2022 will see the return of the Coachella Music and Arts Festival, following the cancellation of the last two events due to the coronavirus pandemic. To mark its return, organizers are creating a range of non-fungible tokens (NFTs). While NFT have so far typically been used to register ownership of digital collectibles, the goal is to connect Coachella NFTs to tangible real-world benefits such as lifetime passes to the event and the access to exclusive areas and attractions.
A very quick primer for those who have managed to avoid learning about them – NFTs are digital tokens that are stored on block chains. This means that, like all entities hosted on the blockchain (other examples include cryptocurrencies like Bitcoin), they are encrypted and distributed, therefore highly secure.
It’s fair to say that not everyone is a fan of the concept. Critics point to the fact that some NFT implementations burn a lot of energy, subsequently creating large amounts of carbon emissions. Others just see them as scams, and it’s certainly true that, as with most new technologies, dishonest and unscrupulous people have quickly figured out how to use them to extract money from the unwary. In fact, in some cases, the sentiment against them is so strong that companies have publicly backtracked on plans to create NFTs, due to backlash of their customers.
Despite this, it cannot be denied that there is also enormous enthusiasm for them from artists and creators, as well as large companies. Nike, Taco Bell, Coca-Cola and the NBA have all posted NFT as well as artists such as Damien Hirst and Mike Winkelmann (Beeple) and musicians Aphex Twin, Shawn Mendes, Grimes and Kings of Leon.
The most famous examples are those used to record ownership of works of art, some of which have sold for several million dollars. However, proponents of the technology insist that it can fulfill many other use cases. A real-world example I wrote about recently is Scottish distiller William Grant and Sons, who are using them to prove ownership of the 15 bottles of rare whiskey they sold for $18,000 each.
So what are Coachella’s plans for NFTs?
Festival organizers have teamed up with cryptocurrency exchange FTX to create their own NFT marketplace. Thanks to this, festival-goers will be able to buy and trade from the first three sets of tokens.
The first – the Coachella Keys Collection – will be an exclusive set of 10 NFTs that grant lifetime festival passes to whoever owns them. Holders of these tokens will also have VIP access to the various virtual events that Coachella is hosting, as this takes the brand into the metaverse.
Following this, two more NFT collections will be released. The Sights and Sounds collection is more in line with typical NFT offerings, consisting of 10,000 digital festival images and sounds, which would cost $60 each. The more expensive Desert Reflections collection will be tied to physical ownership of a limited-edition photobook commissioned to celebrate the festival’s 20-year history.
Probably the biggest criticism of NFT projects is that they waste energy in how energy is needed to “monetize” blockchain transactions that maintain token security. Coachella attempts to avoid this by hosting its NFTs on the Solana blockchain. This uses a proof-of-stake (PoS) algorithm — rather than proof-of-work (PoW) — to maintain consensus and validate information stored on the blockchain. In contrast, Ethereum – the most commonly used blockchain for NFT projects – currently still uses PoW, which is much more energy intensive.
Why Proof of Stake?
The difference is somewhat technical, but a simple way to think about it is that under a PoW algorithm, computer users are rewarded with cryptocurrency when their machines perform the complex calculations that ensure secure operation. of the network. This means that they are incentivized to put as much computer power into it as possible, so that their machines will be the ones that verify the most transactions and they will earn more coins.
Under PoS, on the other hand, users “stake” their own cryptocurrency. Algorithms determine who can verify trades (and receive rewards) based on who has invested the most currency for the longest time. PoS is said to be much less energy intensive and also able to handle a much larger number of transactions over a period of time – however, this is a relatively newer technology compared to PoW and not as well tested or understood.
It’s interesting to see that the organizers of Coachella are taking the time and effort to implement a (relatively) environmentally friendly NFT solution. Recently, it has become clear that environmental concerns are the issue most likely to sabotage NFT and blockchain-based projects. Take, for example, Elon Musk reversing his decision to accept Bitcoin as payment for Tesla cars, which he attributed solely to his concern about the cryptocurrency’s potential to cause environmental harm.
Why is this important?
At first glance, this Coachella move could be seen as another example of a hip, youth-focused brand jumping aboard the NFT bandwagon. However, it’s important because it’s the biggest real-world event to make the decision to get involved. One of the most frequently cited use cases is NFTs as keys, or passes, to access digital environments within the metaverse. As Coachella Chief Innovation Officer Sam Schoonover said, “We wanted to take it a step further and use NFTs to enable ownership of experiences in the real world as well.”
This suggests that the most exciting implications for today’s transformative technologies – from blockchains to the metaverse – don’t necessarily apply solely to the digital realm. Humans, for now at least, are still primarily creatures of the physical world, and while virtual music festivals can be a fun diversion during times of lockdown, or when we just don’t have the time or the resources to travel it will be one before they can completely replace the real thing. This means that the real value of these technologies will likely be realized when we find ways to use them to impact the real world, not just the virtual world.