If the phrase "non-fungible token" doesn't make you burst out laughing, I question whether you are fully human. Fungible! It sounds like a naughty double entendre that James Joyce might have thought up late one night and slipped into Finnegans Wake.
But the news that a digital artwork that is also a non-fungible token (or NFT) was sold earlier this month by the venerable Christie’s art auction house for more than $69 million (€58 million) is definitely more Flann O’Brien territory.
A multi-million dollar artwork that doesn’t actually exist except as virtual files, algorithmically stored forever in original form in the also-virtual blockchain ledger associated with a virtual currency called, wait for it, ethereum (oh, if only they’d called it omnium). And even though someone paid all those millions for it, someone could simply view the work online, or even download the files and possess a copy, for free.
It’s all so perfectly Third Policeman that it seems fair to harbour at least a tiny desire for the artwork to be stolen, in the hope that Sergeant Pluck and Policeman MacCruiskeen will be assigned to the investigation. Although the whole point of a blockchain is that nothing can be stolen from it, as it endures forever.
Absurd
If this all seems as absurd and confusing as a Flannesque world in which eternity is just down an Irish country lane and accessed by a lift, then join most of the rest of the world, which boggled at the sale and struggled to understand why anyone would pay such an outlandish amount for something simultaneously unique yet intangible, owned but not concretely possessed.
I struggled to get my head around the concept of NFTs until I realised I’d written about them a few times years ago, but in another blockchain context, and without that term attached. NFTs are not limited to costly art. They can be any form of digital content, and I’d described proposals to use the blockchain for permanently preserving important documents.
"No need for paper title deeds, which can be lost or forged, when a property transfer is permanently recorded in a blockchain. Little space for fraud when a fund transfer is captured in a blockchain. No question of whether a piece of machinery was properly maintained when service records are fixed in a blockchain," I wrote back in 2017. All these more mundane industry uses involve saving documents or records as tamper-proof NFTs.
Art as NFT is really about creating a multifaceted ownership document, the equivalent of the artist’s signature on a work, a sales receipt, and a record and guarantee of provenance (all owners of a work, and the amounts they paid as the work changes hands, is recorded in the blockchain ledger). But you can buy all sorts of digital content as an NFT, even a tweet, as happened this week when Twitter founder and CEO Jack Dorsey’s first tweet sold in NFT form for $2.9 million (€2.4 million).
Still baffled? Maybe consider NFTs this way: we watch streaming films without owning them outright. We get that film studios own the valuable rights to something that is essentially “just” digital files. NFTs are one way to copperfasten ownership and rights.
The growing market for NFTs are a boon for digital artists, most of whom sell work for considerably less that $69 million – you can pick something up on NFT art auction sites for as little as €10 or €20. But the recent big-price sales probably point to something else.
Cryptocurrency stockpile
Right now, there's mega-speculation going on in tech and finance circles around digital currencies, which are needed to buy NFTs, with the value of some cryptocurrencies exploding by 500 per cent just in the past lockdown year. A hyping effort by Elon Musk (surprise!) surely is one element (and guess what features all over NFT auction sites? "Many, many portraits of Elon Musk," says CNN).
As novelist and New Scientist columnist Annalee Newitz writes, "[M]any of the big NFT sales feel like capitalist stunts, a new flavour of the get-rich-quick schemes associated with cryptocurrencies."
Then there’s the fact that there still aren’t a lot of things you can buy with your cryptocurrency stockpile. Some of those who got in early for very little, now have millions in the virtual currency to spend. Ethereum has gone up in value by a staggering 1,355 per cent since 2019. So for an early ethereum investor, a $69 million artwork would actually be more of a less headline-grabbing $50,000-ish investment.
It makes sense for cryptocurrency investors to diversify some of their virtual cash assets into something like NFTs, which may be why the NFT market apparently quadrupled in 2020, according to one report (mailer.nonfungible.com/subscription/dSOnF3a1N). But Newitz notes that collecting stuff is a very human drive, and NFTs in various forms are forming a growing collectibles market.
I suspect the overhyped big-tag auction items will disappear after a time. But the NFT market and cryptocurrencies will become new norms in at least some aspects of digital life.
