NFTs and crypto

NFTs - what are they? 

Sven started off by saying that outsiders may get the impression that discourse around NFTs is vague and technical, and that it can seem difficult to understand what they are. 

“I suppose you’re all familiar with crypto-currency?“, he asked, and when not all of us nodded, he started there: Crypto currencies are digital money, money which is stored somewhere in a cloud or a blockchain instead of a bank account. 

While crypto currency, the most prominent example being bitcoin, can be shared - it is possible to own half or a quarter of a single Bitcoin - NFTs are non-fungible, i.e. non-shareable and unique. They do however exist in a comparable environment as crypto-currency, both of them stored on a blockchain. Instead of virtual money, you get virtual tokens, which have a certain utility - just like a token for a certain ride at a fair, for example, Sven explained.

You own a digital wallet, to which your tokens are coupled. NFTs are collectible, like pokemon cards, or like art. Some are more rare than others, and therefore more valuable. 

Every NFT has a unique set of characteristics, some of them more rare than others, and the combination of its characteristics determines its overall uniqueness and value. For example, Sven is part of a project called Croskull, which consists of a set of 6000 unique NFTs, all variations of the same comic-like picture of a skull. Software is used to combine different distinguishing characteristics such that 6000 different versions of the picture are made. 

There are many platforms for buying and trading NFTs, and the possibilities are endless - Sven’s prognosis is that soon, NFTs will also be a standard function in online computer games.

The bored ape yacht club 

The most successful NFT project to date is the Bored Ape Yacht Club, its NFTs caricature-like images of monkeys. Each NFT contains the same image of the head of a monkey, but they are distinguished by different facial expressions, hats, glasses, cigarettes... When you own a bored ape, you also have the right to use it commercially as you wish: print it on t-shirts, use it as a character in a game, and so on. 

The price started out at 200€ per NFT but has since risen to enormous heights and slightly back down again, dropping below 100.000€ for the first time in a year this spring. 

In the meantime, the Bored Ape Yacht Club has become a real-life club for the rich and famous, among other things hosting exclusive parties for NFT owners. 

Sven explained how he himself started out in the NFT world: He initially bought five NFTs for 200€ each, to see what would happen. He told us: “At that time I thought “How stupid of me, spending that much money on some images.“ But his NFTs increased in value, and soon reached a peak of several thousand euros per token. He resold them after this peak, but still for a large profit. “We bought some bicycles with the money“, he shared.

Now, he is an active member of multiple NFT “communities“, which exchange information with each other on platforms like Discord and Twitter.

Another artist wondered why people would buy an NFT, saying that yes, they are funny pictures, but not enormously impressive. “I don’t do it because I like the images so much“, Sven admitted, “I do it for the money, and also because it’s fun.“ There are always surprises, he told us, and you always need to have a tactic.

“Well, they look nicer than dollar bills“, another artist chimed in. 

Our second presenter, Arjan, added that he enjoys the complexity of the whole system, and the fact that it is not easy to explain, that understanding it has to be earned by putting in time and effort. However, he attempted to make it a little easier for us, by putting together a step-by-step plan to buying your first NFT on the blockchain of his choice, Cardano. While the terminology was at this point still largely incomprehensible to us, some of the other artists quickly took a picture of this 10-step plan with their phones. 

NFTs and language 

While it is easy enough to join the Discord server of an NFT community, it takes a whole other set of skills to understand what is going on once you have joined it, because members communicate using their own specific and ever-changing set of jargon and abbreviations. 

Arjan has put together a small dictionary of NFT slang, from which he selected a few terms to explain to us. 

NFT, of course, stands for non-fungible token. There is also the opposite - FTs, fungible tokens, such as ethereum or bitcoin. 

There is the concept of hodl, which may stand for “hold on for dear life“, or may have originated from someone mistyping the word “hold“. Do you hodl or do you sell? This appears to be one of the existential questions of crypto. 

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To strengthen the community, especially in times of crisis, members can tell each other wagmi - we’re all going to make it in the end. To which someone may pessimistically reply: nagmi - not all going to make it. 

Then there is dyor  - do your own research. Crypto moves fast, new projects come and crash all the time, and you can not rely on others to explain it all to you. 

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fud - a neat abbreviation for an existential cocktail of emotions: fear, uncertainty, doubt. Although it is often justified, spreading too much fud can get you banned from a community.  

Once you have found your footing inside an NFT project and community, you have to stay vigilant so as not to loose your money in a rug pull, which is used as a metaphor for founders of a project abandoning it and taking with them all of the money. Often times, they do this slowly and over time: a soft rug. 

NFTs as a communal activity 

As mentioned before, this vocabulary and the whole NFT sub-culture is practiced and evolves in communities, which convene mostly on Twitter and Discord. In fact, we learned that communities are the key to succeeding in your NFT endeavours. It is important to be active and consistent in the NFT community of your choice, since this helps not only with understanding which projects are worth pursuing, but is also necessary in order to be added to so-called “whitelists“, which is necessary in order to be able to mint new NFTs and receive discounts.  

Often, the community democratically decides how a collective profit is divided and redistributed. In addition to everyone’s personal wallet there are liquidity pools and staking pools, and a share usually goes to the developers of the project. Of course, to decide these kinds of things together, a certain level of trust within a community is necessary.

“But they are closed communities?“, one of the artists asked. “No!“, our presenters assured us, anyone can join a discord server once you have purchased your first NFT. And how much is that - how much do you need to pay to come and take a look? It can be as little as a few euros, they replied, and added that the communities are not all about money, but also function as a means of social control and a tool against spreading fud (fear, uncertainty, doubt - remember?). 

There is also a degree of interaction between communities and the platforms they perform their NFT trade on. For example, Croskull runs new ideas by the community first and asks what they would like to see. 

In order to really be successful, our presenters shared, it is important to be an active part of multiple communities, not just one. 

“So it is actually something really social?“, another artist asked, and both presenters fully agreed. This was surprising to most of us, who had previously thought of crypto- and NFT-trading as a very solitary activity. 

However, not all communities are friendly and harmonious environments. Sven told us that he sometimes takes on an admin function, and that it can become necessary to remove a person from a community. “I’d say that the majority of these people are right-wing“, he added, and told us that sometimes he has felt it necessary to leave a group once a political discussion broke out. “This sort of environment attracts self-proclaimed freedom fighters, people who don’t want to depend on traditional systems such as banks“, he explained. 

Is there any way to make a sustainable income with NFTs?, another artist wondered. Sven and Arjan 

said that crypto is by definition volatile and unpredictable, but that something of a stable income could be achieved if you are very active in several communities and gain “word of mouth“ popularity by consistently participating. People who help newcomers often gain this kind of popularity and are rewarded with admin positions. This is not always useful, though, Arjan warned us: there are also people who put a lot of time into helping others and receive nothing in return, acting solely out of a desire for social credits. 

We agreed that the importance of the social aspect of the NFT world was one of the most interesting and surprising things we learned during the evening. 

NFTs for a good cause 

Just like any other fortune, the profits from NFT trading can also be donated to good causes. “You can become an activist if you want, there are certainly initiatives and such“, Sven stressed. 

Sometimes, the community gets to vote on which cause to support. Everyone has one vote, or one vote per NFT that they own - “the community controls everything“, our presenters assured us. 

NFTs and energy use 

Unfortunately, NFT trade has a significant negative impact on the environment. There is a lot of inefficiency embedded in the system and a lot of energy that is wasted since storing all the data requires many servers to run constantly. An artist brought up a statistic according to which NFT trade uses the same amount of energy as the entire global banking system, which is roughly equal to the consumption of a small industrialised nation. However, the global banking system covers the financial needs of the entire human population, whereas the NFT world is still a relatively small club of people. For a detailed account of the energy use of NFTs, check out this article on cyberscilla.com. 

There are different systems of storing data on the blockchain, requiring different amounts of energy to be used. Our presenters did not go deeply into the technical details, but Arjan explained that he chose the blockchain Cardano because it uses a more efficient system. “It is smaller, with less transactions, and uses a proof of stake system instead of proof-of-work. That way, computers don’t have to solve puzzles in order to mine blocks, which costs a lot less energy - the energy of a household per year, instead of a nation.“, he explained. “And if that is the comparison, I will choose that one“, he concluded. For more information about this, you can visit this website, which compares the energy use of the Bitcoin and Cardano blockchains. 

Sven added that the energy use of the blockchain is something which is constantly being worked on. On the other hand, there is also a constant competition between blockchains to make computation faster, which costs more energy in return. “You don’t get into crypto because it’s so nice for the environment.“, he admitted. 

How much time does it cost? 

How much time do you spend on this, daily?, someone asked our two presenters. They responded that it could easily occupy you all day long, as especially staying active in multiple communities is very time-consuming. However, they personally spend an hour or so on it per day at the moment. “It can be more when you just bought something new, but I don’t buy that much anymore“, Arjan added. Sven agreed with this: “I also spend much less time on it than I did half a year ago. There are so many other things to do.“ 

NFTs and art - can you use them conceptually?

We were of course also curious about the significance of NFTs for the art world, and what kind of conceptual art projects NFTs could be involved in. Is there a conceptual level, or is it just about the trading possibilities for a controllably unique item?

“It is not very interesting content-wise“, one of the artist said, “unless you play with the underlying structures of the system“. 

Arjan said that while NFTs are of course very much related to money and trade, they are also suited for doing interesting conceptual work with them. He added that it does take a lot of time to get into the subject and understand how it works, but this complexity is exactly why he finds it fascinating. 

We then looked at a few examples of more playful and/or conceptual NFT projects. 

Off by Sarah Friend 

The first of these projects was Off, by Sarah Friend, which is described on her website as an “artist edition, artwork, and multiplayer game“. The artist sells a set of NFTs, each of which an image of the exact pixel dimension of a large collection of computer monitors, smartphones and tablets - in other words, black rectangles. However, each NFT also comes with a private image, which is sent to the buyer via email. These secret images each contain an encrypted sentences as well as a shard of the private key that was used to encrypt it. Together, all the sentences form an essay, which can only be read if a majority of buyers collaborates on sharing their sentences. “Across the full edition of 255 images, an entire essay and the entire private key are hidden.“, states the description on the official Off website. Since you have to decide whether or not to collaborate, the artist refers to the game as a “massively multiplayer prisoner’s dilemma“. 

The Jonas Lund Token 

Another example of NFTs being used for conceptual art is the Jonas Lund token. The artist, Jonas Lund, decided to “fragment himself“ into tokens. Buyers of these tokens become shareholders of his person, with the right to vote on life decisions, such as which country to move to or which conference to attend. 

Balot NFT

Finally, we discussed the Balot NFT, a project by the Congolese Plantation Workers Art League (CATPC) that the Dutch artist Renzo Martens is involved in. Martens first helped to realise the building of the “White Cube“, a museum on a former Unilever plantation in the republic of Congo, together with the CATPC. Much of African art has been stolen to be displayed in museums in the global North, and one piece that exemplifies this is the Balot statue, carved in 1931 during an uprising against atrocities carried out by the Unilever planation system and Belgian colonial agents. Despite multiple loan requests from the CATPC, the statue is currently on display at the Virginia Museum of Fine Arts in Richmond. 

However, digital ownership of the art work has been claimed by the CATPC, who in collaboration Martens created a collection of 306 individual NFTs of the statue. When all of them are sold, they state on their website, the CATPC will buy back 306 hectares of land, replant forests and offset carbon emissions. This way, it reads on Renzo Marten’s website, the NFTs become a tool for decolonisation, helping to make possible a post-plantation world. 

Martens received backlash over this project, also with regards to the considerable carbon footprint of NFTs. One of the artists present spoke against this: “In this case, it has a message and a purpose, and I think it’s justified.“ 

This example brought up another question: could NFTs be used to create a network of artists who finance their practice in an alternative way?  

References: 

Project “Off“ by Sarah Friend: https://off.supply/about

Project “Jonas Lund Token“ by Jonas Lund: https://jlt.ltd/

Project “Balot NFT“ by the CATPC and Renzo Martens: https://balot.org/

Energy use of NFTs: https://cyberscrilla.com/how-much-energy-do-nfts-use/

Cardano vs. Bitcoin comparison: https://testnet.cexplorer.io/energy