In news streams and on social media the talk of NFTs has been unavoidable recently. Most discussions being held are talking about the present and what NFTs are doing now, but not many people are talking about what they could do in the future.
But first, what exactly are NFTs? NFT stands for Non Fungible Token. Fungible means something that can be easily replaced or swapped by an item of identical or close value. So non fungible is the opposite, something that cannot be replaced or swapped, usually a unique or priceless item placed on a blockchain, so not interchangeable.
Examples of NFTs in recent news are the first ever tweet, being sold by Jack Dorsey for $2.5 million! Of course the tweet is still on twitter and still out there on the internet, but the person that purchased the NFT owns the original data from the tweet verifying its authenticity as a “virtual autograph”.
The actual purchasing of the NFT works by a decentralized network (0r blockchain) ensuring everything is above board and then creates a new certificate of authenticity each time it is sold.
Can NFTs become a regular element in future trading, not just for the likes of tweets or art, but for anything? Before any regular NFT use becomes mainstream, there are environmental impacts to address. The use of a single NFT uses a substantial amount of energy, for example 1 transaction would spend the same amount of energy as a house would in nearly 2 days. That is from a single transaction, imagine the energy consumption from thousands of transactions every day!
Another issue is just how can it all be regulated? If businesses want to trade with NFTs that means they will come under the scrutiny of the government over tax and VAT issues. Currently, America is treating any NFT transactions the same as selling and buying stock off the stock exchange.
NFTs may well have a future but for it to become a mainstream “currency” would mean a lot of logistical issues would need to be fixed first. Then we have to ask the question is it worth it for all of the environmental impacts?