A Virtual Insanity
Bored Ape NFTs being sold for thousands of dollars on Opensea, an online NFT marketplace
“Futures made of virtual insanity, now
Always seem to be governed by this love we have
For these useless, twisting, of our new technology”
- “Virtual Insanity” by Jamiroquai
With the rise of cryptocurrencies and non-fungible tokens (NFTs), there are growing questions about the validity of these new ways in which the internet is being used. Cryptocurrencies are virtual currencies that utilize blockchain technology for online transactions. In those blockchains, NFTs are minted to a sort of media (a profile picture, GIF, video, etc.) and can be bought and sold using cryptocurrencies.
So, how might crypto cause any trouble for us? Simply, crypto is too fast for us to catch up to. Everyone risks being harmed by the hidden economic, social, and environmental implications that NFTs and cryptocurrencies have. For an effective change to a digitalized world that may be the future, crypto and NFTs must slow down to match humanity’s pace.
Cryptocurrencies were created after the 2008 recession for the purpose of solving problems created by banks: namely, that they served no apparent function beyond being middlemen in an over-bureaucratized financial system. Decentralization and the elimination of the middlemen during transactions were the main goals of digital currencies like Bitcoin. However, as much as crypto claims to solve the bank issues, it presents its own set of problems. Transactions of cryptocurrency can require up to $60 to $70 dollars in fees, or “gas prices.” High gas prices from transaction slots being auctioned to the highest bidder restrict consumers from purchasing cheaper goods and render the use of crypto in day-to-day transactions inefficient. As such, crypto itself is an obstacle to one of the basic functions of money: medium exchange. Without lower gas prices, “fiat money,” as crypto enthusiasts call it, will still triumph over cryptocurrency.
The volatility of crypto is also an issue. The price of a cryptocurrency is only theoretical, meaning that the price can change mid-transaction since many prominent cryptocurrencies take 5 to 40 minutes for one transaction. The possibility of a price change prompts many consumers to balk at the price of an online good or use an alternative process of transaction to crypto entirely. The wealthy participants in the system and owners of cryptocurrencies benefit from this unpredictable and sluggish system, while the poorer members demand fewer gas fees and volatility that increase the wealth disparity in crypto. Thus, the very system created to solve the banks’ problems failed, because both are run for human interests, and are susceptible to greed and corruption.
As for NFTs, proponents claimed that they are revolutionary ways for artists to earn a profit and gain recognition by the online community. However, a research blog from artist Kimberly Parker has found that 33.6% of primary NFT art sales were less than or equal to $100 and the majority of sales did not reach 3 figures. Even the artist which started the art of the famous Bored Ape Yacht Club (BAYC), Seneca, is unrecognized by most people on the Internet. Seneca claimed that while she advocates NFTs, her compensation from the success of the BAYC “was definitely not ideal”. The NFT community is surrounded by a thick veil attracting artists who desire to “strike it rich”, but the reality is that only a minority of artists are cashing out on the Internet craze.
The blinding development of NFTs turned heads away from the intrinsic value of art to its monetary value. A survey found that 45.17% of the respondents (males and females, aged 21-99) viewed them as investments, while only a minority perceived them as what they truly are: digital art. It is clear that buyers and sellers mostly consider what the token attached to the art could be worth in the future, while the cookie-cutter and usually uncreative art is the cherry on top.
Then, one may ask why the tokens are considered investments. Is it for the ownership? Yes, but no. An owner of an NFT owns the token, but not what it is attached to, because an attached image or meme can easily be copied through a simple screenshot. Technically, the screenshot of the NFT is not the same as the original, but for the human eye, it hardly is a difference. Then is it for bragging rights? It may as well be. NFTs create scarcity in a medium where resources are nearly limitless by attaching them to strings of code. The distinction between digital and physical that have revolutionized the world is slowly being destroyed.
Of course, we cannot forget the environmental effects of crypto and NFTs. One of the methods to earn cryptocurrency is through “mining”, which is a free-for-all battle of computers to solve mathematical puzzles first. The winner is rewarded with cryptocurrency and the process repeats. The computer systems used to mine cryptocurrency use up large amounts of electricity from fossil fuels: so large, in fact, that the yearly amount of energy used for Bitcoin is similar to that of Norway’s entire annual energy consumption. Since the mining system only rewards the winner, the energy used by the losers is wasted, which is extremely inefficient compared to powering numerous households in one country.
It is time to consider a new path to make technology useful for once: a future governed by the people with technology as our allies, not the other way around. Virtual insanity should not be the prophecy humanity follows.