Earlier this month a Non-Fungible Token was sold for the record breaking price of $69 million. The NFT represented a digital artwork named Everydays: the First 5000 Days. I feel a bit silly stating the obvious- this is all total BS- but apparently it needs to be stated, cause people spending money on NFTs or giving positive coverage to their bubble clearly disagree.
What exactly happened?
A digital artist named Mike Winkelmann, who goes by the name Beeple, is very prolific and has a large social media following. In December 2020 he sold an NFT representing one of his works for $3.5 million. Then in February he sold another work for $6.6 million. Then on March 11th, he sold a collage of his first 5000 works for $69 million, making it the most expensive NFT ever sold by far. The NFT represented a jpeg file, and was bought using the cryptocurrency Ether by Vignesh Sundaresan.
What are NFTs?
All transactions made with cryptocurrency are recorded on a highly secure ledger known as a blockchain. Most transaction consist of transferring cryptocurrency. Any bitcoin (or ether, as was used in this transaction) is interchangeable and indistinguishable from another, just as dollars are more or less identical* and interchangeable. This is to say they are fungible. Alternatively, a specific section of the blockchain may have some unique information encoded to it, and be sold as a discreet, unique product. Such a section, or “token”, is not fungible, and is thus known as a Non-Fungible Token.
*Technically a physical unit of currency may have a unique serial number, such as a dollar bill, but they don’t need to and many don’t, such as coins. And in any case the vast majority of conventional currency has no physical form and exists only digitally- 92% of currency to be specific.
Why NFTs are bulls***
Making a Non-Fungible Token is simple- anyone can make one using a service that allows you to do just that. By making one, the idea is that anything can be added to the blockchain. This is part of the collective madness that is contributing to the mania over NFTs- the idea that anything and everything can be added to the blockchain conjures images of the laser from Tron, digitizing physical objects and uploading them to cyberspace in some kind of mind bending cyberpunk magic. The reality is that it’s more akin to creating a facebook profile. The NFT is just a representation of the item being sold. Selling digital items contributes to the confusion about the wizardry going on- the fact that the product is a digital item that exists only on a server and not in meatspace makes it especially easy to believe that the item is actually on the blockchain. But in reality the vast majority of NFTs are simply links to wherever that digital item is stored. If the perception of an item existing “on the blockchain” is the massive head of the Wizard of Oz floating before Dorthy and her associates, the server is the ordinary booth from which the actual “wizard” is being projected.
And even if something is encoded into the blockchain itself rather than just a string that represents the item, it still doesn’t actually change any of these problems, least of all how much some of these assets defeat the very concept of buying something at all. Philosophically, ownership grants exclusive use or control of something. When something can’t actually be used in any way, it defies the very concept of ownership. Combined with something not having a physical presence that can be possessed, it all seems like a ridiculous stunt. To be clear, abstractions can be possessed, used, and consequently be very valueable. Just look at software, or shares in a company, or currency itself. But that’s certainly not the case for Jack Dorsey’s first tweet, which sold (or more accurately an NFT declared to represent the tweet sold) for $2.9 million. In what sense does the buyer of that tweet possess it more than I do? Also, how will the tweet exist when sooner or later Twitter ceases to exist? You can have an image of the tweet, but that’s not the tweet itself. Then again, neither is the NFT that represents it.
And this is just the scamminess and impossible hype that exists with NFTs before you add in the baseline scamminess of the fine art world. The value of fine art is well documented to be arbitrary and highly inflated, and is often used for money laundering and tax evasion. For more information, Adam Ruins Everything has a good video about this.
Even by the standards of the NFT world, the use of a cryptocurrency to buy Everydays: the First 5000 Days was just a stunt. The point of using cryptocurrency for such transactions is circumvent large institutions that can serve as gatekeepers of an industry and to make transactions instantly. In the case of Everydays: the First 5000 Days, it was sold at the worlds most famous auction house, Christie’s, and the transaction didn’t appear on the blockchain for 36 hours after the sale. So there was no point in using cryptocurrency at all. Then again, Christie’s also could have been entirely removed from the equation- there’s no art at the auction because it’s digital, there are no people because it was conducted online, there’s no money because it’s also a digital abstraction, and possibly there was no sale since since some have claimed the artwork was sold in advance and the auction was staged.
So an auction occurred in which money with no physical form and dubious value was exchanged for an NFT with no physical form and dubious value, which in turn represents an artwork with no physical form and dubious value. This ostensibly occurred at Christie’s, but more accurately occurred online, and possibly did not really occur at all. The absurdity of it all makes one’s head spin with confusion, but it’s that very confusion that fuels the perception among some that this stuff really has value. Like looking at a fine set of clothes so magnificent that they can’t be seen or touched, we’re told that the fact you can’t see the value of these magical assets is proof that you’re a fool, not evidence that it doesn’t exist. But then again, what do I know? I’m too stupid to see the emperor’s marvelous new clothes.