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Volume 45, Number 4 - July/August 2021

Librarianship is replete with acronyms. But here’s one that may be new to you: NFT. It stands for non-fungible tokens, which Investopedia defines as “cryptographic assets on blockchain with unique identification codes and metadata that distinguish them from each other” (investopedia.com/non-fungible-tokens-nft-5115211). Blockchain technology bears enormous implications for libraries and publishers, and the recent proliferation of NFTs introduces further opportunities for institutions eager to progress beyond legacy systems. Libraries are uniquely positioned to capitalize on the NFT upswell because their platforms are designed to distribute ideas, art, and community organization.

THE BASICS OF NFTS AS DIGITAL ASSETS

NFTs function as unique digital assets. They cannot be interchanged for other assets, unlike a $5 bill that can be exchanged for five $1 bills, and their transactions are recorded, tracked, and maintained on a decentralized ledger for their entire life span.

Most people associate blockchain technology with cryptocurrencies such as Bitcoin and Ethereum, but as NFTs show, financial transactions are a mere shadow of the cumulative appeal of blockchain. Bitcoin, or any other form of money, is a great example of a fungible asset. Non-fungible assets represent differentiation while maintaining many of the advantages of decentralization. As the BBC writes, “NFTs are ‘one-of-a-kind’ assets in the digital world that can be bought and sold like any other piece of property, but they have no tangible form of their own” (“What Are NFTs and Why Are Some Worth Millions?”; bbc.com/news/technology-56371912).

Notable organizations, from the NBA to IBM, share the same space with independent creatives like the artist Beeple, who recently turned heads with the $69 million sale of his work at a Christie’s auction as a NFT. The current “bubble-ish” nature of NFTs is cause for concern among investors and those looking to flip digital real estate for profit. However, public institutions should not be so fast to dismiss the space, as its potential for enhanced programming, community engagement, and innovative publication models is only beginning.

Even ALA has taken notice of the potential of blockchain technology and NFTs. On its Library of the Future site, ALA says, “Blockchain technology has been proposed as a means of improving digital badges, facilitating the transfer, authority, and reputation of awarded badges and other digital credentials. As blockchain facilitates more secure and trusted certification, its use could expand across formal and informal learning that happens in academic, public, school, and special libraries” (ala.org/tools/future/trends/blockchain).

NFT Implications for Libraries

Blockchain and decentralized protocols are slinking their way into library systems. Because decentralized records allow for instant verification, open datasets, and frictionless collaborations, many libraries are investigating blockchain tools to streamline their day-to-day processes. One relevant example is the concept of a decentralized library card, which can authenticate a user across a consortium or multiple library systems. Such models allow patrons to enjoy the full benefits of their library card without being bound by geography. Additionally, a decentralized library system is better equipped to serve portions of the population facing homelessness or displacement.

Blockchain speculation in the world of libraries is all well and good, but how will NFTs play a role in the do main? For one, libraries taking advantage of non-fungible assets will have a new way to host and present their collections. Unique pieces of local history, online journals, and patron collaborations all benefit from tokenization.

Furthermore, a library with a knack for online program ming can use NFTs to unlock exclusive content for visitors. Donors can ditch check writing and place a bid on one of the items up for sale in their library’s NFT auction. As more platforms continue to grow, minting (the process of creating an NFT and hosting it online) an NFT and putting it up for auction may soon become standard practice for library boards seeking to merge fundraising events with memorable community outreach programs.

NFTs and Publishing Standards

NFTs liberate creators and publishers from the confines of the past. In the future, programmable royalty arrangements may abolish standard royalty share contacts. NFTs allow creators to program royalty shares that apply to their initial sale and all subsequent sales. Such elastic and transparent features stand out as one of the most beneficial aspects of the decentralized exchange of digital assets. Freedoms such as these allow publishers to focus more on the artist-distributor relationship in order to prioritize marketing and output over acquisition and paperwork.

NFTs exist within some defined boundaries that strive to limit problems with exchanges, authentication, and trades. Frameworks like ERC-1155 (Ethereum’s multi-token standard) and ERC-721 (Ethereum’s non-tangible token standard) enable smart contracts and facilitate ease for programmers working behind the scenes. These provide opportunities for libraries and publishers, because they establish standards and permit features such as programmable royalty shares.

In their guide to non-fungible assets, the team members at Hedera Hashgraph (hedera.com) note:

NFTs can contain unique information programmed into them about a good or asset; this configurability makes them ideal for issuing identities, certificates, or licenses and qualifications. A unique document or certification issued on the blockchain as an NFT can be traced back to the source to ensure its authenticity. Regarding identification, NFTs may be used to make medical history, personal profile, education, and other identity attributes digital and placed in the hands of the individual, thereby giving someone complete control over their data.

hedera.com/learning/what-is-a-non-fungible-token-nft

Academic libraries may soon enjoy a boost in their collections from open source, permissionless texts that give both the creator and the reader total sovereignty over their interaction within a work. In public libraries bound by the policies of local governments, blockchain technology and NFTs may facilitate a more liquid relationship between an institution and its patrons.

Current Problems with NFTs

For all their praise and momentum in the market, NFTs have some glaring problems. Outrageous fees and slow transaction speeds stand out among them. Many NFT exchange platforms use the cryptocurrency Ethereum for bidding. In their current state, Ethereum transactions operate on gas fees (the cost associated with making a transaction on Ethereum), which fluctuate depending on the price of the currency and the network’s capacity. Ethereum network upgrades are on the horizon, but as it stands, creating an NFT can be quite costly in some instances.

To add to this, transaction speeds are often slow. You can choose to adjust your transaction speed at the cost of additional gas fees. Other platforms are also cropping up to reduce the NFT market’s dependence on Ethereum. Binance Smart Chain, Polkadot, and Cosmos are three examples of blockchains that are gaining traction among enthusiasts.

NFTs are excellent at giving creators and institutions a new format for displaying and selling their work. Buyers and sellers should still be wary of the numerous intellectual property issues that can arise when interacting with an NFT. The inherent programmable features of NFTs ensure that creators receive credit for their work, both when it is minted on the blockchain and when it passes in and out of wallets. Despite the built-in authenticity measures of a decentralized framework, troublemakers still have the option of minting an NFT of another artist’s work and claiming it as their own.

Many of the most popular NFT exchange platforms, such as OpenSea (opensea.io) and Rarible (rarible.com), have to monitor their outlets for attempts at intellectual property theft. This is an ongoing problem that new blockchain solutions seek to restrain. CoinDesk’s Nikhilesh Deposits, “NFTs are exploding in popularity, but it’s unclear how they fit into the existing legal and regulatory frameworks that govern the financial, technology and cryptocurrency industries. NFTs don’t behave like initial coin offerings (ICOs), so they can’t just be treated like a security. And while there are laws that govern the behavior of NFT activities, it’s essential to ensure consumers are aware of what they’re doing” (coindesk.com/nfts-legal-questions).

Climate Change and Emissions

Bitcoin and other cryptocurrencies have long endured criticism from environmental interest groups and climate change scientists. Most common complaints are not without merit either. Cryptocurrency mining requires the use of pricey, resource-laden graphics processing units. These units are costly to create, and they demand significant power consumption to set up and maintain. Emissions are of particular concern. NFTs face similar environmental roadblocks, as their creation is bound to expensive pieces of hardware. Plus, minting has some harrowing downstream impacts on the health of the planet.

While the current state of the Ethereum network bears some harsh environmental burdens, many developers are working to remedy this in tandem with the recent demand for NFTs. Projects such as Hedera Hashgraph, for example, take an aggressive stance on the environmental stability of their tokenized assets and adjacent cryptocurrency, HBAR. The project aims for environmental cost reductions at every turn and even entices companies and individuals with renewable energy credits. As Justine Calma from The Verge writes, “[T]hey’re [NFTs] largely bought and sold in marketplaces like Nifty Gateway and SuperRare that use the cryptocurrency Ethereum. Ethereum, like most major cryptocurrencies, is built on a system called ‘proof of work’ that is  incredibly energy hungry. …” (theverge.com/2021/3/15/22328203/nft-cryptoart-ethereum-blockchain-climate-change).

As interest in NFTs progresses, libraries and publishers can expect major players to address these and other issues. Blockchain developers continue to implement essential changes as problems arise. Many of the most obvious problems with NFTs, such as high fees and emissions, are already being reduced through network upgrades and a general sense of awareness around the unsustainable nature of outdated models.

New Frontiers for NFTs

In its current state, the NFT market is largely dependent on interactions between disparate parties, many of which operate as sole individuals. It is helpful for librarians and publishers to look at some of the projects that can apply to their institutions as the space evolves from its present form. Decentralized databases, crowdfunded NFT auctions, and user authentication are just the beginning.

Calaxy (calaxy.com) focuses on building a creator economy that prizes creative ownership, transparency, and engagement. The project, spearheaded by public figures such as Brooklyn Nets guard Spencer Dinwiddie, aims to connect creators directly to their fans. As Calaxy’s origin story explains, “Calaxy’s in-app experience will be both secure and seamless, putting the modern fan at the center of all the action.”

Calaxy’s “Creator token” functions as its bedrock. When creators join Calaxy, they launch their Creator token. Fans and supporters can then purchase this token, which grants them access to exclusive content, events, and experiences.

The model begs for the participation of libraries seeking new forums for online event programming. A Creator token purchased on Calaxy not only enables access to one-time events but also gives users the chance to support their favorite institution on an ongoing basis. Creator tokens stand as digital representations of an institution’s current output and future potential. The project aligns with others, such as BitClout (bitclout.com), that encourage fans to directly support their favorite content creator by “investing” in their unique token.

These types of platforms may soon radically transform library and institutional funding. Public institutions now have the chance to tokenize their presence online through blockchain technology. Community members, visitors, and donors, enabled by decentralized applications, can show their support for their favorite institution with explicit backing.

Furthermore, these kinds of projects encourage keen attention to quality. Just as the quality of a library’s catalog may impact a user’s search intent, so will the quality of a library’s exclusive token impact a user’s interaction with the institution.

As Sir John Hargrave theorizes in Blockchain for Everyone How I Learned the Secrets of the New Millionaire Class (And You Can, Too) (Gallery Books, 2019, 353 pp.): “To make these ideas work, we need an open-source blockchain that’s easy for publishers to use and easy for users to install as a browser extension. Most importantly, we’ve got to have great content. This is how Netflix, Amazon, and HBO have built great net works without advertising: by producing content so good that people are willing to buy it.”

How to Create an NFT

Before creating an NFT, it helps to have a plan. Are you intending to create an image, video, or sound? Do you have plans to monetize the NFT for both initial sales and ongoing sales? Addressing these and other questions will help you avoid some of the common pitfalls associated with creation.

Assuming you will be creating an NFT on the Ethereum network, you will need an Ethereum wallet that supports the ERC-721 standard. The most common and reliable option is MetaMask (metamask.io) because it functions as an on-and-off-ramp for your NFT transactions. You will then send Ethereum to this wallet using Coinbase (coinbase.com) or another popular cryptocurrency exchange.

Once you’ve funded your MetaMask wallet, choose your preferred NFT marketplace, such as OpenSea, Rarible, or Mintable. From here, select “Create” to prompt a screen that will allow you to connect your MetaMask wallet to the marketplace. You will need to sign a transaction in your wallet, a process that requires a few simple clicks to confirm your ownership of the wallet and its assets.

Now, click on “Create” and follow the on-screen prompts to upload your NFT. You can upload an NFT in several file formats. Follow the upload standards at your preferred marketplace, making sure to adhere to file format and size requirements. You then fill in the required information and metadata related to your digital asset.

After confirming your information, you again follow a prompt to sign the final transaction in your MetaMask wallet. Here, you will discover the costs of minting your asset. You can always adjust your transaction speed and gas fees by tweaking the settings in your wallet.

Once you have created your NFT and uploaded it to the marketplace, you can list it for auction. At this stage, you can select additional programmable features such as royalty shares. Users are now able to find your NFT and place their bids.

Toward the Decentralized Future

Publishers, librarians, and decision makers should continue to monitor blockchain technology and NFTs as the space grows. While unlikely that the current format of this exciting new frontier will remain as it is, it presents some undeniable advantages for anyone working in information services. Whether you look at access, preservation, intellectual freedom, education and lifelong learning, or other metrics, it is hard to deny blockchain’s role in the library. Using new technologies like non-fungible assets, libraries and publishers can continue to honor the tenets that uphold their institutions and serve their users across time.


Mary Ellen Bates is the owner of Bates Information Services (www.BatesInfo.com) , providing strategic business research and analysis to business professionals and special librarians, and consulting services to the information industry. She also offers strategic busines coaching for entrepreneurs.

 

Comments? Email the editor-in-chief: marydee@xmission.com

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