meme-non-fungible-token-sale-300-ethereum/">the prices some are paying for NFT art</a>, we must assume that more performances will circulate as NFTs, and consider what this may mean for the possibilities of performance and political dissent.</p><img src="https://counter.theconversation.com/content/157557/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lowell Gasoi receives funding from the Social Sciences and Humanities Research Council. Elements of this research have been explored with this funding.</span></em></p>When we see the high prices some are paying for NFT art, we must assume more performances, and potentially, acts of protest, could circulate as NFTs.Lowell Gasoi, Instructor in communication studies, arts advocacy, Carleton UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1580772021-04-01T13:42:40Z2021-04-01T13:42:40ZNFTs: why digital art has such a massive carbon footprint<figure><img src="https://images.theconversation.com/files/393071/original/file-20210401-13-1lf7qzh.jpg?ixlib=rb-1.1.0&rect=0%2C95%2C4000%2C3275&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/colorful-simple-flat-pixel-art-illustration-1941101041">George Chairborn/Shutterstock</a></span></figcaption></figure><p>How much would you be willing to pay for a one-of-a-kind work of art? For some collectors, the limit lies somewhere in the region of hundreds of millions of dollars. What about a work of art that has no tangible form, and exists only as a digital token that’s no more “real” than a JPEG file? Welcome to the strange world of crypto art collectibles, also known as NFTs.</p>
<p>Like Bitcoin, NFTs (non-fungible tokens) are cryptocurrencies. But whereas individual bitcoins all have the same value, NFTs are more like baseball cards. Each token has a different value and they can’t be used to buy things. They exist on your computer as digital representations of artworks, songs, films and games, among other things.</p>
<p>NFTs have been around since 2017, when the first mainstream experiment in crypto-collectibles emerged: <a href="https://www.cryptokitties.co/">CryptoKitties</a>. The average price for one of these cat cards was about US$60 back then. But that’s chicken feed compared to current takings. Rights to a single digital image recently <a href="https://www.christies.com/features/Monumental-collage-by-Beeple-is-first-purely-digital-artwork-NFT-to-come-to-auction-11510-7.aspx?sc_lang=en">sold at auction for US$69.3 million</a> (£50.2 million). <a href="https://www.larvalabs.com/cryptopunks/details/7804">CryptoPunk 7804</a> (a crudely drawn alien with a pipe) sold for US$7.5 million. A house on Mars was purchased for US$500,000. <a href="https://www.theguardian.com/artanddesign/2021/mar/23/digital-home-sells-for-500000-in-latest-nft-sale">A digital house</a> that is, not one that you might live in. Twitter CEO, Jack Dorsey, recently <a href="https://www.theverge.com/2021/3/22/22344937/jack-dorsey-nft-sold-first-tweet-ethereum-cryptocurrency-twitter">sold his first ever tweet</a> as an NFT for just under US$3 million.</p>
<figure class="align-center ">
<img alt="A phone is held up before a larger screen depicting the same NFT marketplace." src="https://images.theconversation.com/files/393069/original/file-20210401-13-1sdgxiq.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C6000%2C3997&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393069/original/file-20210401-13-1sdgxiq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393069/original/file-20210401-13-1sdgxiq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393069/original/file-20210401-13-1sdgxiq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393069/original/file-20210401-13-1sdgxiq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393069/original/file-20210401-13-1sdgxiq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393069/original/file-20210401-13-1sdgxiq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">NFTs are unique, collectable digital tokens.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/vilnius-lithuania-march-8-2021-nonfungible-1932205373">Rokas Tenys/Shutterstock</a></span>
</figcaption>
</figure>
<p>“But how can someone buy a tweet?”, you may ask. After all, anyone’s free to click on, look at, print out and frame <a href="https://twitter.com/jack/status/20">the tweet</a> as many times as they like. </p>
<p>When you buy an NFT, you’re buying a unique certificate of ownership, which is locked away on an immutable distributed database known as a blockchain. The creator of the artwork generally retains the copyright and in most cases, you own little more than bragging rights. Creators are also likely to pass the <a href="https://etherscan.io/gastracker">costs for creating your NFT files</a> (or “minting” them) on to you (around US$100 as I write this). </p>
<p>Most of the time, what you’ll also be responsible for is an enormous carbon footprint.</p>
<h2>Counting the carbon cost of NFTs</h2>
<p>Because they depend on a blockchain, NFTs use a lot of energy. Most creators still use <a href="https://ethereum.org/en/nft/#ethereum-and-nfts">Ethereum</a>, a blockchain secured using a <a href="https://theconversation.com/bitcoin-isnt-getting-greener-four-environmental-myths-about-cryptocurrency-debunked-155329">similar proof-of-work system</a> to Bitcoin. This involves an energy-intensive computer function called mining. Specialist mining computers take turns guessing the combination to a digital lock (a long string of random digits). The computer that correctly guesses the combination wins a reward paid in a cryptocurrency called Ether. The digital lock resets roughly every 15 seconds, and the competition continues. Ethereum uses about <a href="https://digiconomist.net/ethereum-energy-consumption">31 terawatt-hours (TWh) of electricity</a> a year, about as much as the whole of Nigeria.</p>
<p>It’s very difficult to calculate exactly how much responsibility the NFT industry should take for Ethereum’s carbon emissions. Ethereum was going to run with or without NFTs. But with the growing demand for digital art, NFT buyers and sellers are becoming liable for an increasing share of Ethereum’s total energy use, and some artists are starting to think twice.</p>
<p>The French digital artist, Joanie Lemercier, recently cancelled the sale of six works after calculating the associated energy costs. The sale would use, in just ten seconds, enough electricity to power <a href="https://joanielemercier.com/the-problem-of-cryptoart/">the artist’s entire studio</a> for two years. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1375182448439484424"}"></div></p>
<p>ArtStation, a site for digital artists to showcase their portfolios, recently developed an NFT marketplace. But within hours of telling the world about the planned launch, widespread condemnation on social media <a href="https://magazine.artstation.com/2021/03/a-statement-from-artstation/">forced ArtStation to scrap the project</a>.</p>
<p>Alternative technologies exist that enable NFT markets without the carbon headache. Sidechains use negligible amounts of energy to process NFTs because these transactions occur on a more centralised platform where costs (and carbon footprints) are much lower.</p>
<p>Damien Hirst is <a href="https://www.businesswire.com/news/home/20210330005703/en/Palm-A-New-NFT-Ecosystem-and-Studio-for-Creators-Announces-Launch-of-First-Project-with-Damien-Hirst">due to release a collection</a> of NFTs called The Currency Project using the Palm sidechain. Hirst will still be <a href="https://decrypt.co/59864/damien-hirst-bitcoin-ethereum-art">accepting payment in Bitcoin</a> though, so his NFTs could still come with hefty carbon baggage.</p>
<h2>Taking artistic license with climate solutions</h2>
<p><a href="https://www.dezeen.com/2021/03/22/mars-house-krista-kim-nft-news/">NFT enthusiasts argue</a> that the increasing popularity of blockchain technology, with its <a href="https://www.nature.com/articles/s41558-019-0567-9">voracious appetite for energy</a>, provides incentives for upgrading energy grids from fossil fuels to renewable sources. Similar arguments have been made by the airline industry: in order to fund the efficiency innovations that could make aviation greener, people should <a href="https://fee.org/articles/flying-less-is-not-a-solution-to-reducing-carbon-emissions-innovation-is/">fly more, not less</a>. For NFTs, evidence shows this approach is <a href="https://doi.org/10.1016/j.joule.2021.02.006">unlikely to work</a>. Due to the competitive nature of proof-of-work mining, booming NFT markets are encouraging the construction of reliable coal-fired power stations, so that crypto miners don’t have to suffer intermittent access to renewable generation.</p>
<p>Some NFT creators are trying to have their crypto-cake and eat it by using carbon offsets. <a href="https://doi.org/10.1016/j.geoforum.2019.02.011">Buying offsets</a> funds conservation work, with each carbon credit purchased equivalent to one tonne of carbon saved, which is either stored in a tree or theoretically prevented from escaping into the atmosphere through some sort of industrial innovation. The <a href="https://carbon.fyi/">Offsetra company</a> provides an emissions calculator and sells carbon credits to offset emissions caused by NFT transactions. The NFT marketplace Nifty Gateway recently auctioned eight carbon net-negative NFTs “<a href="https://www.carbondrop.art/">inspired by Earth and the climate crisis</a>”. The artworks received 60 carbon credits. Each offset was itself an NFT.</p>
<p>NFT carbon credits (or any carbon credits for that matter) <a href="https://www.tandfonline.com/doi/full/10.1080/09644016.2021.1877063?src=">depend on clever accounting</a> and a belief that carbon, like NFTs on a blockchain, can be immutably locked away in trees forever. <a href="https://www.frontiersin.org/articles/10.3389/fbloc.2020.00022/full">It cannot</a>. <a href="https://www.carbondrop.art/">Nifty’s website</a> explains that offsets make sense for neutralising our unavoidable emissions, “after we’ve done all attainable actions” to reduce our carbon footprint. </p>
<p>But does acquiring bragging rights to a digital image that anyone with an internet connection can enjoy constitute an unavoidable part of one’s carbon footprint?</p><img src="https://counter.theconversation.com/content/158077/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Howson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>NFTs don’t even exist in the real world, but the market around them has a big effect on the planet.Peter Howson, Senior Lecturer in International Development, Northumbria University, NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1574892021-03-31T12:16:47Z2021-03-31T12:16:47ZHow nonfungible tokens work and where they get their value – a cryptocurrency expert explains NFTs<figure><img src="https://images.theconversation.com/files/392667/original/file-20210330-23-1h9ipin.jpg?ixlib=rb-1.1.0&rect=0%2C14%2C4978%2C3293&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">NFTs can be used to prove who created and who owns digital items like these images by the artist Beeple shown at an exhibition in Beijing.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/man-looks-at-digital-paintings-by-us-artist-beeple-at-a-news-photo/1231940889?adppopup=true">Nicolas Asfouri/AFP via Getty Images</a></span></figcaption></figure><p><strong>Takeaways</strong></p>
<p>· <strong>Nonfungible tokens prove ownership of a digital item – image, sound file or text – in the same way that people own crypto coins.</strong></p>
<p>· <strong>Unlike crypto coins, which are identical and worth the same, NFTs are unique.</strong></p>
<p>· <strong>An NFT is worth what someone is willing to pay for it, which can be a lot if the NFT is made by a famous artist and the buyer is a wealthy collector.</strong></p>
<p></p><hr><p></p>
<p>An attorney friend recently asked me out of the blue about nonfungible tokens, or NFTs. What prompted his interest was the sale of a collage composed of 5,000 digital pieces, auctioned by Christie’s on March 11, 2021, for a <a href="https://www.cnn.com/style/article/beeple-first-nft-artwork-at-auction-sale-result/index.html">remarkable US$69 million</a>. Mike Winkelmann, an artist known as <a href="https://www.beeple-crap.com/">Beeple</a>, created this piece of digital art, made an NFT of it and offered it for sale. The bidding started at $100, and the rest of the auctioning process transformed it into a historical event.</p>
<p>Similarly, it was hard to miss the news about the iconic GIF <a href="https://www.theverge.com/2021/2/18/22287956/nyan-cat-crypto-art-foundation-nft-sale-chris-torres">Nyan Cat</a> being sold as a piece of art, Twitter’s founder transforming the <a href="http://heverge.com/2021/3/5/22316320/jack-dorsey-original-tweet-nft-cent-valuables">first tweet into an NFT</a> and putting it up for sale, or an NFT of a New York Times column <a href="https://www.nytimes.com/2021/03/26/technology/nft-sale.html">earning half a million dollars</a> for charity. </p>
<p>My friend’s questions were an attempt to understand where the underlying value of an NFT comes from. The issue is that perceptions of what the buyer is paying for are not easily framed in legal terms. NFT marketplaces do not always accurately describe the value proposition of the goods they are selling. The truth is that the value of any NFT is speculative. Its value is determined by what someone else is willing to pay for it and nothing else. </p>
<p>Turning something as ephemeral as a tweet into an item that can be sold requires two things: making it unique and proving ownership. The process is the same for cryptocurrencies, which turn strings of bits into virtual coins that have real-world value. It boils down to cryptography.</p>
<h2>Keys and blocks</h2>
<p>Cryptography is the technique used to protect privacy of a message by transforming it into a form that can be understood only by the intended recipients. Everyone else will see it as only an unintelligible sequence of random characters. This message manipulation is enabled by a pair of keys, public and private keys: You share your public key with your friend, who uses it to transform his message to you into an unintelligible sequence of random characters. You then use your private key to put it back into its original form. </p>
<p>The special mathematical properties of these two crypto keys are widely used to provide secrecy and integrity. <a href="https://arstechnica.com/information-technology/2013/10/a-relatively-easy-to-understand-primer-on-elliptic-curve-cryptography/">Two crypto keys</a> play the role of digital signatures and are commonly used in blockchain to enable both authentication and anonymity for transactions.</p>
<p>Blockchain is a crucial technology for creating NFTs. It uses cryptography to chain blocks into a growing list of records. Each block is locked by a cryptographic hash, or string of characters that uniquely identifies a set of data, to the previous block. The transaction records of a chain of blocks are stored in a data structure called a <a href="https://blockonomi.com/merkle-tree/">Merkle tree</a>. This allows for fast retrieval of past records. To be a party in blockchain-based transactions, each user needs to create a pair of keys: a public key and a private key. This design makes it very difficult to alter transaction data stored in blockchain. </p>
<p>Although blockchain was initially devised to support fungible assets like Bitcoin and other cryptocurrencies, it has evolved to enable users to create a special kind of crypto asset, one that is <a href="https://decrypt.co/resources/non-fungible-tokens-nfts-explained-guide-learn-blockchain">nonfungible</a>, meaning provably unique. Ethereum blockchain is the basis for most of the currently offered NFTs because it supports the <a href="https://ethereum.org/en/developers/docs/standards/tokens/erc-721/">ERC-721 token standard</a>, enabling NFT creators to capture information of relevance to their digital artifacts and store it as tokens on the blockchain. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/392668/original/file-20210330-17-1dcqawy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A commemorative coin bearing a double-pyramid logo lies in an open leather wallet containing euro coins" src="https://images.theconversation.com/files/392668/original/file-20210330-17-1dcqawy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/392668/original/file-20210330-17-1dcqawy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/392668/original/file-20210330-17-1dcqawy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/392668/original/file-20210330-17-1dcqawy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/392668/original/file-20210330-17-1dcqawy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/392668/original/file-20210330-17-1dcqawy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/392668/original/file-20210330-17-1dcqawy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The first NFTs were made using the cryptographic technology underlying the Ethereum cryptocurrency.</span>
<span class="attribution"><a class="source" href="https://flickr.com/photos/26344495@N05/51014896758/">Ivan Radic/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>When you pay for an NFT, what you get is the right to transfer the token to your digital wallet. The token proves that your copy of a digital file is the original, like owning an original painting. And just as masterpiece paintings can be copied and distributed as inexpensive posters, anyone can have a digital copy of your NFT.</p>
<p>Your private crypto key is proof of ownership of the original. The content creator’s public crypto key serves as a certificate of authenticity for that particular digital artifact. This pair of the creator’s public key and the owner’s private key is primarily what determines the value of any NFT token. </p>
<h2>The very short history of NFTs</h2>
<p>NFTs came to prominence in 2017 with a game called <a href="https://www.cryptokitties.co/">CryptoKitties</a>, which enables players to buy and “breed” limited-edition virtual cats. From there, game developers adopted NFTs in a big way to allow gamers to win in-game items such as digital shields, swords or similar prizes, and other game collectibles. Tokenization of game assets is a real game-changer, since it enables transferring tokens between different games or to another player via NFT specialized blockchain marketplaces. </p>
<p>Besides gaming, NFTs are frequently used to sell a wide range of virtual collectibles, including NBA virtual trading cards, music, digital images, video clips and even virtual real estate in <a href="https://decentraland.org/">Decentraland</a>, a virtual world.</p>
<p><a href="https://nonfungible.com/">NonFungible.com</a>, a website that tracks NFT projects and marketplaces, puts the value of the total NFT market at $250 million, a negligible fraction of the total crypto coin market but still highly attractive to content creators. The contract behind the token, based on the <a href="http://erc721.org/">ERC-721</a> standard for creating NFTs, can be set to let content creators continue to earn a percentage from all subsequent sales. </p>
<p>The NFT market is likely to grow further because any piece of digital information can easily be “minted” into an NFT, a highly efficient way of managing and securing digital assets.</p>
<h2>Blockchain’s carbon footprint</h2>
<p>For all the excitement, there are also concerns that NFTs are <a href="https://qz.com/1987590/the-carbon-footprint-of-creating-and-selling-an-nft-artwork/">not eco-friendly</a> because they are built on the same blockchain technology used by some energy-hungry cryptocurrencies. For example, each NFT transaction on the Ethereum network consumes the equivalent of <a href="https://digiconomist.net/ethereum-energy-consumption">daily energy used by two American households</a>. </p>
<p>Security for most of today’s blockchain networks is based on special computers called “miners” competing to solve complex math puzzles. This is the <a href="https://cointelegraph.com/explained/proof-of-work-explained">proof-of-work</a> principle, which keeps people from gaming the system and provides the incentive for building and maintaining it. The miner who solves the math problem first gets awarded with a prize paid in virtual coins. The mining requires a lot of computational power, which drives electricity consumption.</p>
<p>Ethereum blockchain technology is evolving and moving toward <a href="https://spectrum.ieee.org/computing/networks/ethereum-plans-to-cut-its-absurd-energy-consumption-by-99-percent">a less computationally intensive design</a>. There are also emerging blockchain technologies like <a href="https://cardano.org/">Cardano</a>, which was designed from the outset to have a small carbon footprint and has recently launched its own fast-growing NFT platform called <a href="https://coinpedia.org/non-fungible-token-nft/cardano-towards-new-highs-with-cardanokidz-nft/">Cardano Kidz</a>. </p>
<p>The speed of transformation of blockchain technology into a newer, more eco-friendly variant might well decide the future of the NFT market in the short term. Some artists who feel strongly about global warming trends are opposed to NFTs because of perceived <a href="https://www.wired.com/story/nfts-hot-effect-earth-climate/">ecological impact</a>.</p>
<h2>The coming crypto-economy</h2>
<p>Whether or not the current NFT craze can keep its momentum going, NFTs have already accelerated a larger trend of digital economic innovation. NFTs have confirmed that the public is feeling increasingly favorable toward a crypto-economy and is <a href="https://wirexapp.com/blog/post/2021-the-year-of-crypto-0250">embracing short-term risks</a> in return for creating new business possibilities.</p>
<p>[<em>Over 100,000 readers rely on The Conversation’s newsletter to understand the world.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=100Ksignup">Sign up today</a>.]</p>
<p>NFTs have already made significant inroads into the luxury and gaming industries, and have plenty of room to grow beyond these initial applications. The art sector will continue to be an important segment of the overall NFT market and is likely to gradually reach maturity over the next couple of years, although it is likely to be surpassed by other digital certificate applications like trademarks and patents, training and <a href="https://www.forbes.com/sites/markcohen1/2019/09/03/upskilling-why-it-might-be-the-most-important-word-in-the-legal-lexicon/?sh=1cc1bdfc36a9">upskilling</a> certificates.</p><img src="https://counter.theconversation.com/content/157489/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dragan Boscovic receives funding from NSF, Federal and State Government Agencies, industrial corporations. He is affiliated with VizLore LLC, which provides the blockchain as a platform service to other blockchain application developers.</span></em></p>NFTs are made the same way as crypto coins, but where every crypto coin is like every other, each NFT is a unique digital item – from images to sound files to text.Dragan Boscovic, Research Professor of Computing, Informatics and Decision Systems Engineering, Arizona State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1563892021-03-04T23:01:26Z2021-03-04T23:01:26ZNFTs explained: what they are, why rock stars are using them, and why they’re selling for millions of dollars<figure><img src="https://images.theconversation.com/files/387650/original/file-20210304-20-5gtepu.png?ixlib=rb-1.1.0&rect=0%2C8%2C1915%2C1059&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Still from 'Mars' by Grimes x Mac.</span> <span class="attribution"><a class="source" href="https://niftygateway.com/itemdetail/secondary/0xe04cc101c671516ac790a6a6dc58f332b86978bb/11600020008">Grimes x Mac</a></span></figcaption></figure><p>A couple of days ago, the musician Grimes sold some <a href="https://niftygateway.com/profile/grimes">animations</a> she made with her brother Mac on a website called Nifty Gateway. Some were one-offs, while others were limited editions of a few hundred – and all were <a href="https://www.theverge.com/2021/3/1/22308075/grimes-nft-6-million-sales-nifty-gateway-warnymph">snapped up </a>in about 20 minutes, with total takings of more than US$6 million.</p>
<p>Despite the steep price tag, anybody can watch or (with a simple right-click) save a copy of the videos, which show a cherub ascending over <a href="https://niftygateway.com/itemdetail/secondary/0xe04cc101c671516ac790a6a6dc58f332b86978bb/11600020008">Mars</a>, <a href="https://niftygateway.com/itemdetail/primary/0xe04cc101c671516ac790a6a6dc58f332b86978bb/1">Earth</a>, and <a href="https://niftygateway.com/itemdetail/primary/0x948b3515d81034a3c16d5393c6c155946c93c103/1">imaginary landscapes</a>. Rather than a copy of the files themselves, the eager buyers received a special kind of tradable certificate called a “non-fungible token” or NFT. But what they were really paying for was an aura of authenticity – and the ability to one day sell that aura of authenticity to somebody else.</p>
<p>NFTs are a cultural answer to creating technical scarcity on the internet, and they allow new types of digital goods. They are making inroads into the realms of <a href="https://theconversation.com/a-token-sale-christies-to-auction-its-first-blockchain-backed-digital-only-artwork-155738">high art</a>, <a href="https://variety.com/2021/music/news/kings-of-leon-release-new-album-nft-1234921278/#!">rock music</a> and even new mass-markets of <a href="https://crypnews.com.au/nba-top-shot-leads-nft-explosion-with-230m-in-sales/">virtual NBA trading cards</a>. In the process, they are also <a href="https://www.artnews.com/art-news/news/beeple-nft-artwork-nifty-gateway-sale-1234584701/">making certain people rich</a>.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/a-token-sale-christies-to-auction-its-first-blockchain-backed-digital-only-artwork-155738">A token sale: Christie's to auction its first blockchain-backed digital-only artwork</a>
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<h2>How NFTs work</h2>
<p>NFTs are digital certificates that authenticate a claim of ownership to an asset, and allow it to be transferred or sold. The certificates are secured with blockchain technology similar to what underpins Bitcoin and other cryptocurrencies.</p>
<p>A blockchain is a decentralised <a href="https://hackernoon.com/databases-and-blockchains-the-difference-is-in-their-purpose-and-design-56ba6335778b">alternative to a central database</a>. Blockchains usually store information in encrypted form across a peer-to-peer network, which makes them very difficult to hack or tamper with. This in turn makes them useful for keeping important records. </p>
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Read more:
<a href="https://theconversation.com/blockchain-is-useful-for-a-lot-more-than-just-bitcoin-58921">Blockchain is useful for a lot more than just Bitcoin</a>
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<hr>
<p>The key difference between NFTs and cryptocurrencies is that currencies allow fungible trade, which means anyone can create Bitcoins that can be exchanged for other Bitcoins. NFTs are by definition non-fungible, and are deployed as individual chains of ownership to track a specific asset. NFTs are designed to uniquely restrict and represent a unique claim on an asset. </p>
<p>And here’s where things get weird. Often, NFTs are used to claim “ownership” of a digital asset that is otherwise completely copiable, pastable and shareable – such as a movie, JPEG or other digital file.</p>
<h2>So what is an authentic original digital copy?</h2>
<p>Online, it’s hard to say what <em>authenticity</em> and <em>ownership</em> really mean. Internet culture and the internet itself have been driven by copying, pasting and remixing to engender new forms of <a href="http://www.illegal-art.net/allday/">authentic creative work</a>. </p>
<p>At a technical level, the internet is precisely a system for <a href="https://en.wikipedia.org/wiki/Internet_protocol_suite">efficiently and openly</a> taking a string of ones and zeroes from <em>this</em> computer and making them accessible on a <em>that</em> computer, somewhere else. Content available online is typically what economists call “<a href="https://en.wikipedia.org/wiki/Rivalry_(economics)#Non-rivalry">non-rivalrous goods</a>”, which means that one person watching or sharing or remixing a file doesn’t in any way impede other people from the doing the same.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/387901/original/file-20210304-16-s12s7p.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/387901/original/file-20210304-16-s12s7p.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=366&fit=crop&dpr=1 600w, https://images.theconversation.com/files/387901/original/file-20210304-16-s12s7p.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=366&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/387901/original/file-20210304-16-s12s7p.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=366&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/387901/original/file-20210304-16-s12s7p.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=460&fit=crop&dpr=1 754w, https://images.theconversation.com/files/387901/original/file-20210304-16-s12s7p.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=460&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/387901/original/file-20210304-16-s12s7p.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=460&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Producer 3LAU raised US$11.6 million on an NFT auction around his latest album. The top bidder received a ‘custom song created by 3LAU with winner’s creative direction’, an NFT for each track on the album, unreleased music, and even a physical copy on vinyl.</span>
<span class="attribution"><a class="source" href="https://nft.3lau.com/#/auction">3LAU</a></span>
</figcaption>
</figure>
<p>Constant sharing adds up to a near-infinite array of material to view, share, copy or remix into something new, creating the <a href="https://library.oapen.org/handle/20.500.12657/34556">economies of abundance</a> on which online culture thrives. </p>
<p>TikTok is built around reimagining common audio loops with seemingly endless but unique <a href="https://culturalscience.org/articles/10.5334/csci.140/">accompanying visual rituals</a>, which are themselves mimicked in seemingly endless variations. On Twitter, tweets are only valuable to the extent they are retweeted. Fake news only <em>exists</em> insofar as <a href="https://theconversation.com/why-the-business-model-of-social-media-giants-like-facebook-is-incompatible-with-human-rights-94016">Facebook’s algorithm</a> decides sharing them will increase engagement via driving more sharing.</p>
<h2>Information wants to be free</h2>
<p>The life and longevity of digital content has depended on its ability to <a href="https://spreadablemedia.org">spread</a>. The internet’s pioneering cyber-libertarians had a motto to describe this: <a href="https://en.wikipedia.org/wiki/Information_wants_to_be_free">information wants to be free</a>. Attempts to stop information spreading online have historically required breaking aspects of technology <a href="https://theconversation.com/governments-undermining-encryption-will-do-more-harm-than-good-53038">(like encryption)</a> or <a href="https://www.copyright.org.au">legal regimes</a> like copyright. </p>
<p>NFTs, however, bring code and culture together to create a form of control that doesn’t rely on the law or sabotaging existing systems. They create a unique kind of “authenticity” in a otherwise shareable world.</p>
<h2>What’s next?</h2>
<p>Nearly 40 years ago, Canadian science-fiction writer William Gibson famously described cyberspace as a “<a href="http://www.columbia.edu/%7Eey2172/gibson.html">consensual hallucination</a>” in which billions of users agreed that the online world was real. NFTs take this to the next level: they’re a consensual hallucination that <em>this</em> string of ones and zeroes is different and more authentic than <em>that</em> (identical) string of ones and zeroes.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/387631/original/file-20210304-13-1kgm6u2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/387631/original/file-20210304-13-1kgm6u2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/387631/original/file-20210304-13-1kgm6u2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/387631/original/file-20210304-13-1kgm6u2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/387631/original/file-20210304-13-1kgm6u2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/387631/original/file-20210304-13-1kgm6u2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/387631/original/file-20210304-13-1kgm6u2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The animation CROSSROADS by Beeple can be viewed online for free – but the NFT independently conferring ownership of the work recently changed hands for US$6.6 million.</span>
<span class="attribution"><a class="source" href="https://niftygateway.com/itemdetail/secondary/0x12f28e2106ce8fd8464885b80ea865e98b465149/100010001">Beeple</a></span>
</figcaption>
</figure>
<p>NFTs work by reintroducing a mutual hallucination of scarcity into a world of abundance. There is no shortage of buyers: the NFT market is already worth hundreds of millions of dollars. Even humble <a href="https://www.nbatopshot.com/about">sports trading cards</a> will never be the same.</p>
<h2>Are NFTs different enough to break the internet?</h2>
<p>The real function of NFTs is to create a clear delineation between ordinary creators and consumers of online content and those privileged enough to be paid to produce content or claim to own “authentic” work. The internet decentralised content creation, but NFTs are trying to recentralise the distribution of culture.</p>
<p>NFTs facilitate the exchange of fungible money for non-fungible authenticity. It’s a <a href="https://scholar.google.com.au/scholar?hl=en&as_sdt=0%2C5&q=advertising+authenticity&btnG=">well-known move</a> that occurs in all sorts of industries, and one with a long history in, well, <a href="https://www.theartnewspaper.com/comment/the-nft-craze-encapsulates-the-absurdity-of-the-art-world-and-its-obsession-with-authenticity">art history</a>.</p>
<hr>
<p>
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<strong>
Read more:
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</strong>
</em>
</p>
<hr>
<p>How the culture-code of NFTs will evolve is <a href="https://dontbuymeme.com">anyone’s guess</a>, but at the moment, it is opening a lot of new ways to make <a href="https://theconversation.com/after-gamestop-the-rise-of-dogecoin-shows-us-how-memes-can-move-markets-154470">new money</a> change hands. </p>
<p>At first take, it might seem that this presents artists everywhere with a recourse to get paid for their otherwise copy-pastable work. Yet creating normative rules around paying for content online has not so far gone smoothly: think of the <a href="https://theconversation.com/stream-weavers-the-musicians-dilemma-in-spotifys-pay-to-play-plan-151479">lacklustre payments</a> musicians receive from streaming services like Spotify.</p>
<p>NFTs have also been <a href="https://memoakten.medium.com/the-unreasonable-ecological-cost-of-cryptoart-2221d3eb2053">criticised</a> for their profligate energy consumption, because they depend on a lot of computer power to encrypt their tokens. According to the online calculator at <a href="http://cryptoart.wtf">CryptoArt</a>, the computations required to create NFTs for each of Grimes’ animations would have used enough electricity to boil a kettle 1.5 million times – and resulted in around 70 tonnes of CO₂ emissions. I’m not sure that cost for future generations was priced into the current market value, or any appreciation as tokens cryptographically change hands.</p>
<p>Other than their tonnes of CO₂ emissions, what’s real about NFTs is how their creation of technical scarcity enables a new cultural agreement about how something can be authentic and who controls that authenticity. NFTs create new forms of hierarchy, power and exclusion on the wider web. They have already created a new type of haves and have-nots.</p><img src="https://counter.theconversation.com/content/156389/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Luke Heemsbergen does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The digital tokens are a way to create scarcity and an aura of authenticity in an online world of infinite copying, pasting and remixing.Luke Heemsbergen, PhD, Media and Politics, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1557382021-02-24T19:08:30Z2021-02-24T19:08:30ZA token sale: Christie’s to auction its first blockchain-backed digital-only artwork<figure><img src="https://images.theconversation.com/files/386026/original/file-20210224-23-1edx4ee.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3000%2C3000&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Everydays: The First 5000 Days</span> <span class="attribution"><span class="source">Beeple</span></span></figcaption></figure><p>Since May 2007, US-based digital artist Mike Winkelmann (who goes by the name <a href="https://www.beeple-crap.com/">Beeple</a>) has posted a new artwork online every day. He posted the 5,000th one in January, and has now packaged them into an enormous digital collage titled Everydays: The First 5000 Days, which will be <a href="https://onlineonly.christies.com/s/beeple-first-5000-days/beeple-b-1981-1/112924">auctioned online</a> by Christie’s on February 25.</p>
<p>The work will be sold in purely digital form, as a 21,069 × 21,069-pixel JPEG file and a “non-fungible token” or NFT. NFTs use blockchain technology to give the successful bidder unquestioned ownership of the work.</p>
<hr>
<p>
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Read more:
<a href="https://theconversation.com/blockchain-is-useful-for-a-lot-more-than-just-bitcoin-58921">Blockchain is useful for a lot more than just Bitcoin</a>
</strong>
</em>
</p>
<hr>
<p>NFT artworks are becoming a serious business. Last year, Beeple <a href="https://cryptobriefing.com/digital-art-auction-raises-record-million/">made US$3.5 million</a> on an NFT auction. </p>
<p>But the <a href="https://www.christies.com/features/Monumental-collage-by-Beeple-is-first-purely-digital-artwork-NFT-to-come-to-auction-11510-7.aspx?sc_lang=en&lid=1">entry</a> of a global blue-chip auction house like Christie’s into this domain may mark a new stage for blockchain technology, as a widespread tool for both maintenance and transformation of digital art markets. </p>
<h2>Not as new as it seems</h2>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/386063/original/file-20210224-15-1lm31oe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/386063/original/file-20210224-15-1lm31oe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1063&fit=crop&dpr=1 600w, https://images.theconversation.com/files/386063/original/file-20210224-15-1lm31oe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1063&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/386063/original/file-20210224-15-1lm31oe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1063&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/386063/original/file-20210224-15-1lm31oe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1335&fit=crop&dpr=1 754w, https://images.theconversation.com/files/386063/original/file-20210224-15-1lm31oe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1335&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/386063/original/file-20210224-15-1lm31oe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1335&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The digital work Ever Blossoming Life – Gold by teamLab.</span>
<span class="attribution"><a class="source" href="https://www.christies.com/lot/lot-teamlab-ever-blossoming-life-gold-6142016/?from=searchresults&intObjectID=6142016">teamLab</a></span>
</figcaption>
</figure>
<p>Christie’s claims the sale of Everydays is the first time a major auction house has offered a <em>purely</em> digital artwork. Christie’s has sold digital works before, including videos (such as Ryan Trecartin’s <a href="https://www.christies.com/lot/lot-ryan-trecartin-a-family-finds-entertainment-5727220/?from=searchresults&intObjectID=5727220">A Family Finds Entertainment</a> in 2013) and software-based installations (such as teamLab’s <a href="https://www.christies.com/en/lot/lot-6142016">Ever Blossoming Life – Gold</a> in 2018). </p>
<p>But these were accompanied by physical trappings, such as certificates of authenticity or fancy hard drives to house the digital files. This time, however, it’s simply <a href="https://onlineonly.christies.com/s/beeple-first-5000-days/beeple-b-1981-1/112924">the image file and an accompanying NFT</a>. </p>
<h2>What are NFTs?</h2>
<p>NFTs support claims to an artwork’s value. While the JPEG file of Everydays may be copied, the collector’s blockchain-based record of ownership will allow them to display the work (and to resell it) on a number of online platforms.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/386026/original/file-20210224-23-1edx4ee.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3000%2C3000&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/386026/original/file-20210224-23-1edx4ee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/386026/original/file-20210224-23-1edx4ee.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/386026/original/file-20210224-23-1edx4ee.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/386026/original/file-20210224-23-1edx4ee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/386026/original/file-20210224-23-1edx4ee.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/386026/original/file-20210224-23-1edx4ee.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Here’s a copy of Everydays: The First 5000 Days. Without an NFT, it’s not worth much.</span>
<span class="attribution"><span class="source">Beeple</span></span>
</figcaption>
</figure>
<p>Christie’s has teamed up with one such platform, <a href="https://makersplace.com/beeple/5000-days/">Makersplace</a>, for the deal. Makersplace uses an open standard smart contract for its NFTs, which means the work can be sold in many other places in the the increasingly complex <a href="https://nonfungible.com/">NFT ecosystem</a>. </p>
<p>NFTs are useful in the digital art market because they enable claims to authenticity and scarcity, despite the ease with which digital works can ordinarily be copied. Artists and galleries have tried to create scarcity via <a href="https://www.artquest.org.uk/how-to-articles/editioning/">limited-edition works</a> and to assure authenticity with certificates, but NFTs seek to automate this process. </p>
<p>NFTs record ownership on a blockchain, which is a decentralised alternative to a central database. Built through cryptography and peer-to-peer networks, blockchains are resistant to tampering and hacking, which makes them useful for storing important records. Vince Tabora from US tech website <a href="https://hackernoon.com/">Hacker Noon</a> has written an accessible <a href="https://hackernoon.com/databases-and-blockchains-the-difference-is-in-their-purpose-and-design-56ba6335778b">explainer</a> of how blockchain is different from older ways of storing and organising data.</p>
<h2>Why blockchain?</h2>
<p>Ever since blockchains were described in the <a href="https://bitcoin.org/bitcoin.pdf">white paper</a> published by pseudonymous Bitcoin inventor Satoshi Nakamoto in 2008, the idea of a “<a href="https://academy.binance.com/en/glossary/trustless">trustless</a>” way to keep secure public records has evolved into a so-called “<a href="https://www.sciencedirect.com/science/article/pii/S0160791X20303067">confidence machine</a>”, fuelling a considerable amount of hype. Simultaneously, voices have emerged to encourage more nuanced and critical engagement with blockchain’s possibilities and limitations.<a href="https://issuu.com/instituteofnetworkcultures/docs/moneylabreader2overcomingthehype">MoneyLab Reader 2: Overcoming the Hype</a> and <a href="https://www.academia.edu/39464761/There_is_no_Such_Thing_as_Blockchain_Art_A_report_on_the_current_status_of_the_intersection_of_Blockchain_and_art">There is No Such Thing as Blockchain Art</a> are two key publications exploring these tensions across varied cultural domains. </p>
<p>Carnegie Mellon Researchers have <a href="https://www.cmu.edu/news/stories/archives/2019/april/art-of-blockchain.html">described</a> potential use-cases for the art industry, including securing artwork provenance (see <a href="https://verisart.com">Verisart</a>) or enabling secure forms of fractional ownership (see <a href="https://www.maecenas.co/">Maecenas</a>). </p>
<p>And Christie’s is no stranger to new technology. The company has hosted regular <a href="https://www.christies.com/exhibitions/art-and-tech">Art+Tech Summits</a> since 2018 (the inaugural topic being blockchain). </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/386061/original/file-20210224-15-1iu8mzs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/386061/original/file-20210224-15-1iu8mzs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/386061/original/file-20210224-15-1iu8mzs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=596&fit=crop&dpr=1 600w, https://images.theconversation.com/files/386061/original/file-20210224-15-1iu8mzs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=596&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/386061/original/file-20210224-15-1iu8mzs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=596&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/386061/original/file-20210224-15-1iu8mzs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=749&fit=crop&dpr=1 754w, https://images.theconversation.com/files/386061/original/file-20210224-15-1iu8mzs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=749&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/386061/original/file-20210224-15-1iu8mzs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=749&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The algorithmically generated Portrait of Edmond Belamy by French collective Obvious was sold by Christie’s in 2018 for US$432,500.</span>
<span class="attribution"><a class="source" href="https://www.christies.com/features/A-collaboration-between-two-artists-one-human-one-a-machine-9332-1.aspx">Obvious</a></span>
</figcaption>
</figure>
<p>In 2018, Christie’s proudly announced it was “the first auction house to offer a work of art created by an algorithm”, with the sale of the AI-generated painting <a href="https://www.christies.com/features/A-collaboration-between-two-artists-one-human-one-a-machine-9332-1.aspx">Portrait of Edmond Belamy</a> for more than 40 times its estimate. </p>
<p>So by selling Everydays as “the first purely digital work” to be offered by a major auction house, Christie’s is reinforcing its self-described “position at the forefront of innovation in the art world”.</p>
<h2>Virtual trading cards and CryptoKitties</h2>
<p>At the same time, Christie’s upcoming auction is only the tip of the NFT-collecting iceberg. Industry publication <a href="https://www.coindesk.com/blockchain-bites-why-buy-an-nft">Coindesk</a> estimates the total value of the NFT market to be US$250 million. Platforms such as <a href="https://opensea.io/">Opensea</a>, <a href="https://niftygateway.com/">Nifty Gateway</a> and <a href="https://superrare.co/">SuperRare</a> host a rapidly expanding range of digital collectibles to buy and sell by a growing community of collectors. </p>
<p>Beyond art, digital collectibles include virtual trading cards, artefacts and attire for virtual gaming worlds. They also underpin games such as <a href="https://www.cryptokitties.co/catalogue">CryptoKitties</a>, in which NFTs serve to secure the “unique genome” of each kitty in the game. These examples reflect the uptake of NFTs across different digital subcultures, providing collectors with claims to uniqueness that were previously considered impossible in the online realm. </p>
<h2>Blockchain for artists</h2>
<p>Artists and other creative practitioners may also benefit from blockchain-backed systems.</p>
<p>Researchers at RMIT published a <a href="https://apo.org.au/node/267131">paper</a> on how blockchain infrastructures could help Australia’s creative economy in 2019. They note how blockchains could support artists in trading, creating contracts, getting their work discovered, sharing resources – and making money to support their livelihoods.</p>
<p>Artists themselves are also searching for new ways to use blockchain and other “distributed ledger” technologies. Over the past decade, <a href="https://www.furtherfield.org/tag/diwo/">Furtherfield</a> in London has worked with artists to explore the possibilities and limitations, partnering most recently with Goethe Institute and Serpentine Galleries for <a href="https://www.e-flux.com/announcements/372459/the-daowo-sessions-artworld-prototypes/">The DAOWO Sessions: Artworld Prototypes</a>. Other notable projects include <a href="https://torquetorque.net/wp-content/uploads/ArtistsReThinkingTheBlockchain.pdf">Artists Re: Thinking the Blockchain</a>, which showcases how artists have a stake in this technological shift, and <a href="https://disco.coop/">DisCo Coop</a>, <a href="https://www.trojanfoundation.com/">Trojan DAO</a> and <a href="https://www.goethe.de/ins/gb/en/ver.cfm?fuseaction=events.detail&event_id=22087610">Black Swan DAO</a>, which examine how new tools for organisation can challenge the value systems of the traditional art market, rather than further solidify them. </p>
<h2>Blockchain futures</h2>
<p>This reexamination of art in light of blockchain has also been happening in Australia. In 2019, <a href="https://www.badenpailthorpe.com/">Baden Pailthorpe</a> and I worked with the <a href="https://www.bitfwd.com/">Bitfwd</a> community to curate a project called <a href="https://www.artspace.org.au/program/ideas-platform/2019/blocumenta/">Blocumenta</a>, which brought together local artists, designers and hackers to examine how blockchain could affect the arts, culture and heritage in the Asia-Pacific.</p>
<p>More recently, <a href="http://sister0.org/">Nancy Mauro-Flude</a> and I co-curated an event called <a href="https://economythologies.network/">Economythologies – MoneyLab#X</a>, which was co-presented by several universities, galleries and arts organisations. We presented a program of talks, performances and artworks that considered how blockchain’s uprooting of legacy economic systems and narratives opens space to imagine different ways to value, design and organise our creative and cultural practices. </p>
<p>At this stage it’s hard to say exactly what blockchain will mean for art. For now, perhaps we should let Beeple have the <a href="https://niftygateway.com/collections/beeple">last word</a>:</p>
<blockquote>
<p>bruh, i just learned wtf an NFT is like two weeks ago, not gonna act like i have a ton of intelligent shit to say here. this crypto space seems super interesting though and i see a ton of potential to do some weird shit nobody has done yet…</p>
</blockquote>
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Read more:
<a href="https://theconversation.com/friday-essay-the-australian-art-market-has-flatlined-what-can-be-done-to-revive-it-122932">Friday essay: The Australian art market has flatlined. What can be done to revive it?</a>
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<p><em><a href="https://economythologies.network/">Economythologies – MoneyLab#X</a> was co-presented by <a href="https://www.canberra.edu.au/research/faculty-research-centres/cccr">Centre for Creative and Cultural Research</a> (University of Canberra), <a href="https://www.westernsydney.edu.au/ics">Institute for Culture and Society </a>(Western Sydney University), <a href="https://soad.cass.anu.edu.au/">School of Art and Design</a> (Australian National University), <a href="http://www.vvvvvvvvvvvv.net/vvhome/">Holistic Computing Aesthetics Network </a>and <a href="https://cvin.com.au/">Cultural Value Impact Network</a> (RMIT University), <a href="http://www.agac.com.au/">Ainslie+Gorman Art Centre</a> and <a href="https://www.bettgallery.com.au/">Bett Gallery </a>, with the support of the <a href="https://networkcultures.org/moneylab/">Institute of Network Cultures</a> and <a href="https://www.miss-hack.org/?about_md">Despoinas Media Coven</a>.</em></p>
<p><em><a href="https://www.artspace.org.au/program/ideas-platform/2019/blocumenta/">The Blocumenta Blockathon </a>was co-presented with bitfwd ventures and community, with the generous support of the University of Canberra, ACT Government, the Australian National University, DAOStack and Sigma Prime.</em></p><img src="https://counter.theconversation.com/content/155738/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Denise Thwaites receives funding from The Australia Council for the Arts and the ACT Government. To facilitate her research, she has small holdings of ether cryptocurrency.</span></em></p>To quote the artist: ‘bruh… this crypto space seems super interesting though and i see a ton of potential to do some weird shit nobody has done yet.’Denise Thwaites, Assistant Professor in Digital Arts and Humanities , University of CanberraLicensed as Creative Commons – attribution, no derivatives.