Lately, while scrolling through social media I've seen a lot of emotional, divisive reactions to NFTs. One sentiment among people outside of crypto is that NFTs are "GIFs that burn the Amazon" (or something along those lines).
I'm not saying that NFTs are the next best thing or anything, but this trend in misinformation irks me.
NFTs are more than GIFs
An NFT can be thought of as a token that represents something unique on a blockchain. Lately, this has been applied heavily to art and music (as it has been very profitable for artists), but it's an ambiguous technical tool that can be applied to anything unique.
For instance, in-game items, event tickets, and even an actual receipt from a store can be an NFT. Again, not saying that it's better to have these things as NFTs, it depends on the exact use case, but the point is that an NFT can be anything unique.
What an NFT actually represents depends on the developers behind the platform that is "minting" the NFT. The developers have to ensure that the NFT they are minting follows a certain specification (ERC721 or ERC1115).
This specification is an "interface" of sorts, which allows other platforms in the decentralized ecosystem to know how to interact with the NFT, as the NFT is just a smart contract.
In the world of decentralized apps, NFTs are basic technical building blocks. They can be used for their standalone value too, as investments for instance, but that is one specific use case.
Environment Impact of NFTs
As of right now, there are two common methods of mining on a blockchain: Proof of Work (PoW) and Proof of Stake (PoS).
The two are very different in their environmental impact. PoW mines blocks by computational power, to repeatedly try to find a hash that matches a given result. PoS on the other hand is done by validators staking some kind of collateral, and if they mine something incorrectly (or maliciously), their collateral is slashed.
Bitcoin (which has its own blockchain) is PoW, and it does take a considerable amount of energy to mine a block. However, crypto is more than just Bitcoin.
NFTs exist on blockchains which have smart contracts. Popular blockchains with some kind of presence in the top 100 market cap include:
- Binance Smart Chain
Of these, Ethereum is the only blockchain still on PoW, all others are on some form of PoS. However, Ethereum has plans to move to PoS in their ETH 2.0 upgrade.
On PoS, the energy required to mint and swap NFTs will be no more than what's needed to send a tweet.
NFTs have been a hotly debated topic, and one specific sentiment has been to say that they are "GIFs that burn the Amazon". As explained above, NFTs are generic tokens that can represent anything unique rather than GIFs/JPEGs. Their environment impact is minimal and ideally in the future this impact is the same as any other application.