Scarcity, ownership, and the inexorable rise of NFTs
In 2021, I didn't care about NFTs.
As the year went on, it felt harder and harder to avoid learning what they were, or forming some sort of opinion on them. I lumped them in with banana duct tape, something partway between art, concept, finance, and troll: funny and curious but mostly irrelevant. But as a Very Online person, I kept absorbing more knowledge and others' opinions by osmosis.
At the end of the year, my (now former) employer, Kickstarter, announced that it was planning to fund a new blockchain protocol and integrate it with Kickstarter.com.
To say that the announcement went poorly is a dramatic understatement. Literally overnight, I had to learn about blockchain, NFTs, Web3, and more, because I managed the creator outreach team, aka the folks with some of the most public-facing roles at the company. Not only did I have to learn about these things, but I had to understand all of it well enough to be able to talk about it with creative people I respected and cared about, whose livelihoods were at least partly dependent on Kickstarter as a platform continuing to exist, and work.
[A quick note: by the time I left the company in late February 2022, Kickstarter had shared no plans to get involved in NFTs, though many in the creator community was vocally fearful and furious that it would.]
So over the past four months, I've done a lot of reading and had a lot of conversations about blockchain and NFTs, and how either one could potentially be useful for art. Before diving too much into my thoughts on that, first:
What even is an NFT?
Wikipedia has done quite a good job defining them: "A non-fungible token (NFT) is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded. Types of NFT data units may be associated with digital files such as photos, videos, and audio. Because each token is uniquely identifiable, NFTs differ from blockchain cryptocurrencies, such as Bitcoin.
"NFT ledgers claim to provide a public certificate of authenticity or proof of ownership, but the legal rights conveyed by an NFT can be uncertain. NFTs do not restrict the sharing or copying of the underlying digital files, do not necessarily convey the copyright of the digital files, and do not prevent the creation of NFTs with identical associated files.
"NFTs have been used as a speculative asset, and they have drawn increasing criticism for the energy cost and carbon footprint associated with validating blockchain transactions as well as their frequent use in art scams. The NFT market has been compared to a Ponzi scheme."
Thanks, Wikipedia! My high school teachers just felt the hair on the back of their necks rise as I cited Wikipedia as a source.
OK but really, what is an NFT?
What Wikipedia mentions but I'd like to emphasize is that buying an NFT does not buy you the art in question, nor the right to do what you will with it. It's like walking into a bookstore, choosing a book that looks interesting, paying for a copy, and then leaving with only the receipt, proud of your brand new Book NFT, while the book itself remains in the store and anyone who wants to can come in and perfectly replicate and take a copy of the real thing for free. Yes, you do own....something. But the thing you own isn't the art.
I've heard arguments that NFTs enable artists to create scarcity for digital works. This (artificially created) scarcity will allow a piece of art to have or increase in monetary value. Conceptually I understand this argument, but I do not agree with it.
Are NFTs valuable? Is art?
NFTs do not inherently have value to people. Paying for a directory listing that says you paid for a piece of digital art is...kinda silly to me.
If a famous author hand-writes a masterpiece and binds it in leather, and there is only one copy, someone would likely pay quite a lot of money for it. To me, there are two reasons to pay money for that leather-bound book: the first is the enjoyment and pleasure that one would feel from having the book, reading it, and interacting with it. Even if many paperback copies of the text are produced and sold, the original will have inherent value to many people because it is beautiful.
The second reason someone might pay money for this unique object is because there is only one, and the value is likely to increase over time as the author gets more famous or one day passes away. It has value as a financial asset.
The latter could be true of an NFT, but the former is not. The only pleasure provided by NFTs is a speculative, acquisitive pleasure.
Artificial scarcity creating "value"
I also disagree with the premise that creating artificial scarcity for digital works is a good thing. One of the biggest benefits of digital books and artwork, in my view as a writer and publisher, is that they can be accessed and enjoyed widely.
People talk about how NFTs allow artists or writers to get paid, but there are many substantially less complex structures that allow that. There are fairly easy-to-use digital markets to purchase ebooks or art prints and pay the authors and publishers and artists for them. Fans can also subscribe to the Patreon , send a tip via Paypal, or buy a Ko-Fi for a writer or artist they admire. And with those mechanics for compensating creators, widespread access to and enjoyment of a creator's work is a good thing for the enjoyers AND the creators, both emotionally and financially.
Money for nothing: a virtual pyramid scheme
Let's return for a moment to the concept of NFT as a speculative store of value, pretending for a moment that we both agree that that is a good thing. Because NFTs do not have any inherent value aside from as an alleged store of value, only people who agree with this concept and believe that NFTs will increase in value over time are likely to pay money for them. In general, when more people are involved in a market or an auction, the higher the price is likely to go.
“'Speculative market expansions have often been associated with popular perceptions that the future is brighter or less uncertain than it was in the past.' They also, Shiller notes, have a way of clustering around century turns—as if the prospect of going from ’99 to ’00 is so fantastic as to make all things seem possible. In the new millennium, the residents of America’s high culture thought, the Internet would change everything, making everyone who bought Internet stocks rich, no matter how much they paid. Those in the lower culture adapted that optimism to a belief in the investment potential of stuffed animals, and it’s hard to say which view was proven more wrong."
We're in a moment where stocks have risen dramatically for years. Bitcoin and other cryptocurrency prices have skyrocketed from pennies to four or five figure valuations. Interest rates were so low for so long, and the pandemic drove such demand for products, that the top corporations have increased their profits by billions of dollars. Rich people have a LOT of money sloshing around with nothing to really spend it on. People who aren't rich see other people getting rich and vow that they won't miss out next time.
So along come NFTs, which seem to tech early adopters to be the Next Big Thing, and people have begun pouring money into them. Whether in earnest or cynically, it's hard for me to say. Maybe some of each.
But as with beanie babies, tulips, NFTs, leather-bound books, or basically anything that isn't a necessity of life or a creature comfort, most things we think about as having financial value only have value because we agree that they do. It's the Tinkerbell Effect: it's true because we believe, but if we stop believing, well...
Fear and loathing in the NFT market
There aren't too many people who have done the research and are neutral about NFTs or crypto right now. There are true believers, there are people who don't understand them and still don't care, and there are people who absolutely loathe them and everything they stand for. Why is that?
Web 3, including Blockchain and NFTs, makes the argument that everything can and should be monetized. Each interaction has a value that can be measured in financial terms, each retweet or compliment or Kickstarter backing or Amazon review should help monetary value accrue to the tweeter or complimenter or backer or reviewer. The entire world could be Wall Street, and the fabric of our choices and online lives should rise or fall in financial value.
That is the terrifying promise, or ominous threat, of the new internet that Web3 folks are trying to usher in. It's so deeply transactional, so exactly the opposite of the concept of mutual aid, community, and human caring.
I want to live in a world where joy exists, where things like inspiration, creation, education, and friendship are not monetized, because their value is greater and more than money can or should contain.
Are NFTs totally pointless?
I'm remaining open to the possibility that blockchain or NFTs could eventually have some sort of value proposition that is impossible to achieve without those technologies and formats. I haven't seen it yet, but I'll keep an ear out and an open mind. I'd love to hear from you about any novel use cases, especially for writing and publishing.