NFT art will lead to something bigger
NFTs (“non-fungible tokens”) are all the rage this year. In case you missed it, NFTs work the exact same way as cryptocurrency does—except instead of the blockchain storing the relationships between currency tokens and wallets, the blockchain is instead used to store and verify ownership of arbitrary blocks of data. This enables, for instance, an artist to digitally sign a copy of a piece of artwork they’ve created and then sell the “original” file to a buyer in a very similar fashion to traditional, physical art. While art is probably the most (in?)famous example of NFTs in use right now, they’re also being experimented with by the gaming industry (as a monetization model) and the events industry (to verify ownership of, say, backstage passes).
Frankly, the use of NFTs to sell digital art seems like a fad that will die out. Fundamentally, ownership of digital media isn’t a real thing—because digital media is fundamentally fungible. If an artist creates an NFT of their artwork and sells it for a million dollars, there’s absolutely nothing preventing them from minting another one hundred NFTs of the same artwork and selling them which would destroy the value of the original NFT. Doing such a thing with physical media is impossible, because while there are indeed photographs, imitations, and scans of the Mona Lisa available, there’s only one version of the Mona Lisa that was painted by Da Vinci and even if there were other ones available each one would be subtly different. Until 3D printing gets massively better than it currently is, that’s not going to change.
Furthermore, I’m not convinced that people even believe in the concept of owning digital media. Have you ever tabbed out to your desktop and felt happy that you “own” your wallpaper image? When you download a video off the Internet do you think to yourself how glad you are that you now “own” that video? Have you ever worried about whether you truly own your operating system—as in, your particular copy of that operating system? Do you know anybody who has? Maybe I lack imagination, but I honestly can’t see this changing.
What NFT art has achieved, however, is to get attention. NFTs of cartoon apes selling for upwards of US$20m seems crazy, and people are clicking on those headlines and becoming acquainted with the technology. This, I think, is a good thing—because while a lot of people have restricted NFTs to art and pieces of digital media, they actually probably do work really well with assets that you actually do own. Way back when before everything became digitized, stock was issued via physical certificates which made transferring ownership of that stock trivial—all you had to do was find a buyer, and exchange the goods. These days it’s a lot more complicated as transferring stock from one brokerage to another is nowhere near as straightforward (if it’s even possible to do to begin with).
NFTs can solve this, as now your stock is just a bunch of crypto tokens you can move at will by leveraging the infrastructure of the blockchain. Video games are another great example—sure, you can buy digital games off of Steam, but you aren’t able to sell or loan those games to someone else like you used to be able to when you used to buy game disks. If you were able to instead purchase video games in NFT form, then all of a sudden you once again truly own your copy of that video game and can do whatever you want with it rather than being constrained by Steam.
It’s a mistake to get swept up by the NFT art hype; but it’s also a mistake to write off the technology entirely. I’m excited to see which industry gets disrupted first.