NFTs Explained

What are NFTs? NFT stands for Non-Fungible Token, sometimes written as non-fungible token. It’s a digital asset, or something that can’t be held or transferred physically. These means they’re usually traded on the internet, and are intrinsically linked to blockchain, the technology behind cryptocurrency. In this first of two articles looking at potential Green NFTs we look at what NFTs are in real terms, how they’re impacting our youngsters, and take a first look at their possible impact on the environment – both negative and positive.

Non-fungible token: what does it really mean? Fungible is a complicated way of saying replaceable. Something that is fungible can be replaced by something else exactly the same, and that’s okay. If you lose a £10 note, another £10 note is an ideal replacement.

Non-fungible means there is no way to replace the token. Even if you have something that’s exactly the same in appearance, it can never replace the original NFT. This is different to digital assets like cryptocurrency. Bitcoin, for example, can always be replaced with more Bitcoin.

NFTs are called tokens because they have a worth in the same way that digital currency does. In fact, NFTs can be extremely valuable indeed, especially some of the artistic tokens. Many famous NFTs are pieces of art, and one sold last year for $69 million or £56 million, at renowned auction house Christie’s! People love to own unique art, and this is a new way to be involved in an already high-profile scene.

Aren’t NFTs just pictures, so anyone can copy them?

There’s a misconception that the image often associated with an NFT is the NFT itself. Many people feel like they’re beating the system by simply saving the NFT image to their computer or smartphone.

Unsurprisingly, it’s not as simple as that. The reason people pay so much for NFTs is because they are, truly, unique. That’s because each NFT is more than what you see on the surface – no matter how beautiful the piece of art. The real NFT – the bit you pay for – is a file that exists in blockchain, a complicated system that anyone can add to by “chaining” a “block” to lots and lots of existing blocks. The whole system works via peer-to-peer computing, which sounds pretty cool and community-based, until you consider how many people are running computers at a single time to make blockchain work. More on that later.

The NFT token proves that you own the art, music, ticket, or other asset attached to the NFT. Even if someone else copied it, they would never be able to sell it or trade it, as they don’t have any rights to the information held in the original file. And, it turns out, buying and selling NFTs is big business. The most expensive art NFT (so far) sold for $91.8 million, around £75 million.

Young People and NFTs

Are children and young people learning about NFTs, and should they be? Tech education in schools is probably lagging behind the emergence of this digital asset technology, but kids may find out about NFTs from friends, social media, and tech education/stem education extracurricular groups. The BBC has added some learning content on NFTs into their educational pages, while organizations like Crypto Kids Camp in America encourage kids to learn about all aspects of blockchain, including NFTs.

Some parents think this is great, as learning about any emerging technology gives kids a head start and a better chance of opportunities in tech companies. Others think it’s irresponsible, and could encourage kids to spend money unwisely or get scammed in to buying or investing in NFTs that they don’t really understand.

Whichever point of view you come at the NFT issue from, it’s clear that additional tech education can only help kids when it comes to dealing with NFTs – especially since these tokens don’t seem to be going anywhere.

NFTs and the Environment

One question you’re almost bound to be asked by your kids is this: Are NFTs good or bad for the environment? Again, there are varying viewpoints on this. Blockchain in general is considered to be energy intensive. It involves multiple computing machines running for extended periods of time to create large volumes of code.

Any energy-intensive activity is bad for the environment, as it increases the amount of CO2 pumped out into the atmosphere. The Ethereum Blockchain is a common online platform where NFT transactions take place. One Ethereum transaction can create the same amount of CO2 as watching over 24,000 hours of YouTube. Hardly sounds like green tech, right?

Well, there are some alternatives that could make NFTs viable as green technology, or at least offset some of that carbon footprint. Proof-of-stake is an investment-style way of minting NFTs that we’ll explore more in our next article. The upshot is that it uses a lot less energy than the standard method, which is called proof-of-work. Traders of NFTs can also invest some of their earnings back into renewable energy. Doing this is a way of balancing out some of the negative impact caused by the creation of the NFT.

In our next article, we’ll take a deeper dive into the marketplaces actively working to make NFTs more environmentally friendly, and other aspects that could make these tokens appealing to some – and concerning for others. In the meantime, if your kids ask about Green NFTs, you can tell them that there are people working hard to make it a more viable “green tech” – but there could still be a long way to go.