NFT art has been making headlines for the past couple of weeks but as knowledge of the new form of buying and sellingof digital art is becoming widespread, questions are being asked on the safety, validity, and potential impact of NFTs.

i. Credit: Weird Undead

NFT Heists

Recently, it has been reported that multiple buyer’s and artist’s NFTs have been stolen on the NFT marketplace website, Nifty Gateway. Multiple people on Twitter have reported that their accounts on the site have been compromised. Some have reported that their crypto art ismissing, and others are seeing unauthorised purchases on their credit cards. A Nifty Gateway representative has stated that, “the impact was limited.” The hack seems to be limited to those with re-used passwords and users without two-factor authentication.

One Twitter user, @KeyboardMonkey3, has been following the hack and estimates that roughly USD $150,000 worth of NFT’s have been stolen and then traded on third-party sites.

Nifty Gateway user, Michael J. Miralfor reported on Twitter that someone had purchased over USD $10,000 worth of digital art on his credit card attached to hisaccount. The thief then apparently transferred the art to another account and proceeded to sell them on Discord. Miralfor can see where his art is and can do nothing to retrieve it.

It is an unfortunate reality of the crypto world as theft and fraud can be prominent. Blockchain transactions are anonymous and irreversible, making the identity of the thief almost impossible to find and then funds impossible to recover. Nifty has promised to return the $10k to Miralfor but stated that they couldn’t return his stolen artworks as it wouldn’t be fair to those new owners who bought it without the knowledge that it was stolen or bought fraudulently. The money has come out of Nifty Gateway’s pocket and the art into the aether.

This begs the question whether buying NFT’s is a larger risk than buying traditional, physical art. Does the digital nature of these artworks mean they are easier to steal? In one sense, if you use a weak password or don’t turn on two-factor authentication, it may definitely be the case. However, it is unclear whether or not this limited to user error, like not locking the front door, rather than a problem with the digital marketplace itself. There currently isn’t an answer but it raises serious questions about the safety of the digital marketplace. And these aren’t the only ones.

Artist Reactions

After the first NFT auction of Beeple’s artwork at Christie’s, a mainstream art auction house, exhibition maker Kelani Nichole had a few thoughts. “It’s absurdity at every level of implementation. They sold a JPEG. This was a $69 million marketing stunt.” Harsh words but where does it come from? Shouldn’t she just be happy that there are other avenues for artists to make money?

ii. Beeple’s $69 million artwork sold at Christie’s | Credit: Christie’s

There are two issues. Nichole says the way Christie’s sold the artwork invalidated any claim that the artwork is an NFT. None of the usual processes involved in buying and selling NFT art were present at the Christie’s sale, like the use of a blockchain. Plus, the auction wasn’t held on a site like Nifty Gateway, which some claim is the entire point.

This is where the second issue comes in,the involvement of Christie’s at all. For some, this auction validated NFT’s place in the art world. But others have claimed that this has ruined the values of crypto-art as one aspect of NFTs is to eliminate any gatekeepers. Christie’s just being a part of the selling removes any authenticity of the NFT as then it is just another piece of art sold by elitist gatekeepers at exuberant prices.

It might sound ridiculous, but the crypto purists argue that the difference between an NFT and a traditional artwork is not negligible. If the buying and selling of NFTs are executed between specific guidelines, they are seen as highly equitable and transparent. Through the proper methods, NFTs avoid the dubious backdoor dealings often associated with traditional art selling. It is common to find traditional art auctions that are fixed beforehand by offers and deals made behind closes doors, often meaning that the auction is more of a show than a legitimate auction. The digital marketplace removes this as it is purely a transaction between the artist and the buyer.

iii. JussiPylkkanen, auctioner at Christie’s | Credit: Christie’s

The Beeple sale has since brought new questions to light about the buyer, MetaKoven’s, intentions. It seems that the buyer has made money from this purchase by selling portions of the collage to the public for a profit. While there is nothing illegal about this, it does question the longevity of the NFT market. Christie’s called the sale a “milestone for digital art collecting” but others aren’t so positive. Some instead are calling this a gold rush in the new and highly speculative blockchain technology. It may be a bubble about to burst.

This is a philosophical argument that asks what aspects of the sale of NFTs qualify them as NFTs. Does it require specific processes involving the digital marketplace, or can you purchase them the same as any traditional artwork? Does the medium change the sale of it? For instance, because it is digital art, does it have to be an NFT, or can it be printed out and sold like a canvas? Would printing it out be missing the point? Is it simply crypto purists worried that their marketplace will be sullied by the traditional art-market interfering and changing things for the worst? The art world has a lot of questions to answer and it is unlikely that any of them will be answered anytime soon.

The Environmental Impact

NFTs being entirely digital means that it has the same environmental impact that many crypto currencies face. To power the servers that upkeep crypto currencies require an enormous amount of electricity. Some experts are calling NFTs humanity’s most direct way of making money by polluting the planet. Ethereum, the blockchain used by most NFTs, consumes about 26.5 terawatt-hours of electricity per year – nearly as much as the entirety of Ireland.

In 2018, a study found that cryptocurrency mining consumes more energy per dollar made than the extraction of copper or gold. The process of producing digital coins is horribly inefficient. The developers of Ethereum are themselves attempting to reduce the amount of energy they use and aim to implement their new framework by 2022. But given the decentralised nature of the crypto world, there is nothing forcing people to use greener methods of mining their crypto currencies.

This is unfortunate but it is not a problem unique to NFTs but one that appears in many facets of modern life. How do we continue our daily activities while reducing our environmental impact? Can digital currencies ever be bought and sold on green energy? If they are, can it be effectively regulated? It’s potent food for thought. 

iv. Consensual Hallucinations by SerwahAttafuah | Credit: SerwahAttafuah

NFT art seems like it will be in discussion for some time to come. Whether it be about the marketplace or the artworks themselves there are still many unanswered questions and just as many speculations. What the future will hold for NFTs will be determined on the art world’s reaction to them and the libertarian, free market of crypto currency. Will NFTs survive without regulation? Or is that exactly why they are selling?