Are NFT's the future of conservation funding?
Although they’ve been around since 2014, NFT’s have gained notoriety of late, with increasing mention of them socially and within every type of industry, from car manufacturers to art studios. As NFT’s hit the news, with headlines such as “NFT sales hit $293 million over the past week” (Business Insider) and global brands such as Coca Cola, Gucci and Tesla jump on the band wagon, we couldn’t help but ask; what are NFT’s, why are people spending so much money on them, and can they be applied in any way to benefit wildlife conservation?
For those of you who are savvy with NFT’s, jump to the main discussion point of this article – Can NFT's benefit Conservation?
If you are anything like me however; a non-bitcoin owner who doesn’t know the first thing about gaming, online currencies or trading for that matter, you will likely be asking, what on earth are NFT’s?!
Before we go any further, I’ll share some advice I was given when I asked the exact same question recently. And that is, don’t try and understand them, think logically, nor make sense of them. So here goes.
What are NFT’s?
NFT stands for “Non-Fungible Token”. Huh?
In economics, a fungible asset is something with units that can be readily interchanged. Money is a fungible asset - you can swap a $10 note for two $5 notes and it will have the same value. However, if something is non-fungible, it means it has unique properties so it can't be interchanged with something else. NFT’s are non-fungible - they are “one of a kind” digital assets, that can be bought and sold like pieces of property but that have no tangible form of their own. Think of them as digital certificates.
Are NFT’s and Cryptocurrency the same?
The online cryptocurrency boom over the past two years has helped to propel (or develop, if you will) a whole new market to record heights, and that is digital collectibles, known as NFT’s. How do they differ? Cryptocurrencies are similar to money – they are fungible assets that can be interchanged. You can use a cryptocurrency to pay for a good or service. NFTs, by contrast, are “tokenised” proof that you own the original digital version and NFT's can be purchased using cryptocurrency. Similar to fine art, NFT's rely on scarcity.
Digital files can be duplicated, how can you prove you are the “owner” of the digital file?
It’s true, digital files/ certificates can be easily and endlessly duplicated. How it works is that an asset, for example a piece of artwork like the Mona Lisa, is “tokenised” to create a digital certificate of ownership that can be bought and sold. As with crypto-currency, NFT’s keep a digital record of who owns what, which is stored on a shared ledger known as the blockchain. The records cannot be forged because the ledger is maintained by thousands of computers around the world.
To be clear, real-life ownership and digital ownership is not the same. The person/ organisation who own’s the Mona Lisa painting in real life, still owns it. The digital version however, can be owned by whoever first tokenises it, or whoever buys the NFT of it.
What are NFT’s used for?
NFT’s are used by artists, individuals and content creators to monetize their wares. Artists don’t have to rely on galleries for sales, celebrities/ sportsmen are able to release unique memories and moments as securitized NFT’s, and global companies can reach new consumers (particularly gamers) with exclusive NFT products. In some instances, NFT's can also contain smart contracts that may give the artist/creator, for example, a cut of any future sale of the token. NFT’s can also be used to fundraise for charity. These are key points which we shall discuss later.
In the meantime, let’s take a look at some examples. In the past week alone (December 2021), sales of NFT’s hit $292 million, according to data from NonFungible.com.
Here are some examples of some of the biggest NFT sales in 2021:
The record for the most expensive NFT ever sold (and one of the most expensive artworks ever sold) goes to EVERYDAYS: THE FIRST 5000 DAYS. The artwork, created by famed digital artist Mike "Beeple" Winkelmann, sold for $69.3 million at Christie's—the first time that the venerable auction house has ever sold a purely digital artwork.
Why are people spending so much money of NFT's?
My initial thought to this answer is simply because NFT’s are the latest fad “investment opportunity” – after all, Bitcoin is estimated to have made over 100,000 millionaires – if you jump in early there’s money to be made. But others argue that it is about collecting - Over the years, humans have collected everything from postage stamps and coins to baseball cards. Rarity is a valuable trait in any collector’s world, and with each NFT guaranteed to be unique, some are arguing that NFT’s could be the new frontier of collectibles.
In terms of the amounts of money being spent, in isolation it seems insane but on a spectrum of how wealthy people spend money in the real world, is it really so different? You can buy a nice house in a safe neighbourhood almost anywhere in the world for $1 million, yet celebrities regularly snap up $20 million mansions. Is it so inconceivable they (wealthy individuals) would buy extravagant things online, too?
I’ve read elsewhere that NFT’s are being purchased as status symbols. Where there is a high profile sale, or a record is broken, you become known for it. Being able to show your cryptopunk alien as your social media profile picture, for example, automatically enters you into a certain society and gives you status (of kind). This is key – and we certainly all know the extent some people will go to purchase and show off their status symbols.
Can NFT’s benefit Conservation?
In short, yes NFT’s have the potential to be enormously beneficial to conservation.
1. Charity Fundraising
If there are people out there willing to spend $500,000 on a Gif of a flying pop tart cat, surely an opportunity exists to tap into this highly lucrative market with the aim of fundraising for charity, and our case, wildlife conservation? How does “Spend $500,000 on a unique flying pop tart cat Gif and 50% of your purchase will be donated to support the protection of flying pop tart cats into the future” sound? Replace “pop tart cat” with “xx endangered specie” - I think we are on to something. Another question – are the people who are buying these pop tart cat Gif’s the same people who are currently donating to charity/ conservation? Maybe, definitely some, but for others, perhaps this is a unique opportunity for us to connect with a whole new group of people who are yet to be swayed by the wonderful world of wildlife? Regardless of previous support, given the right encouragement, or product if you will, there is certainly opportunity for the sale of NFT’s to significantly contribute to the funding needs of conservation.
The good news is, there are an increasing number of platforms that are allowing people to convert their NFT art and creativity into charitable giving. “NFT for Good” and “Wildlife Tokens” are two examples, both donating percentage sales of artwork to charitable organisations, connecting NFT’s directly to meaningful global action. CryptoBirds is another, which donates 50% of the net profit from CryptoBirds sales to support organizations in the field of birdlife conservation. WWF, a high profile wildlife charity, have themselves jumped at the opportunity to sell a limited number of crypto artworks, with the proceeds of those artworks donated to the protection of endangered animals.
2. Status symbols: Can NFT’s save rhinos from poaching?
The fact that some people are purchasing NFT’s as a status symbol made me think. Rhino horn is also purchased by some as a status symbol… is there some kind of opportunity here? What if rhino horns (collected humanely, for example when reserves de-horn rhino’s annually) could be tokenised and made into NFT’s and auctioned online? Could we get to a state one day where an NFT of a rhino horn is more valuable than the rhino horn itself, cutting the demand for real life horns and in doing so reduce poaching? This would take time, but in the meantime the amount of money raised by the NFT sales could certainly go a long way towards the security costs of protecting rhinos. With reserves spending up to $20 million dollars to protect their rhino’s annually, any new methods of fundraising will be keenly sought after.
And indeed selling rhino horn as an NFT has already been done! In November (2021), Momint, Africa’s first NFT marketplace, successfully auctioned Black Rock Rhino and Virtual Nation Builders’ inaugural rhino horn NFT. The virtual, one-of-a-kind horn received a winning bid of ZAR105,000 ($6,782), with proceeds from the sale earmarked for conservation costs.
3. Protecting wildlife in the Metaverse
The “Metaverse” is key to this digital world of ownership. The Metaverse is a place where our physical world blends with the virtual and creates new digitized spaces somewhere in between. This is an important concept because games and platforms have now been developed where you can purchase land, property and “things” outside of our world, in the Metaverse. For example, Gucci has sought to reach new consumers in the Metaverse in the game Roblox. They sell NFT’s for avatars of the limited edition “Gucci Collection” which includes bags, glasses and hats.
In the game Decentraland, users can buy and sell digital real estate, and people have purchased digital ownership of places like the Eiffel Tower, Statue of Liberty and even places like Skukuza Rest Camp in the Kruger National Park! In July 2021, Coca-Cola launched branded virtual clothing as NFT’s, including a “wearable” jacket to be worn on avatars within this virtual world of Decentraland. With an average sale price of $19,469 for items in Decentraland, it’s not surprising so many are turning to the Metaverse to make money.
But what of conservation? Imagine game reserves bought equivalent spaces in Decentraland and tokenised the real-life animals they have on earth – giving them characters, so to speak. The sale of the NFT of those unique animals would go toward conservation costs on earth, and using the contract option (reference paragraph what are NFT’s used for), every time the animal NFT was sold, the reserve would get a cut of the future sale. It’s certainly an out of this world theory, but the potential is there for serious funds to be raised.
Conclusion: Are NFT’s a fad or an opportunity?
Make no mistake, there are a LOT of issues with NFT’s. From confounding inaccessibility, high and confusing transaction fees, lack of regulation, not to mention the environmental impact (there is major criticism over the amount of energy (computing power aka electricity) that is consumed in these online transactions), NFT’s have a long way to go before they become mainstream. That is, of course, if they ever do become mainstream and don’t peter out as most “fads” usually do. And that’s the truth of the matter – there’s always a chance that the latest tech frenzy is a passing fad or is stoking a speculative bubble.
The problem for conservationists and charities, is that they don’t have the capital to lose if that bubble bursts.
Despite the perceived risks, many people believe NFT’s are here to stay and will change investing forever. I personally don’t think that NFT’s are the silver bullet to wildlife conservation fundraising, nor do I think that NFT’s will end the war against rhino poaching, but there is something to be said for leveraging digital technology to create value and I do believe there is an opportunity here to raise vital funds for wildlife conservation - if you can make it work! And goodness knows we need it - in the wake of COVID-19, African countries lost nearly $55 billion in travel and tourism revenue…sourcing funds to support anti-poaching efforts and conservation has never been more challenging. Perhaps it is this challenge that will kick start us into creating a true 21st century model for conservation and embrace crypto animals in the name of saving wildlife? The first movers will undoubtedly gain an advantage, but time will tell if they are still smiling longer term.