The potentials and problems of NFT
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When digital artist Kevin McCoy and technologist Anil Dash coined the concept of verifiably unique digital artworks-now known as NFT-during a hackathon in 2014, the duo had to simplify the concept due to the time limit of hackathon.
“You couldn’t store the actual digital artwork in a blockchain; because of technical limits, records in most blockchains are too small to hold an entire image,” Dash told The Atlantic. The duo opted to include the website address or mathematical comprehension of the artwork and it would be used to reference the artwork elsewhere instead.
According to Dash, the aforementioned concept is still being used in today’s NFT. The issue was recently brought up on Twitter. Most NFTs making headlines refer to an IPFS hash or a specific file. The metadata of the file links to a gateway URL or website address. It could pose two problems regarding the originality of the artwork:
How can we know if the link belongs to the real artist?
If the company or website operator went bust, the file would be gone too.
What makes an NFT valuable is its exclusivity and scarcity for being the only one in the world. It is often regarded as the solution to plagiarism. But a recent alleged plagiarism case of Twisted Vacancy shows that the system is not entirely foolproof. Fellow Indonesian illustrator Kendra Ahimsa claimed that Twisted Vacancy’s artwork submitted to NFT platforms were a direct copy of his visual identity. Nifty Gateway and SuperRare have since cancelled Twisted Vacancy’s drop.
However, it is also worth noting that plagiarism issues will always exist since artwork uploaded shown to the public is finished artwork ready to be sold. Nobody knows what is going on behind the process of creating the artwork.
On the other hand, we can’t ignore the benefit NFT brings to artists. As mentioned in the previous article, the original artist receives commission on every resell. Many artists have profited off of it, especially during the pandemic. Mal Associates founder Maryadi Laksono said, “Street artists in New York can afford daily necessities even though they previously lived on the streets. This is why NFT provides plenty of benefits especially to artists.”
The gaming community has benefitted from NFT as well. “NFT game attracts a lot of youth market, because aside from spending money to buy NFT, they are being motivated by a rewarding system. They are not only completing games like in the console game era back then, but also get income,” said PO1 Network co-founder Wendy Marvin.
NFT is still in its early stage of development. CryptoKitties in 2017 prompted the early craze of NFT. There is a huge potentials for NFT to be used in the banking industry and ticketing services. NFT could simplify the authentication and verification process of loans. In ticketing, it can eliminate pimps and distribute ticket resale commission to the company. Real estate in March has seen mind-boggling sales of virtual homes.
Another concern that NFT needs to navigate in order to push the adoption forward includes public awareness, regulation and environmental concerns.
“Many people investing in crypto assets don’t know what private key and public key are, [they] spread [the private key] and then the assets are broken into. The system is definitely good, but what we cannot control is the human error,” said Wendy.
Aside from that, Maryadi pointed out that smart contract technology in blockchain is also in the early stage of development. Smart contracts validate the originality of a digital asset before it is turned into a token. They are terms and conditions prepared to determine whether a digital asset is original or not. “Why does NFT/DeFi staking have really huge risk? Because the smart contract that supports cryptography on the ethereum blockchain is prone to hacking,” said Maryadi.
In the near future, the government might have to revise the current regulations to include NFT in the Copyright Law. NFT is considered as original when it becomes the first one tokenised and recorded in the blockchain. In the Copyright Law, a creation is automatically protected the moment it is published. It doesn’t need to be registered.
“If a plagiarised work is tokenised earlier than the original, the artwork regarded as the original version is the one submitted as NFT first. This is often misused by artwork copycats to reap benefits,” said Maryadi. Perhaps, NFT can support physical art as a certificate of ownership in the long run. The transaction may take place offline, but the NFT of the artwork is recorded in the blockchain.
For both Marvin and Wendy, support from the government is critical in the development of NFT. “In Indonesia alone, the technology isn’t sufficient to offset the blockchain technology itself. Even in banking industry in 2021 there are many banks that haven’t used digital system in recording transactions. The Indonesian government hasn’t initiated [anything] in this case,” said Marvin.
In comparison, the Singapore government launched a sandbox where young tech experts gather and receive facilities to develop any technology they want to develop, including blockchain. “As opposed to here, where even the regulations are not familiar with the terminology. Entrepreneurs haven’t realised that investing in blockchain-based crypto assets could bring benefit to their businesses,” Marvin added.
The Surabaya government launched a similar programme named Start Surabaya in 2015. “A lot of startups are hatched from this programme. This programme invites a number of tech experts from Silicon Valley to train the participants,” said Wendy. It is unclear whether the programme is still running or not as the last update from its social media handles was in 2017.
Then there is environmental concerns that are haunting blockchain technology. Cambridge Centre for Alternative Finances estimates that annual electricity consumption to mine bitcoin could power all tea kettles used to boil water in the UK for 31 years. Carbon emission from mining and ‘minting’ cryptocurrencies has been a debacle. The more computers connected to the blockchain, the more energy it needs to complete a transaction since every computer has to verify the transaction.
Electricity plays a detrimental role in mining. Cities or countries-Texas, Iran and Mongolia-with low electricity rates become ideal places to mine cryptocurrency. Additional points if the cities have cold weather and fast Internet connection. Cold weather could reduce the cost of air conditioners needed to stop mining hardware from overheating.
Despite its flaws, the appetite for NFT will most likely continue to grow. “The trend cannot be stopped by the government. Artists in Bali that are struggling to sell their artwork might have better lives if they have known NFT. There are no tourists visiting to buy their artworks, meanwhile, foreigners are extremely interested in buying digital art,” said Maryadi.