• NFT stands for ‘Non-fungible token’ and is a tradeable, digital ownership certificate representing the ownership of a unique asset.
  • Blockchain (which collects information together in groups or ‘blocks’) means that virtual art can become collectible.
  • However, most NFT art is stored in blockchain of the Ethereum cryptocurrency, which has a heavy carbon footprint.

How much would you pay to own a piece of art that doesn’t exist in the real world? For some people, the answer is millions.[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]

A virtual work by cult artist Beeple sold for more than $69 million dollars recently in a timed Christie’s auction that set a new record for such digital works.

It is a fast-growing market with high risks and rewards. Creators – from musician Grimes to meme-makers – are cashing in on booming demand for crypto-art with ownership certified by blockchain data known as a non-fungible token (NFT).

Here is how prosaically named NFTs are driving stratospheric price rises for art that only exists online – and why legal grey areas and hefty emissions might lead buyers to think twice.


WHAT IS AN NFT?

An NFT is a digital asset that exists on a blockchain. The blockchain serves as a public ledger, allowing anyone to verify the asset’s authenticity and ownership.

So unlike most digital items which can be endlessly reproduced, each NFT has a unique digital signature, meaning it is one of a kind.

NFTs are usually bought with the cryptocurrency Ether or in dollars and the blockchain keeps a record of transactions. While anyone can view the NFTs, the buyer has the status of being the official owner – a kind of digital bragging rights.


Why are prices skyrocketing?

Blockchain – essentially a digital ledger – means virtual art can be authenticated as one-of-a kind or limited edition and so become collectible, despite the fact it can also be downloaded and reproduced with ease.

“An original painting or a limited edition print are valuable, in large part, because not everyone who wants one can own one,”

“That’s not true for digital assets. They can be replicated infinitely. But NFTs hold out the promise of actually owning something unique.”

Some works command huge prices.

Another work by Beeple – real name Mike Winkelmann – sold for $6.6 million this year, while Canadian musician Grimes made $5.8 million with a collection of her NFT artworks, and a gif of the rainbow Nyan Cat meme sold for more than $500,000.

The online Beeple sale marks the first time a purely digital, NFT-based artwork has been offered by a major auction house, with Christie’s experts expecting more to follow.

“Digital art continues to gain momentum as a direct result of NFTs and blockchain technology,” said Noah Davis, a Christie’s specialist in post-war and contemporary art.

“We believe that there will be significant growth of the market for NFTs, both within the digital collectible community and the wider art market,” he told the Thomson Reuters Foundation in emailed comments.


What about ownership?

You might think buying a NFT-based artwork gives you the exclusive right to own a copy and make use of it, but not so.

NFTs are easily viewable online – and there’s nothing to stop anyone from making a copy. Indeed, in the case of a meme, the fact is it so widely shared might be part of the appeal.

So what are owners getting?

Generally, it’s nothing more than the ability to claim and sell the right of ownership to the work,  with artists typically retaining the copyright to the underlying art.

“With traditional artworks if you buy then, you typically get to hang them in your house. With digital artwork you get to save a copy of the artwork but so can everybody else,”

There is little to stop the creator of a limited-run NFT from making and selling more copies, which could reduce the value if you are the original buyer.

Future disputes over terms could quickly spill into legal wrangling in a fast-developing new sphere. “NFTs are ahead of their time, and as is often the case, the law hasn’t caught up yet.


WHAT KIND OF NFTS EXIST

All kinds of digital objects – images, videos, music, text and even tweets – can be turned into an NFT.

Digital art has seen some high-profile sales, while in sports, fans can collect and trade NFTs relating to a particular player or team.

For instance, on the National Basketball Association’s Top Shot platform, enthusiasts can buy collectible NFTs in the form of video highlights of moments from games.

While these highlights can be seen for free on other platforms such as YouTube, people are buying the status as the owner of a particular NFT, which is unique due to the digital signature.

NFTs can also be patches of land in virtual world environments, or exclusive use of a cryptocurrency wallet name.

An auction for the first ever tweet from Twitter boss Jack Dorsey – “just setting up my twttr” – was an NFT.


HOW HAS THE MARKET GROWN?

Traded since around 2017, NFTs have surged in 2021. Monthly sales on NFT marketplace OpenSea hit $95.2 million in February, up from $8 million in January.

Total NFT trading volumes on the Ethereum blockchain amount to over $400 million, nearly half of which were in the last 30 days, according to NonFungible.com, which aggregates data from NFT marketplaces.

NBA Top Shot, which is not included in NonFungible.com data, has 683,000 users and has seen $396 million in sales, $232 million of which were in February.


WHY NOW?

Some attribute it to lockdowns forcing people to spend more time at home on the internet. But NFTs are also a way to have possessions that can be viewed by owners’ online friends.

For others, the lure lies in rapidly rising prices and the prospect of big returns. Recent years have also created a lot of crypto millionaires with Ethereum to spend.


WHY ARE THEY IMPORTANT?

Enthusiasts see NFTs as the future of ownership. All kinds of property – from event tickets to houses – will eventually have their ownership status tokenised in this way, they believe.

For artists, NFTs could solve the problem of how they can monetise digital artworks. They can receive more income from NFTs, as they can get a royalty each time the NFT changes hands after the initial sale.

NFTs could also transform music. Kings of Leon’s NFT allows buyers access to limited-edition vinyl or seats at future concerts.


WHAT ARE THE RISKS?

Given that anybody can create NFTs, the scarcity of each piece does not guarantee value. Losses can stack up if the hype dies down.

In a market where many participants use pseudonyms, fraud is also a risk.


Why such controversy over their energy cost?

NFT art has a dirty secret: most is stored in blockchain of the Ethereum cryptocurrency, which has a heavy carbon footprint. Its annual energy use is on a par with Ireland’s, said de Vries of Digiconomist, a hidden cost for many buyers.


 

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  • The United Nations has shaped so much of global co-operation and regulation that we wouldn’t recognise our world today without the UN’s pervasive role in it. So many small details of our lives – such as postage and copyright laws – are subject to international co-operation nurtured by the UN.

    In its 75th year, however, the UN is in a difficult moment as the world faces climate crisis, a global pandemic, great power competition, trade wars, economic depression and a wider breakdown in international co-operation.

    Flags outside the UN building in Manhattan, New York.

    Still, the UN has faced tough times before – over many decades during the Cold War, the Security Council was crippled by deep tensions between the US and the Soviet Union. The UN is not as sidelined or divided today as it was then. However, as the relationship between China and the US sours, the achievements of global co-operation are being eroded.

    The way in which people speak about the UN often implies a level of coherence and bureaucratic independence that the UN rarely possesses. A failure of the UN is normally better understood as a failure of international co-operation.

    We see this recently in the UN’s inability to deal with crises from the ethnic cleansing of the Rohingya Muslims in Myanmar, to civil conflict in Syria, and the failure of the Security Council to adopt a COVID-19 resolution calling for ceasefires in conflict zones and a co-operative international response to the pandemic.

    The UN administration is not primarily to blame for these failures; rather, the problem is the great powers – in the case of COVID-19, China and the US – refusing to co-operate.

    Where states fail to agree, the UN is powerless to act.

    Marking the 75th anniversary of the official formation of the UN, when 50 founding nations signed the UN Charter on June 26, 1945, we look at some of its key triumphs and resounding failures.


    Five successes

    1. Peacekeeping

    The United Nations was created with the goal of being a collective security organisation. The UN Charter establishes that the use of force is only lawful either in self-defence or if authorised by the UN Security Council. The Security Council’s five permanent members, being China, US, UK, Russia and France, can veto any such resolution.

    The UN’s consistent role in seeking to manage conflict is one of its greatest successes.

    A key component of this role is peacekeeping. The UN under its second secretary-general, the Swedish statesman Dag Hammarskjöld – who was posthumously awarded the Nobel Peace prize after he died in a suspicious plane crash – created the concept of peacekeeping. Hammarskjöld was responding to the 1956 Suez Crisis, in which the US opposed the invasion of Egypt by its allies Israel, France and the UK.

    UN peacekeeping missions involve the use of impartial and armed UN forces, drawn from member states, to stabilise fragile situations. “The essence of peacekeeping is the use of soldiers as a catalyst for peace rather than as the instruments of war,” said then UN Secretary-General Javier Pérez de Cuéllar, when the forces won the 1988 Nobel Peace Prize following missions in conflict zones in the Middle East, Africa, Asia, Central America and Europe.

    However, peacekeeping also counts among the UN’s major failures.

    2. Law of the Sea

    Negotiated between 1973 and 1982, the UN Convention on the Law of the Sea (UNCLOS) set up the current international law of the seas. It defines states’ rights and creates concepts such as exclusive economic zones, as well as procedures for the settling of disputes, new arrangements for governing deep sea bed mining, and importantly, new provisions for the protection of marine resources and ocean conservation.

    Mostly, countries have abided by the convention. There are various disputes that China has over the East and South China Seas which present a conflict between power and law, in that although UNCLOS creates mechanisms for resolving disputes, a powerful state isn’t necessarily going to submit to those mechanisms.

    Secondly, on the conservation front, although UNCLOS is a huge step forward, it has failed to adequately protect oceans that are outside any state’s control. Ocean ecosystems have been dramatically transformed through overfishing. This is an ecological catastrophe that UNCLOS has slowed, but failed to address comprehensively.

    3. Decolonisation

    The idea of racial equality and of a people’s right to self-determination was discussed in the wake of World War I and rejected. After World War II, however, those principles were endorsed within the UN system, and the Trusteeship Council, which monitored the process of decolonisation, was one of the initial bodies of the UN.

    Although many national independence movements only won liberation through bloody conflicts, the UN has overseen a process of decolonisation that has transformed international politics. In 1945, around one third of the world’s population lived under colonial rule. Today, there are less than 2 million people living in colonies.

    When it comes to the world’s First Nations, however, the UN generally has done little to address their concerns, aside from the non-binding UN Declaration on the Rights of Indigenous Peoples of 2007.

    4. Human rights

    The Human Rights Declaration of 1948 for the first time set out fundamental human rights to be universally protected, recognising that the “inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world”.

    Since 1948, 10 human rights treaties have been adopted – including conventions on the rights of children and migrant workers, and against torture and discrimination based on gender and race – each monitored by its own committee of independent experts.

    The language of human rights has created a new framework for thinking about the relationship between the individual, the state and the international system. Although some people would prefer that political movements focus on ‘liberation’ rather than ‘rights’, the idea of human rights has made the individual person a focus of national and international attention.

    5. Free trade

    Depending on your politics, you might view the World Trade Organisation as a huge success, or a huge failure.

    The WTO creates a near-binding system of international trade law with a clear and efficient dispute resolution process.

    The majority Australian consensus is that the WTO is a success because it has been good for Australian famers especially, through its winding back of subsidies and tariffs.

    However, the WTO enabled an era of globalisation which is now politically controversial.

    Recently, the US has sought to disrupt the system. In addition to the trade war with China, the Trump Administration has also refused to appoint tribunal members to the WTO’s Appellate Body, so it has crippled the dispute resolution process. Of course, the Trump Administration is not the first to take issue with China’s trade strategies, which include subsidises for ‘State Owned Enterprises’ and demands that foreign firms transfer intellectual property in exchange for market access.

    The existence of the UN has created a forum where nations can discuss new problems, and climate change is one of them. The Intergovernmental Panel on Climate Change (IPCC) was set up in 1988 to assess climate science and provide policymakers with assessments and options. In 1992, the UN Framework Convention on Climate Change created a permanent forum for negotiations.

    However, despite an international scientific body in the IPCC, and 165 signatory nations to the climate treaty, global greenhouse gas emissions have continued to increase.

    Under the Paris Agreement, even if every country meets its greenhouse gas emission targets we are still on track for ‘dangerous warming’. Yet, no major country is even on track to meet its targets; while emissions will probably decline this year as a result of COVID-19, atmospheric concentrations of greenhouse gases will still increase.

    This illustrates a core conundrum of the UN in that it opens the possibility of global cooperation, but is unable to constrain states from pursuing their narrowly conceived self-interests. Deep co-operation remains challenging.

    Five failures of the UN

    1. Peacekeeping

    During the Bosnian War, Dutch peacekeeping forces stationed in the town of Srebrenica, declared a ‘safe area’ by the UN in 1993, failed in 1995 to stop the massacre of more than 8000 Muslim men and boys by Bosnian Serb forces. This is one of the most widely discussed examples of the failures of international peacekeeping operations.

    On the massacre’s 10th anniversary, then UN Secretary General Kofi Annan wrote that the UN had “made serious errors of judgement, rooted in a philosophy of impartiality”, contributing to a mass murder that would “haunt our history forever”.

    If you look at some of the other infamous failures of peacekeeping missions – in places such as Rwanda, Somalia and Angola – ­it is the limited powers given to peacekeeping operations that have resulted in those failures.

    2. The invasion of Iraq

    The invasion of Iraq by the US in 2003, which was unlawful and without Security Council authorisation, reflects the fact that the UN is has very limited capacity to constrain the actions of great powers.

    The Security Council designers created the veto power so that any of the five permanent members could reject a Council resolution, so in that way it is programmed to fail when a great power really wants to do something that the international community generally condemns.

    In the case of the Iraq invasion, the US didn’t veto a resolution, but rather sought authorisation that it did not get. The UN, if you go by the idea of collective security, should have responded by defending Iraq against this unlawful use of force.

    The invasion proved a humanitarian disaster with the loss of more than 400,000 lives, and many believe that it led to the emergence of the terrorist Islamic State.

    3. Refugee crises

    The UN brokered the 1951 Refugee Convention to address the plight of people displaced in Europe due to World War II; years later, the 1967 Protocol removed time and geographical restrictions so that the Convention can now apply universally (although many countries in Asia have refused to sign it, owing in part to its Eurocentric origins).

    Despite these treaties, and the work of the UN High Commission for Refugees, there is somewhere between 30 and 40 million refugees, many of them, such as many Palestinians, living for decades outside their homelands. This is in addition to more than 40 million people displaced within their own countries.

    While for a long time refugee numbers were reducing, in recent years, particularly driven by the Syrian conflict, there have been increases in the number of people being displaced.

    During the COVID-19 crisis, boatloads of Rohingya refugees were turned away by port after port.  This tragedy has echoes of pre-World War II when ships of Jewish refugees fleeing Nazi Germany were refused entry by multiple countries.

    And as a catastrophe of a different kind looms, there is no international framework in place for responding to people who will be displaced by rising seas and other effects of climate change.

    4. Conflicts without end

    Across the world, there is a shopping list of unresolved civil conflicts and disputed territories.

    Palestine and Kashmir are two of the longest-running failures of the UN to resolve disputed lands. More recent, ongoing conflicts include the civil wars in Syria and Yemen.

    The common denominator of unresolved conflicts is either division among the great powers, or a lack of international interest due to the geopolitical stakes not being sufficiently high.  For instance, the inaction during the Rwandan civil war in the 1990s was not due to a division among great powers, but rather a lack of political will to engage.

    In Syria, by contrast, Russia and the US have opposing interests and back opposing sides: Russia backs the government of the Syrian dictator Bashar al-Assad, whereas the US does not.

    5. Acting like it’s 1945

    The UN is increasingly out of step with the reality of geopolitics today.

    The permanent members of the Security Council reflect the division of power internationally at the end of World War II. The continuing exclusion of Germany, Japan, and rising powers such as India and Indonesia, reflects the failure to reflect the changing balance of power.

    Also, bodies such as the IMF and the World Bank, which are part of the UN system, continue to be dominated by the West. In response, China has created potential rival institutions such as the Asian Infrastructure Investment Bank.

    Western domination of UN institutions undermines their credibility. However, a more fundamental problem is that institutions designed in 1945 are a poor fit with the systemic global challenges – of which climate change is foremost –  that we face today.