Welcome to this week’s edition of Tokenised, your weekly read mining the rich vein of crypto developments flowing through India and SouthEast Asia. 

In case you saw the front-page ads in Indian newspapers for short-video app Chingari’s crypto adventure and were wondering what it's all about, check out last week’s edition. We unpacked how the company is trying to build a crypto token of its own, and why it wants to do so. 

This week, we turn our attention to non-fungible tokens (NFT) and a question that has always bugged me about this newfangled form of digital asset: where do they actually live? We also look at how China’s restrictions on crypto mining have driven miners into countries like Kazakhstan and the United States and, for the uninitiated, a brief look into what crypto mining is. 

Let’s jump right in.

Put simply, the existence of an NFT doesn’t exactly guarantee that the asset you own will exist in perpetuity. It’s more of a signboard that indicates where that asset currently resides and can be used to call it up as needed, much like a URL does for a website. 

For people looking to dive into the world of buying and selling NFTs, a good starting point might be to just vet the galleries hosting the underlying art. For example, a well-funded firm like Dapper Labs (which has licensing deals with sports leagues like the NBA) might be a more reliable seller than an anonymous artist on the internet.

Given the nascent nature of the technology, there are also few legal protections that exist around them. “Apart from having solid proof that you paid for something, you own little else. NFTs, in their current form, are glorified bragging rights,” noted Pramod Emjay, a fintech consultant, in a blog post for law firm Ikigai Law. 

While solutions like a large scale peer-to-peer file distribution system, such as the InterPlanetary File System (IPFS) built by Protocol Labs, promise to solve some of these permanence issues, it’s still early days yet. 

Guaranteeing that an NFT will be around even if the platform behind it fails is, therefore, still an evolving pursuit. And to be fully honest, probably not one that consumers especially care about right now. Ownership bragging rights for a video clip of a flying cat with a rainbow trail are certainly more attractive than figuring out which obscure server-gallery it hangs in.

But at the same time, it’s a question that NFT makers and sellers need to grapple with, because customers will (eventually) demand assurances that the meme they shelled out serious money for won’t disappear overnight. For now, it would be a good start to remember that a transaction being recorded on a blockchain grants immutability to the transaction, but it doesn’t guarantee a perpetual existence for whatever asset was exchanged through it.

As noted by Moringiello and Odinet:

The United States is now the world’s leading hub for mining bitcoin. 

About two months after China started cracking down on crypto mining operations, the country’s share of the hashrate—processing power used to mine bitcoin—has dropped from 75.5% in September 2019 to zero. Crypto mining restrictions unveiled by China have also sparked an exodus of mining companies to friendlier neighborhoods like the United States and the central Asian nation of Kazakhstan. 

The US’ share of the mining pie has more than doubled from 17% in April 2021 to 35% in August, while Kazakhstan’s rose from 12.9% to 18% in the same period. Though crypto mining firms have enjoyed a warm welcome in the US, Kazakh authorities have blamed the ‘exiled’ miners for recent energy shortages. Kazakhstan has also passed a cryptocurrency mining tax that is supposed to come into effect in 2022.