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K-Pop NFT Part 2: K-Pop Labels and the NFT Token Economy

in K-virtual

This is Part 2 of our article — K-Pop Labels and the NFT Token Economy. Check out Part 1 here.


K-pop labels have to be mindful to build trust with their NFT strategies and offer tangible value, while avoiding the frenzied speculation and rampant fraud that plagued the NFT art market.


TLDR

As this is a deeper and more thorough article on the benefits and implications of the (NFT) token economy on the K-Pop industry, we have created quick sections so that you can jump ahead to later sections if so needed.




4.1 NFT & What You Actually Own

Ownership of NFT. When you purchase an NFT, what is clear as day and non-repudiable is your ownership of that NFT. That is the tamper-proof strength of NFTs built upon the foundation of blockchain technology.

What NFT Does Not Address. Where the implementation of NFTs does not address are three areas — (1) the hyperlink to the digital item you have intended to purchase, (2) ownership rights relating to the hyperlinked item and (3) legitimacy of the item purchased.

Let's be clear — what this means is that you do completely own the non-fungible token (NFT) itself but not necessarily the persistency of the link between the NFT and the item, which proves that you own this item as a result of the NFT, nor the entire rights of the item itself. Or worse, you may have purchased a stolen or fake item.


These risks are rampant in the NFT art scene — purchasers being victims of "stolen" items which are subsequently removed from the marketplace or users losing the value of their NFTs when the embedded hyperlink points to a server that is longer in use or to an item that is missing from the server.

We need sharp-eyed fans. We believe these risks are mitigated in the K-Pop NFT as the NFTs are directly minted by the K-Pop labels, who have a desire to foster trust with their fan bases and thus, will ensure that the NFT-linked items are secure and robustly linked. In addition, K-pop fan communities are tight and sharp — thus, "fake" or "non-official" collectibles are likely to be well detected and flagged well before they are circulated further in the marketplaces.



4.2 Environmental Concerns

Since the announcements of K-Pop labels to venture into NFTs, there is a significant base of fans who have voiced out against the NFT moves, as the blockchain technology requires an enormous amount of energy to operate, leading to negative environment impact.


Energy consumption of the entire UK. These fans are rightly concerned. According to an energy consumption report by digiconomist.net, the total electrical energy consumed by Ethereum and Bitcoin, two of the most common blockchain platforms, nears 287.8 TWh (TeraWatt-hour), consuming more energy than the entire United Kingdom in 2020 (at 286 TWh).


Carbon Footprint of Venezuela. Furthermore, the carbon footprint of the both platforms combined is around 140 Mt (metric tonne) CO2, around the total carbon footprint of a mid-sized country such as Venezuela.

1 Transaction = 1 week of USA Household's Energy. A single, unit Ethereum transaction easily consumes 196.7 kWh or nearly 1 week's worth of household energy consumption in the United States, and produces a carbon footprint of 93.43 kg CO2 or the carbon footprint of a one-hour flight from San Francisco to Las Vegas.


#BoycottHybeNFT, #ArmysAgainstNFT. Some of the increasingly vocal fan groups on social media include #BoycottHybeNFT and #ArmysAgainstNFT which have protested that the serious impact that NFTs exact on the global environment is antithetical to what BTS stands for in terms of climate change.


A tweet hashtagged with #ARMYsAgainstNFT and #BoycottHybeNFT

To address this concern, some NFT platforms are planning to upgrade to the more energy-efficient blockchain technologies such as Ethereum 2.0. However, while the newer technologies will certainly be more "eco-friendly" compared to the predecessors, it remains unclear how much of the environmental impact in terms of energy consumption and carbon footprint can actually be reduced.



4.3 Bots and Fraud

In the physical world, opportunists who manage to secure highly popular concert tickets will sell these tickets at exorbitantly high prices in a practice known as "scalping".

Attack of the Scalper Bots. In the NFT world, this phenomenon is no different but its severity is several orders of magnitude higher. Automated bots can be programmed to place large number of bids to snap up NFT drops within micro-seconds of releases and later trades these NFT items at unreasonably skewed prices due to supply deprivation.


What Happened with the Time Magazine NFT Launch. In September 2021, Time Magazine launched an NFT collection called "Time Pieces" which were snapped up in minutes by line-cutting scalper bots at the launch price of US$310 a piece . These NFTs were later offered on the secondary market at around US$9,500 which is 30x the launch price.


Bot-manipulated scalping can create frustration among real fans and foment distrust of the NFT marketplace. K-Pop NFT marketplaces will need to put in place measures that can minimize such bot attacks.

Discerning Fans from Bots. For example, NFT-based games, such as Splinterlands, combat bots by tracking the involvement of players in games and offer NFTs only to players with some form of committed activity and spending in the game, rather than releasing the NFTs en masse publicly.

This practice can be similarly adopted by K-Pop labels and NFT marketplaces by offering rarer NFTs to fans who are more active or financially supportive, instead of dropping these NFTs in public launches.



What's ahead?

The 2021 Gartner Hype Cycle ranks NFT as top-solid hype at the "peak of inflated expectations" and predicts a good 5 years before mainstream NFT adoption.


In conclusion to this two-part article, we believe when the NFT hype settles, NFTs will become just another means for fans to purchase idol-affiliated items, event tickets or access from K-Pop labels and should not be construed as a instant, get-rich-quick scheme. In the post-hype period, the value of NFTs would be appreciative over time but no longer speculative in a short time.


We believe metaverses will be an ideal fit for NFTs.. The NFT means of purchase carries built-in benefits of ownership recognition and appreciative potential for fans and trade royalties for K-Pop labels. What more fitting use can there be other than in the open, digital economy of metaverses, where NFT-purchased items are not easily copied and ownership of digital goods can be governed properly.

Of course, we will having a piece on K-Pop Metaverses soon. Stay tuned and support us by bookmarking haen.ai and checking back!


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Another new direction for the K-pop industry — the embrace of the metaverse! Hop on to our post Is BTS's Minecraft Debut Video for Youtube Escape a buildup for more metaverse appearances in 2022?.


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