The good, the bad and the ugly faces of NFTs

If you have just arrived in the NFT ecosystem you might be feeling a little lost. As you first see the passionate discussions taking place between monkey avatars, pixelated punks and  manga characters you can be excused for feeling bewildered… but don’t worry it’s normal.

The submerged side of the iceberg

“Normal”, in the sense that more and more musicians, sportsmen and even actors are publicly flexing their latest NFT purchases. Sometimes for several hundred thousand dollars, sometimes a few million. Yes you read that right, the monkey image you saw as a profile picture of Justin Bieber or Neymar is worth a significant amount in dollar value.

If you’re thinking of wandering through a virtual world like Decentraland, you’ll have the opportunity to visit the Coca-Cola building or in the case of The Sandbox, a map slot is reserved for Warner Music Group and Snoop Dogg…

You could be forgiven for thinking of this digital image based world as a simple fad, and yet…

Twitter has set up a system to highlight NFT ownership as a profile picture. Meta (ex-Facebook), Instagram and Youtube are actively working on the integration of NFTs on their platform. Adobe is thinking of putting an “export to NFT” option in its software and the list continues.

Famous auction houses Christie’s and Sotheby’s have made sales of NFT artworks totaling several hundred million dollars.

Not to mention an original copy of the US Constitution was sold through an NFT auction and the only copy of Wu Tang Clan’s album “Once upon a time in Shaolin” was bought by a group of NFT collectors.

Also Nike has acquired metaverse wearable creation company RTFKT, McDonalds and Pepsi have done promotional NFTs and there’s The Matrix license too by the way.

These big institutional moves display a movement very far from the idea of a simple fad. In reality what we are talking about here is a massive NFT adoption by some of the most influential actors in our society. 

Plus, everyone seems to be getting rich..!

And not like with Bitcoin, there is a fundamental difference here as this is not about buying or selling money. But rather it is a question of evaluating, with strong subjectivity, an entirely new type of asset class, with all that it entails.

The hidden side of the NFT iceberg

Now let’s dive beneath the surface and see what wonders are lurking in the depths.. Because so much happiness, so much money that seemingly falls from the sky, it only happens in movies doesn’t it? It can’t be real. 

But it is real: the blockchain remembers, and the transaction is irreversible.

In case of human error, there is no central entity to request a cancellation of the transaction. This implies that the user is fully responsible for his wallet and transactions and individual financial accountability is taken to the extreme.

Those who have been in crypto for a few years remember exchange hacks, ICOs that disappeared with the money or simply cases of loss from compromised private keys. These war torn early adopters tend to play it careful and regularly post reminder messages about basic safety.

Since 2017, the NFT ecosystem has been building little by little and at the start, thanks to the small number we were then, it was relatively easy to notice dubious projects and we had the time to do some research, to ask questions.

Then in 2021, a massive increase in activity took the entire community by surprise. We knew that NFTs were going to be a revolution, but maybe not so fast! So, new generation, new rules! What was going to be the trend of Summer of 2021?

Avatar Jpegs with a random design, what we thought was a seasonal fad was actually going to become an economy of memes. Unfortunately, cynicism knows the price of everything but the value of nothing. And in the absence of a sufficient number of expert players, the older form of self-regulation that operated within the ecosystem has become less effective.

Behaviors devoid of ethics or morality have emerged. Not really online scams, in themselves they are as old as the internet itself. Two biggest problems would emerge: identity theft and the use of NFTs of major brands in their product without consultation with their community.

The start of a dead end conversation 

There are several ways to resolve conflict, some with more peaceful methods. It can be said that the consensual method (everyone is satisfied with a commonly found solution with no one party required to make a sacrifice) was not the one that was preferred.

It was probably Joanie Lemercier and Memo Akten who opened the dialogue on the issues inherent in NFTs. Especially on the ecological aspect of Ethereum which uses the Proof of Work, algorithmic consensus known to be energy intensive. The #CleanNFT movement was created as a result of this. Very quickly, Tezos saw fit to buy a slot of their logo every time a user uses this tag on Twitter.

The ecological aspect of Proof of Work is regularly discussed, especially on the side of Bitcoin. Miners’ efforts to have cheaper energy, in particular from renewable energy which has steadily increased in recent years, even more so since China banned mining on their territory.

Spending energy is not a big deal in itself, what matters is to know where this energy comes from. For Bitcoin, the narrative is very clear. For NFTs, a little less so and this is where the tension seems to crystallize. 

What exactly does “the NFT community” carry as a value?

Getting rich

We’re not going to lie, the overwhelming majority are here to make money and to get rich in this ecosystem and there are not many options: work or trade.

The first option, there is not too much risk and income is created regularly in the familiar manner. The organization or the company you work for may differ from usual but the goal remains the same: to pool efforts in a paid way to achieve something bigger. 

The second option on the other hand, a difficulty will soon become apparent, how to accurately value the asset to be bought, sold or resold. How to know the “right price” of an asset in such a new market? Is it by looking at the sales history or by fragmenting the NFT into several ‘shards’ to have an overall estimate? or by asking a trusted third party? 

The questions are endless.

Ethics and morale

Without law (or regulation), it is community ethics and morality that have become the regulators in this space. The set of values that define what is “good” or “bad” are currently being thrashed out in Discord channels, voted on in DAOs and in other virtual community spaces.

In our article on ethics and NFTs, we returned to visit the political movement that comes closest to this market: Libertarianism. This notion is highly developed in the United States with progressive and conservative undercurrents more or less extreme. Taken to the extreme, it is the idea that everything can be traded on a free and open market. Yes, everything.

For example, when looking at what underpins traditional currency, is trading oil and weapons morally correct? Nowadays, the majority answer to this question will be “no, it’s wrong”. Yet it is oil and weapons that serve as the store of value for the U.S. dollar. Not gold anymore.

Real-world discussions about what is “good” for humanity have been in full swing since various COP and IPCC reports. But in the face of government inaction, increasingly radical actions have been organized across the world in a fight “at all costs” against this system of centralized and unequal regulation so that future generations can have a fairer life.

As the fight against faceless corporations and seemingly powerless politicians continues, the NFT ecosystem seems to have been lumped together as part of this battle. And the ecosystem’s efforts to self-regulate are not enough in the eyes of these new detractors.

How the NFT community has reacted to this criticism without proposal for improvement?

With the self-mockery it already knows so well and in response, the hatred has become visceral.

We must distinguish between trollish attacks and legitimate points that can be resolved together. Just as it is necessary to distinguish between the reuse of works for commercial purposes with impunity and the actors of good faith who seek to improve this ecosystem on a daily basis.

Decentralization

Today, everyone wants visible and immediate effects on their efforts and seemingly as it’s happening online, the collective unconscious feels results have to be instantaneous. Because there is someone who just has to press a button to do or undo. Because after all, it’s just information sent through a cable at the speed of light.

But this is not the case with the NFT ecosystem. As we saw above there is no going back when a transaction is sent. Before 2020, it was necessary to pay a certain amount to interact with Opensea. Then with the surge in transaction fees on Ethereum, “lazy minting” appeared.

No need to pay smart contract deployment fees, this was now up to the buyer to pay all fees at the time of purchasing the NFT. A little more centralization for better scalability seemed like a good solution. Recently, Opensea announced a limit of mint per user before backpedaling. Why? Because their minter is so easy to use and today facilitates not only the mint of true works but in addition is a spam multiplier!

But if the spoofing had taken place on another online art sales site, outside of the public blockchain, who would have heard of it? The Internet is not limited to Deviantart or Behance. Decentralized transparency is a double-edged sword: it allows for public verification after the transaction has taken place but makes it impossible to cancel.

NFTs are here to stay, deal with it

This is the sledgehammer argument of the pro-NFT side. NFTs are here to stay, and for a long time to come. Already, because some investors see these small tokens as a long-term investment and have no desire to see them disappear. So they will do everything to ensure that technology survives.

Also NFTs represent a way for artists to quantify what was previously unquantifiable. And to have access, peer-to-peer, to a global market thanks to an censorship-proof means of payment.

Oddly enough, this idea seems to charm the biggest platforms in the world. To continue to offer a “free” service based on ever more intrusive advertising targeting, these companies need your personal data, your buying habits are worth more than gold.

Whether to pay to deploy a smart-contract and have full power over it or to continue to give away your digital integrity..the question continues..

There is bound to be an answer in the middle, but for now, no one has found it. What is certain is that today more than ever our online actions have consequences in real life.

Rather than declaring war and seeing the dust in the eye of the neighbor, it is time to open up spaces for discussion to reduce the risk of damage on both sides of this new digital universe that our children will likely live in.