The Dark Side of NFTs
What are NFTs?:
An NFT is a non-fungible token. A non-fungible token is a unique identifier attributed to data and information on the internet. NFTs are also decentralized and work on blockchain technology, meaning that there is no central server controlling transactions. In this article, we will be talking about NFTs as pieces of digital art. NFTs are booming in popularity, and it could be a promising way to sell art, but they are still immature, so there are still many unresolved problems with this new technology.
Some problems with NFTs:
There are many drawbacks to NFTs. Among the most important are carbon emissions, money laundering and other monetary-related crimes, art thieves minting stolen art as NFTs, and a lack of security in many NFT markets.
There is no doubt that NFTs create tremendous carbon emissions. Even buying and selling a cat picture is equivalent to one month of energy use for an American citizen. This is because of the massive amount of computing power needed to handle transactions and uploads of NFTs. According to The Atlantic, "Each transaction or recording of artwork requires more and more computing power to complete. More computing power means more resources consumed." The more resources an NFT uses, the more carbon emissions it contributes to the environment, making the problem of climate change more and more drastic.
Money laundering and other crimes:
Along with the high amounts of carbon emissions, NFTs are also used as a tool for money laundering, tax evasion, and other monetary-related crimes. According to EisnerAmper, "Someone looking to 'clean' dirty money could theoretically generate an anonymous NFT; list it for sale on the blockchain; purchase it from himself/herself from an anonymous, unregulated digital wallet with illicit funds; and then recognize the money as legitimate funds from the sale of the artwork." This means that someone who wants to commit money laundering could buy an NFT from themselves, which authorities would recognize as legal.
Stolen art being minted as NFTs:
Another big problem with NFTs is that legitimate pieces of art that artists worked for tens or even hundreds of hours on are minted and sold as NFTs, benefiting the thief of the artwork and not the actual artists. Many artists have taken to Twitter to voice their concerns, but websites like OpenSea, the largest NFT trading platform, aren't doing anything to stop art thieves from selling stolen art. On OpenSea alone, art thieves stole 11,000 digital art pieces from July of 2021 to September of 2021.
Lax security on many platforms:
NFT advocates advertise security as one of the strong points of NFTs. Security is essential for expensive assets like NFTs, as stealing these assets can cost thousands or even millions in damage. Although the technology itself is secure, many hackers have carried out attacks on NFT markets like OpenSea and Nifty Gateway to steal the accounts of people who use the platform. Once hackers steal an account, there isn't much a user can do to gain their account back since NFTs are decentralized.
Identifying the problems with NFTs is one thing, but solving the problems is tricky. Even a daunting task, though, is still possible.
Companies like StarkWare, a technology company founded by Eli Ben-Sasson and Uri Kolodny, have found a way to pack more information into one block of the blockchain. This means that less time and computing power are needed to convey the same amount of information, reducing carbon emissions. Time.com states that "StarkWare's approach reduces energy consumption by anywhere from 200 to 200,000 times other options, [Starkware says], but on a purely theoretical level, that number is limitless."
The governments of many countries and platforms that allow the selling of NFTs must be involved to solve legal problems. Current laws are too negligent of new technologies such as NFTs, so laws and regulations must be updated or created to encompass new kinds of cybercrime. Platforms that sell NFTs can also increase security to make sure accounts are not buying from themselves.
Solutions to this problem already exist, such as DevianArt's recognition and protection system, but sites like OpenSea, Rarify, and Nifty Gateway have yet to implement solutions to stop art thieving.
This problem may be the trickiest to solve, as hackers seem to always find a way to bypass a security measure or regulation. Users themselves must be involved to solve this problem. By enabling security measures on their accounts like Two-Factor Authentication, they can make individual accounts and therefore the platform as a whole more secure; similar to how people who get vaccinated protect themselves against a virus but are also protecting their country as a whole.
Although NFTs seems like a promising new way to sell and collect art, there are many problems with the system like carbon emissions, stolen art, and lax security. NFTs are harmful for many reasons, and people should discard statements saying that it is a perfect way to sell art and an ideal currency.