What’s next for NFTs after a breakthrough year?

Trevor Jones, a Canadian artist, graduated from the University of Edinburgh in Scotland 14 years ago and was immediately confronted with the harsh reality of the art industry.

He told Al Jazeera that he had “several decent exhibitions and gallery displays,” but that he couldn’t afford to pay his bills. At the time, I was working three separate jobs.”


He became interested in the interaction between technology and art in the early 2010s and began experimenting with QR codes and augmented reality. The traditional art world was lukewarm to these subjects, but he persisted. He put his money into the surging cryptocurrency Bitcoin in 2017, only to lose it all in the 2018 crash.


He remarked, “I discovered I’m a far better painter than an investor.” “However, it provided me with a whole new universe to explore through painting.”


Since then, he’s been creating works with cryptocurrency themes, combining classical painting and crypto themes, and frequently including digital art pieces in the form of non-fungible coins (NFTs). 


NFTs are one-of-a-kind digital files that are supported by blockchain technology – the same technology that underpins Bitcoin – and the blockchain ledger on which they are stored certifies who the rightful owner of that one-of-a-kind digital asset is, so providing it with a provenance.

NFT demand began to pick up late last year, and interest in them has exploded this year – along with Jones’ fortunes.

Provenance and pixels

NFTs have backed this year’s most anticipated art sales.

In March, American artist Mike Winkelmann, popularly known as Beeple, sold an NFT of his digital artwork Everyday: The First 5000 Days for a stunning $69 million at Christie’s.

To capitalize on the trend, Christie’s teamed with NFT trading platform OpenSea at the end of November. This year, celebrities like Paris Hilton, Snoop Dogg, Lindsay Lohan, and even Tim Berners-Lee, the inventor of the World Wide Web, created and sold NFTs.


Another big development has been the sale of avatar-like portrait drawings as NFTs. CryptoPunks is the most well-known initiative in this field. The cheapest CryptoPunk could be had for $242,918, while the most costly could be had for $7.58 million at the time of writing.


In September, a bundle of 101 NFTs was resold at auction at Sotheby’s for $24.4 million to the Bored Ape Yacht Club, which has celebrity members such as Jimmy Fallon and Steph Curry.

Aside from the bragging benefits of being on the cutting edge of a new crypto craze, investors are betting that pixels with provenance will remain attractive collectibles in the future.


“There’s always a finite amount of them when you make an NFT,” Yan Ketelers, CMO of Venly, a Belgian business that creates NFT marketplaces, told Al Jazeera. “Every time you sell them, a blockchain is created.”


These NFTs can then be sold by their owners, paving the path for trade on NFT exchanges like OpenSea or Nifty Gateway. NFTs, on the other hand, profit from the blockchain’s property rights, but they also bear the brunt of the technology’s carbon footprint.


The majority of blockchain networks rely on so-called miners, whose rigs—often made up of thousands of energy-guzzling computers—race to solve complicated arithmetic challenges, with the winner receiving cryptocurrency.


Most NFTs are registered on the Ethereum blockchain, which consumes more energy than the Philippines as a whole. “This digital system has a significant impact in the real world,” said Alex de Vries, the founder of Digiconomist, a website that assesses the energy consumption of blockchain networks such as Ethereum.

De Vries is also a member of the Dutch central bank’s financial crimes team in his day job. “In the age of climate change, when we’re meant to reduce our emissions, that’s not what we want,” he said.


However, this is only a temporary issue for blockchain proponents. Miners, according to Ketelers, are rapidly transitioning to renewable energy sources, and blockchain systems are experimenting with new business models. Venly, for example, frequently uses Polygon, an Ethereum-based network that employs a mechanism that can save up to 99 percent of the energy consumed by the so-called proof-of-work systems outlined previously.


“I don’t think the environmental criticism is still valid,” Ketelers remarked.


De Vries claims that the problem has yet to be resolved. Although there are some environmentally friendly blockchain networks, the larger ones, such as Ethereum, are still energy hogs. Ethereum has likewise tried for years to move away from proof of work but has so far been unsuccessful.


While some may view NFTs as a passing fad, believers argue that the “metaverse” – a loose word for a more immersive future version of the internet populated by avatars – is ready to drive them into the mainstream through applications like video games, which is Venly’s major industry.


“Imagine everything you build or buy in a game being your property,” Ketelers explained. “It becomes a part of your identity, and the assets can even be sold.”


To some extent, this is already taking place. According to Juniper Research, the market for game skins, which are cosmetic upgrades for in-game objects like firearms, hit $30 billion in 2018. NFTs, on the other hand, allow users to truly own these objects, independent of game developers, and even trade them on third-party marketplaces, potentially allowing growing virtual economies to flourish.


With innovations like this, Venly aids game makers like Atari.

However, the NFT frenzy, like previous crypto bubbles, might burst at any time. “In the crypto realm, I learned how quickly things can take off, but also how quickly they can crash,” Jones added. “Bitcoin has been declared dead numerous times in recent years, but it continues to rise like a phoenix.”


This is why Jones is bracing for turbulence. He hasn’t spent his sudden fortune on anything spectacular, just a new automobile (albeit a Tesla). And, next year, he’ll hire Stirling Castle in Scotland for a celebration for his art collectors – a luxury in some ways, but one he sees as an excellent business.


“To survive the inevitable bear market, I need to expand my brand and community,” he stated. “There will be a large number of artists who will vanish, as well as enterprises that will come to a halt. Everyone is aware of it. However, some artists will succeed and emerge victoriously. I’m hoping to be one of them.”


Movine Oduor