Derek Thompson: The GameStop story you think you know is wrong
Yet the presumption that NFT buyers are being ripped off misses an important paradox of certain digital goods: The less of a link they have to tangible, non-internet stores of value, the higher the price they might command. NFTs’ abstraction, their seemingly arbitrary valuation, and even the paltriness of the privileges they convey to their owners are, for now, big selling points, especially to buyers purchasing directly from artists. People have complex reasons for buying things, and NFTs are no exception.
In the long history of technology and finance, new and complicated phenomena have frequently led to large sums of money rapidly changing hands. In fact, many markets depend on this dynamic, especially in arcane realms even more disconnected from real-world referents than NFTs are. During the 2008 financial crisis, another three-letter acronym—CDOs, for collateralized debt obligations—collapsed as curiously as they came about, giving rise to the 2008 financial crisis. The complexity that makes them so sketchy in the eyes of regulators and financial commentators appealed to certain investors.
Some artists and other content creators have described the NFT craze as a blessing. They’re selling comic books, music albums, digital artwork, tweets, basketball videos, and even farts, in many cases for large sums of money, on a “blockchain,” a collectively generated, public, distributed ledger that undergirds cryptocurrencies such as bitcoin and Ethereum. Some artists, such as the Canadian DJ deadmau5, are cashing in even as they declare skepticism. After acknowledging that he’d made a “low effort NFT,” deadmau5 told his Instagram followers that “artists are happy to have finally found a way to fuck people over harder than any major label ever could.”
In the narrowest version of an NFT, its first buyer is getting three things: the warm feeling that may accompany financing an artist; the pride that comes with claiming a relationship to a digital artifact and its creator; and perhaps most tangibly, an asset that can be traded at a later date. The buyer is not, however, acquiring anything that they alone can use. In the physical world, if you purchase a candy bar, you can’t give someone a piece of it without losing a few bites of your own. That makes your freedom to take a bite valuable, because the bar has only so much chocolate.
By contrast, an NFT buyer is not purchasing a work, but rather a publicly available token that links to a work. For example, for a digital picture, the token may be a unique number and a link to a copy of the picture, hosted on a service such as IPFS. The token itself is visible to all, as is the work to which it points, so anyone else can look at the work and download it. And most NFT transactions don’t purport to convey copyright or other intellectual-property interests regarding the work in question, so owning an NFT tied to an animation of, say, a flying Pop-Tart cat doesn’t put you in a position to use that animation any differently than someone who hadn’t bought it. You have only a token that is hosted publicly online, “registered” as assigned to your digital wallet rather than someone else’s. If you orchestrate your wallet through an app, the app might present you with a handsome visual trophy case listing the NFTs that you’ve purchased. (As you can see, we’re having to reach to describe unique value.)