NFTs, or non-fungible tokens, are the latest digital trend to befuddle the team at Parkers HQ. And we don’t think we’re alone. With the announcement of Alfa Romeo’s decision to release an electric vehicle (EV) with its own NFT, like us, you might be wondering what exactly is an NFT?
> What is a non-fungible token?
> How do NFTs work in cars?
> Will an NFT stop my car being stolen?
What’s the difference between fungible and non-fungible?
Firstly, we need to establish the definition of ‘fungible’. (hint: It’s nothing to do with mushrooms) Pronounced ‘fun-jub-uhl’, the dictionary defines fungible assets as commodities that are easily interchanged or replaced. Broadly speaking, if you can trade the same measurement/weight of one thing for the same thing, that’s fungible.
Fungible assets and goods include oil, currency and even cutlery. Literally anything that can be swapped like-for-like. Though fungibility is technically more down to use case, rather than face value.
For example, all 50-pence pieces are fungible. Plenty are minted and whichever 50p you take from your pocket, the shop will accept it to purchase a packet of crisps. The owner of an uncirculated 2007 Kew Gardens collectable 50-pence piece might disagree, however. Their 50p coin is worth up to £230. Though it could buy the same packet of crisps—fingers crossed the shop keeper isn’t a hawk-eyed coin collector—it is highly doubtful the coin owner would agree to a straight swap with your commonly minted one.
Hypothetically, their fancy 50p comes in its own box with a certificate and so carries more value. Same applies to football sticker books; the common stickers are traded like-for-like, ergo fungible. The shinies? Not so much. The rarer they are, the more value they carry.
What is a non-fungible token?
Non-fungible tokens (NFTs) exist like shinies in the virtual world. They are unique strings of code attached to a digital creation, like a graphic image, digital photo, Bitcoin, or even a tweet. While these digital creations might be easily copied, only ‘the shiny’ is going to have the NFT attribution to verify its value.
In the real world, replicating something is usually pretty costly, especially if you’re doing it to the same quality, e.g. Shelby Cobra kit cars, Picasso paintings. Replication in the digital world, however, is as easy as taking a screenshot.
You’d be spot on for asking why anyone would bother buying an NFT-certified digital asset for thousands of pounds if someone else could copy it for nowt. By the same logic though, why would anyone pay £230 for a 50p when you can have one for, er, 50p?
How do NFTs get their value?
Understanding the attribution of value is easier in the physical world because we’ve existed here much longer than online, in the virtual one. Photography is an area that best demonstrates attribution of value to something digital. The digitisation of photography, coupled with both smartphone development and social media, may have made David Baileys of us all, but there’ll only ever be one Annie Leibowitz or Stuart Collins. Their work matters. Attribution is their livelihood, their next job – which is why it’s not cool to steal pics from the internet.
NFTs offer immutable authentication to protect the copyright and intellectual property rights of such assets. NFT code is generated on a blockchain platform.
How does blockchain fit into this?
Blockchain technology forms a fundamental part of understanding why NFTs could be helpful to drivers and people in business who manage fleets of cars or logistical operations.
Without wishing to make this explanation too complex, blockchain technology is about confirming transactions and verifying their legitimacy then recording them to a distributed ledger. Transactions, such as sales or NFT creation or even contracts, are confirmed in chunks. Once all the transactions are verified by a miner or validator, a ‘block’ is created, then committed to the blockchain (the ledger) and duplicated in different places. This decentralised approach means the block can’t be altered (well, it’s just too convoluted to do so) thus reducing fraud and increasing trust.
(If you’ve been wondering how people earn Bitcoin and Ethereum cryptocurrencies, in short, they’re helping maintain the integrity of this whole complex, yet more transparent, system. But we’ll have to save that story for another day.)
How do NFTs work in cars?
Automotive brands have been toying with this trend since 2021. Official and non-official channels of BMW, Lamborghini and Mercedes Benz have been getting creative to promote the brands through digital art, while a subsidiary of BMW have gone one step further and captured sound as digital files for NFT creation.
In 2020, Ford relaunched the Bronco. The 4X4 Bronco is to Ford and America what the original Land Rover is to Land Rover and Britain. The relaunch saw a limited run of 7,000 vehicles produced and VIN 001, the first model off the production line, sell for over $1 million. To commemorate the relaunch, auction house, Barrett Jackson created an exclusive NFT, containing videos and images of VIN 001, and tickets for access to its events. That NFT sold at auction for $22,000.
Then there’s the NFT Garage whose creator imagines his and his community’s wishlist garage, selling the graphic once it’s finished.
The use of NFTs is predominantly limited to digital art, changing hands for big bucks on community forums and grabbing headlines. And it looks like Alfa Romeo has jumped on the NFT bandwagon. Or has it?
What is Alfa Romeo doing with NFTs?
Alfa Romeo has launched the 2023 electric hybrid Tonale with its own NFT. Essentially, it’s digital proof of ownership. You might ask why, if the sales receipt wasn’t sufficient, wouldn’t the V5C work? V5Cs are issued by a UK authority, not a global one.
With stolen-to-order vehicle thefts being taken abroad, recovery becomes nigh-on impossible. Yet, this kind of blockchain-secured verification might provide a way to deter criminals.
Will an NFT stop my car being stolen?
Sadly, right now (and probably for the next decade at least), an NFT won’t stop your Tonale getting nicked. Though it might be possible to recover the vehicle more easily, the education piece around NFTs as proof of ownership hasn’t been established yet so they’re not legally recognised.
Nonetheless, Alfa Romeo spotlights a practical use case for NFTs in cars. If service histories can be recorded globally and immuteably, the average motorist could see a genuine track record of the work on the car they’re looking to buy, engendering more trust.
Can an NFT be retrospectively applied to my current car?
Not really. The biggest criticism to be levelled at NFTs is that the computing power required to make all this generation and verification happen is so great, it’s not environmentally friendly. This means such technology is likely doing more damage to the planet than our petrol-powered motors we’re all being asked to leave behind. The irony is not lost on anyone.
Further reading:
>> Surveillance capitalism in your car
>> Why car apps are changing how we buy, sell and charge our cars
