Who I am

Dr. Catherine Flick

● Reader in Computing and Social Responsibility, De Montfort University

● World-leading expert on the ethics of emerging technologies and responsible innovation

● Vice-chair of the Association of Computing Machinery’s Committee on Professional Ethics

● Executive committee member for the ACM’s Code of Ethics update (2018)

● Excellent communicator and “go-to” for BBC Business and other journalists for accessible discussions of blockchain, cryptocurrency and other emerging technologies - many media appearances including Radio 5 Live, BBC News 24, BBC Radio 4, Swiss National Radio, and interviews with the Washington Post, New York Times, Telegraph, Sky News, WIRED, Nature Magazine, etc.

● Peer-reviewed academic papers on ethics of emerging technologies, informed consent in ICTs, responsible innovation in augmented reality, and the ethics of NFTs

Executive Summary

My research (Flick, 2022) has revealed the following:

Ethical assessment of NFTs shows inherent problems in terms of harms
There are few use cases where another technology couldn't be used to implement the same experience for users.
Therefore, there are significant ethical concerns around implementation of NFTs and these should not be implemented unless concerns addressed or mitigated.

I provide a point-by-point expansion of my executive summary below.

1. Ethical assessment of NFTs shows inherent problems in terms of harms

● I was a member of the executive committee of the ACM Code of Ethics update (2018). This Code of Ethics (hereafter called the ACM Code) was a ground up effort to capture the spirit of the profession in terms of ethical behaviour of computing professionals. It is applicable to members of the Association of Computing Machinery but is intended to be an aspirational document suitable for non-members as well.

● Harm, according to the ACM Code, means “negative consequences, especially when those consequences are significant and unjust”. It includes “unjustified physical or mental injury […] and unjustified damage to property, reputation and the environment”.

● I am the author of an article entitled “A critical professional ethical analysis of Non-Fungible Tokens (NFTs)” (Flick, 2022). This paper was published this year in the Journal of Responsible Technology and uses the ACM Code as its basis for analysis..

According to my analysis, harms that NFTs can cause include:

● Environmental harm: Given the differences between energy requirements for traditional transactions and PoW-based blockchains, there is no real justification for increased use of energy for these, especially when lower-energy versions exist. While less environmentally impactful themselves, use of PoS-based blockchains normalise blockchain use which continue to include PoW-based blockchains.

● Mental harm: There are also concerns about the mental health of cryptocurrency and NFT traders, with traders experiencing anxiety and stress as a result of the volatility of the sector.

● Financial harm: Harm can be caused by taking advantage of vulnerable people's desperation and taking their money without returning on the promises made. Examples of this include “rug pulls” and other forms of fraud that are frequent within the cryptosphere. Increasingly in other blockchain-using technologies such as “play to earn” games we are seeing manipulation of the market and hacks that are also leaving vulnerable people, particularly in developing countries, without the income they require to live.

● Other ethical issues: including those of well-being, discrimination, fairness, intellectual property rights, privacy, quality of work, competence of those involved, legal issues, the ability to give and receive critical review, lack of education for users, personal gain over public good, security, maintenance and end-of-life for NFT ecosystems, and ensuring the public good is the key concern when developing, deploying, and maintaining NFTs.

2. There are few use cases where another technology couldn't be used to implement the same experience for users.

● NFT value claims are often hypothetical and frequently based on fictional projections in order to drive sales that serve to inflate the value of the NFT, the NFT collection and/or the underlying cryptocurrency.

● Most of NFT utility claims are already feasible with existing technology; one of the key challenges to NFTs currently is the lack of use cases that are only possible or are improved in implementation using NFT technology rather than using already-existing methods. There could well be some utility to NFTs that help prevent fraudulent asset transfer (e.g. concert tickets or similar), but as of writing, these use cases are still future promises rather than current reality, and require significant infrastructure and buy-in for them to displace existing methods for fraud prevention.

3. Therefore, there are significant ethical concerns around implementation of NFTs and these should not be implemented unless concerns addressed or mitigated.

● Developing a responsible, ethical approach to the NFTs requires the flexibility to not engage in development of an NFT-based project should it become impossible to find a way to solve or mitigate the ethical responsibility. Reflection at too late a stage will likely lead to financial or momentum pressure on continuing with the project. Therefore, this should be an initial step and engage with a wide variety of stakeholders in order to ensure that pre-existing biases can be exposed and mitigated along the way.

● I make the following recommendations for the use of NFTs:

If NFTs must be used, and there is no other technical way to deliver the desired experience, avoid public blockchains that rely on environmentally destructive methods for validations
If NFTs must be used, have a plan for long-term support of any NFTs, whether aesthetic or functional, and/or have a way for players to exit ownership gracefully in a fair and equitable way.
If NFTs must be used, have a plan in place for potential for regulation of this space. We are already seeing NFTs being regarded as investment securities and other financial assets that are more heavily regulated than traditional collectibles. Be realistic, open, and transparent about the potential for returns on investment, and respect the spirit of regulation and existing laws as well as their word.
If NFTs must be used, ensure that smart contracts and platforms are developed to an extremely high quality, and have test spaces that allow for appropriate testing (whether this is possible may be a stopping point for the project). Be realistic and transparent with potential users with roadmap deliverables and timelines and consult with experts in milestones prior to planning
If making a NFT game or application that is advertised as “play to earn” or “play and earn”, ensure that the most vulnerable players are not exploited by other players, that they are protected from fraud, hacks, and volatility of the underlying cryptocurrency, and that any other potential risks are appropriately consented to (and not just disclosed). Similarly, if your platform requires some kind of “buy in” to engage with it, ensure that those who might be left out have some other means of entry that does not involve them being exploited
Be wary of storing personal, confidential, and other sensitive data on a public blockchain, even if encrypted. Consider the worst-case scenario if that encryption were to be broken or keys stolen, and whether that data may need to be updated or deleted (and not just appended to) in the future. Also be wary of “link rot” for hyperlinks stored in NFTs, of the potential impact of poor smart contract programming, and of the potential of your NFT project to be used for harassment purposes or illegal material.
Consider the risks to your company of engaging with the NFT space: alienation of the user and developer base, changing what it means to engage in your company's product – e.g. for playing games, removing the “fun” aspect, especially for vulnerable people, or turning it into a vector for exploitation by those with capital, potential for hacking and fraud, and other risk factors such as IP rights, regulation of crypto-assets, etc.

References

● Flick, C. (2022) A critical professional ethical analysis of Non-Fungible Tokens (NFTs), Journal of Responsible Technology, Volume 12, December 2022. doi: https://doi.org/10.1016/j.jrt.2022.100054

● ACM Code of Ethics and Professional Practice: https://ethics.acm.org

● My publications: https://scholar.google.com/citations?user=vB3wHkRNMgQJ&hl=en

● Media appearances: https://blog.liedra.net/2021-2022-media-appearances

Dr. Catherine Flick

Reader in Computing and Social Responsibility

De Montfort University, UK