The Wild West of NFTs: Heinz College Prepares Students for Web3’s Next Frontier
By Elaine Vitone
NFT art was a modern-day gold rush. The likes of Bored Apes, CryptoPunks, and a whole cast of other colorful, algorithmically generated characters blew up in 2020 and soared to a $40 billion market in 2021 before crashing through the floor in recent months.
But that was the art market. For NFTs, the technology that made this boom possible, it’s likely not all bust from here, say experts at Heinz College.
What does the rise of NFTs really mean? “It’s a big question,” says Brett Crawford, associate teaching professor of arts management and executive director of the Arts Management and Technology Laboratory. “And to what end? I don’t think that the edges of the opportunities for NFTs are defined yet. It’s still a Wild West.”
For the uninitiated: An NFT (which stands for nonfungible token) is, essentially, a one-of-a-kind digital certificate, a proof of ownership. Through a process known as “minting,” NFTs are encoded into the blockchain, a kind of public digital ledger that is validated by a multitude of servers all at once—so many that it’s extremely difficult to hack. The tie that binds the blockchain and NFTs together is a bit of code known as the smart contract, and that’s where the nitty gritty lives: Who minted the NFT, the full list of each owner thereafter, and any additional information you want to include for posterity.
Because this new kind of ownership certificate is not just a piece of paper lying lifeless in a drawer somewhere, but rather a dynamic code, it has made possible a new, automated process whereby the original minter gets a cut each time the NFT is sold, as does anyone else written into the smart contract. This has been a game-changer in the art world and beyond.
Getting into the NFT game is a multi-stepped mess of a process with a steep learning curve. Thus, the number of players, for now, is small. And, this being crypto, the landscape has been largely lawless.
In NFTs’ short history, they’ve gotten plenty of scrutiny (and for good reason) amid reports of theft, money laundering, intellectual-property suits, cheating at auctions, and privacy concerns. And, owing to the massive computing power required for both minting and trading, the ecological costs have presented a grave moral quandary. (More on that later.)
Fundamentally, another huge challenge in the NFT space is still, frankly, a basic understanding of what the heck an NFT actually is.
“It’s not a currency,” says Crawford. “It’s an asset. By law.”
Nor is an NFT a piece of art, “like up there,” she says, pointing to a photograph hanging on her office wall. “The NFT is a pointer to it. … It’s a token, like you use at a fair.”
But once her students understand that, a whole new world of possibilities opens up.
They learn that an NFT doesn’t have to be a one-to-one value for whatever it’s pointing to. For example, a sculpture in, say, the British Museum collection could be represented by an unlimited number of tokens. These tokens could be sold as art postcards to create a steady stream of funds to help the museum keep the lights on.
In reality, an NFT pointer needn’t even point to an object. It could be a service, a ticket, a membership.
It could be something that only exists in the metaverse.
It could even be something that has yet to exist at all. Maybe some art patrons, seeing potential in a rising star, tokenize the next David before the sculptor even picks up a chisel. So she can keep her lights on, buy more marble, make more work.
NFTs aren’t bound to the art world. They could be used for just about anything. (Whether something should be an NFT, however, is another matter, and Heinz faculty are teaching students to answer that question, as well.)
Yes, there are pitfalls and perils inherent in NFTs. At present, the lack of protections around consumers makes it all too easy to lose access to funds, tokens, or crypto wallets forever. Fraud, phishing, and deceitful trading tactics abound, and none of these risks should be taken lightly.
However, say these Heinz experts—themselves a colorful cast of characters, with expertise in technology, arts management, information systems, and policy—in the long view, there’s hope and promise. On the other side of this lawless Wild West, they see a new frontier.
Ari Lightman is a tall, Canadian-born professor of digital media and marketing who in his spare time fills his wallet with NFT collectibles by female-identifying artists. (“Have you ever bought one?” he says, pulling up his favorites, Women & Weapons, on his phone. “No? Oh, you should. It’s fun.”)
Lightman, who thinks a lot about creative marketing approaches, is excited about a number of novel uses for NFTs:
Alfa Romeo created NFTs for its new SUV, the Tonale, by tokenizing (basically, NFT-ifying) the car’s service transactions (no more intermediaries à la CARFAX). It’s an example of how, once tokenized, information can be even more valuable than a product itself, Lightman says.
Tokenization is also a great vehicle for premier access to whoever or whatever catches your fandom. Case in point: the band Kings of Leon sold NFTs for access to the best seats in the house for any of their future shows.
NFTs for various collectibles are a huge market, and Lightman sees a lot more applications ahead for pro sports. Say, for example, an athlete has an NFT with a multi-party smart contract between himself, his team, and the NFL. Benefits could continue even in the event of a trade, and even after he retires (and his tokenized jerseys take off).
Lightman teaches “Measuring Social,” an experiential learning class that many graduate students at Heinz and across CMU take to better understand engagement with online communities around brands. Last spring, the class worked with the Cleveland Cavaliers, Blizzard Entertainment, Youtube, Sephora, Levi’s, Bed, Bath & Beyond, and TaskRabbit.
Part and parcel of marketing is understanding audiences and what they consider to be a value add. “We segment based on demographics, behavioral considerations, psychographics,” he says, “and now Web3.” You can understand purchasing patterns, including holdings and diversification, by analyzing crypto-wallet addresses, which are transparent on the blockchain.
Lightman’s class looked at social sentiment around crypto and made predictions on how it would rise and fall in the open market. For example, what happens when an influencer says something about a particular cryptocurrency? Students used statistical modeling of the timeline between waves of impact, i.e., retweets and market response. Watching how these things benchmark price over time “was fascinating,” he says.
Sam Perl is a member of CMU’s Software Engineering Institute and an adjunct instructor for Heinz College as well as for the undergraduate information systems program, which is jointly offered by Heinz and Dietrich College of Humanities and Social Sciences.
In Perl’s course, “Blockchain Fundamentals,” he stresses the urgent need for more basic understanding of how NFTs really work, generally, especially given the lack of guardrails around them (regulation, insurance, enforcement, and standards that exist in other industries such as banking).
We need more education, support infrastructure, and operational capacity to make it a more seamless, user-friendly, and safe experience.Professor Ari Lightman
Perl also challenges students to dream up a new use for NFTs—but to do their homework first.
Say you want to do NFTs for pottery, he says. You should know something about pottery: markets, main players, platforms, growth opportunities. “All of that might be, like, half the analysis, and it’s got nothing to do with the Internet,” he says. The idea is: Do a real assessment. Is there value to add by using alternative transaction structures, contracts, and agreements? And what implications will those introduce? For example, what about enforcement? What about dispute resolution? Many smart contracts do not currently adhere to legal standards for certain contract elements, so their enforcement is an open question.
In Crawford’s course, “Disruptive Technologies in Arts Enterprises,” students go through the entire process of making NFTs, short of paying the fee that makes the listing go live.
She readies her students, future leaders in arts and entertainment, to be the only ones in the room who know how to deal with blockchain. Because, even though things are as-yet rocky and raw, “I do believe blockchain is part of our future,” she says. Crypto, NFTs, the metaverse, these concepts are all key—“they are what they’re inheriting.”
One of Crawford’s favorite uses of NFTs to date: Last April, Coachella Valley Music and Arts Festival included NFT opportunities with admission—they functioned, essentially, like raffle tickets, shots at VIP passes and other prizes.
If you combined that element of surprise with a membership at a museum, she says, “How much fun could that be? Every month my NFT opens up something new for me, or it’s tied to every show that goes through.” And maybe, someday, it could double as a ticket to an experience in the metaverse, too.
Crawford says her unusual combination of arts experience and tech savvy make her kind of a “weirdo.” And happily so.
Tech was invariably the piece that was always missing from every staff she’s ever managed. She’s made a point to normalize weirdness in her classroom, and when she looks at where Heinz graduates are going, it certainly seems to be paying off. “We’ve never had more people hired,” she says. “Everybody’s like, You understand data, you understand digital, you say words we don’t really understand. We probably need you!”
Lightman, who is also a commercialization advisor for the Center for Machine Learning and Health, sees real potential for NFTs in healthcare, an industry notoriously plagued with decentralized data.
“If there were a smart-contract mechanism for all that information around my health, it would be accessible to me, and I could give access to folks as I see fit, whether that’s a physician, a caretaker, or a care provider.”
And who knows what other societal ills the humble NFT could help tackle.
Josh Knauer, an adjunct faculty member at Heinz who graduated from CMU in 1995 with a BA in Environmental Ethics and Policy, is a self-described “serial entrepreneur” on Lightman’s roster of class visitors. Knauer has worked at the intersection of emerging technology, community economic development, and environmental issues for three decades.
Knauer says it’s actually a widely held misconception that all minting and trading is murder on the environment.
“It’s a choice,” he says, meaning: There are companies that use a lot less computational power via an alternate mechanism known as proof-of-stake, which operates with about the same carbon footprint as a web server. (Why have I never heard of this game-changing good news? “We all thrive on the negative story instead of the positive story,” he says.)
In his latest startup, Reseed, Knauer is flipping the script on both NFTs and carbon markets, the latter of which has long been under fire for ineffectiveness and lack of transparency. “We always joke that we decided to take on the two most controversial and misunderstood markets in the world,” he says.
One of the largest sources of CO2 release into the atmosphere (second only to the burning of fossil fuels) is deforestation. Amazon rain forests have been destroyed at an alarming rate for decades, first by the timber industry and then, in more recent years, by mass-farming of palm oil and soy.
On the edges of these dwindling forests are an often-overlooked source of carbon: small farms, many of which have been stewarded by the same families for centuries. Their historical practices—to cultivate dozens of different crops clustered together in canopies and complex root systems—produces carbon far more efficiently than industrial farms—vast, sentinel rows of identical crops treated with chemicals in a mad race toward higher yields.
Under pressure from industrial Golioths that’s been known to devolve into harassment and violence, families are losing their land at a devastating rate.
Knauer and his cofounders put two and two together, and stepped in.
“We have an app that farmers use that writes data to blockchain,” he says. From there, AI bots take that information and verify it against satellite imagery using spectral analysis. Thus, Reseed “can actually measure, with a high degree of accuracy, the amount of carbon stored in vegetation and soil on land anywhere in the world.” All of this information, then, is encoded in the blockchain and sold as tokens; each one represents a preserved metric year ton of carbon.
What’s needed to realize more of the promise of NFTs, and head off the perils? A lot, say these experts.
“Probably public policy around cryptocurrency will help, to be honest,” says Crawford. And eventually, this very wild and very decentralized West will have to standardize in some way. At the moment, we are basically getting “digital robber-barons,” she says. She calls for public policy, globally, to right the ship.
In the meantime, Lightman says, one company that’s leading the pack in helping brands stand-up infrastructure for security protocols, compliance, and risk management is Prime Trust, which has several Heinz ties. CEO Tom Pageler is an alumnus as well as adjunct faculty member who co-teaches a course, “Digital Transformation—Security Implications,” with Lightman.
Lightman stresses the importance of bringing more people into the NFT space. To date, there are under two million unique wallet holders in the world. Making it easier to get into the game would certainly help, he says. “When Amazon became really popular was when they started one-click purchasing.”
And ultimately, he says, it will happen. More brands will enter the NFT/Web3 space. Web3 will become part of how consumers engage with brands and make purchases.
But first thing’s first.
“We need more education, support infrastructure, and operational capacity to make it a more seamless, user-friendly, and safe experience,” Lightman says.
On a recent afternoon, Knauer does a little Google Earth–enabled demo of his startup, Reseed, zooming in on the deep-green heart of the Brazilian Amazon. “These are the lungs of the planet,” he says. Encroaching all around them are felled forests, ominous dead zones etched with striations—logging roads.
They look like claw marks.
All that’s standing between the forests and the destruction at their door are family farms. “They’re the last defense,” he says.
Knauer zooms in on a single farm, and a popup window tells us what’s growing under the cursor. “This is milho,” corn, he says. “This is cana de açúcar,” sugar cane. He tells me who this particular farm belongs to—we’ll call her Ana (it’s all de-identified in the public-facing system). Her small property’s carbon output is 20 times that of her nearby neighbor, a massive soy plantation.
A metric ton of carbon stored in the ground is a real, measurable thing, Knauer says. Reseed publishes all of it on the blockchain, every data attribute they collect, every algorithm they run.
Meanwhile, these farmers, who are among the poorest in the world, are doubling their incomes and retaining familial legacies and livelihoods—all while helping to beat back climate change, Says Knauer.
“We saw a problem in the world that a combination of technology and common-sense logic could fix.”
In Josh Knauer's latest startup, Reseed, he used NFTs to bring to market the carbon stored in vegetation and soil.