We are in the midst of a new mania. A species of digital asset as unsexy-sounding as the "non-fungible token" — or the only marginally sexier "NFT" — is taking over the front pages, social media and, sadly for me, my life.
Over the past two weeks, I have been added to a WhatsApp group named "crypto NFTs"; been invited to two chats about the tokens on Clubhouse; and had three friends call and ask me to try to explain this strange new phenomenon. On top of this are the dozens of NFT-flavoured press releases thwarting my increasingly vain attempts to reach inbox zero.
Google Trends — a rough but useful metric — shows global interest in the term NFT began to surge about a month ago, with searches now exceeding those for "blockchain".
Last week, after Christie's sold a digital collage for $69.3m, we got another indicator that the tokens had gone mainstream: a segment on BBC Radio 4's flagship Today programme. And, on Monday, Elon Musk, a man who appears able to provoke a frenzied rush into any asset he mentions on Twitter, released a music video (which he also said he would sell as an NFT, though he later changed his mind) in honour of the non-fungible goodies.
So what is this new craze all about — and what explains the stratospheric prices? These supposedly unique tokens are secured using blockchain technology and are "akin to a digital certificate of authenticity", as digital artist Brendan Dawes told Today. If you believe the crypto evangelists, they are the future of art, music and asset ownership more broadly.
In reality, NFTs are just the latest way that what we might call the cryptosphere — the industry that has sprung up over the past decade around blockchain, bitcoin and other tokens — has found to make a quick buck. After the record-breaking auction of the digital sketches by the artist Beeple, it emerged that the pseudonymous buyer, MetaKovan, owns the world's biggest NFT fund and was already the biggest owner of Beeple's work. So the sale should not be thought of as representing the true market value of NFTs, but as PR expenditure.
"This is just about the pure desire to get rich that drives everything in the crypto space right now. It's another of these bubble manias," says Frances Coppola, a finance and economics commentator.
The most notable related bubble mania came in 2017, with the boom in "initial coin offerings". Like NFTs, the barriers to entry to make and sell these coins were low, meaning thousands of versions were created, pulling in billions of dollars of investment. Ultimately, however, the ICO bubble burst, with the public cottoning on to the fact that the scarcity claimed for these digital coins was undermined when so many were being flogged.
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NFTs face the same problem. Anyone can create one of the tokens, even if they did not make the asset being tokenised. That means that while the Beeple NFT was indeed created by the artist, so the buyer is able to prove they have the "original", anyone else could create an NFT of exactly the same digital collage, or of someone else's tweet, GIF or anything else on the internet. The value is not conferred by the artwork itself, but by the idea that a digital certificate of its provenance is valuable in its own right.
"What we need to understand is that what is being traded is not the artwork, it's the participation," says Edmund Schuster, an associate professor of corporate law at the London School of Economics. "And why not? People can subjectively assign value to something, and that is not something that we can really argue against, even if NFTs have no objective value whatsoever."
Schuster is right: value is in the eye of the beholder. And the NFT craze will probably stick around for a bit longer because the novelty and the hype surrounding it currently hold some value.
But that does not mean NFTs represent the future of art. We value original pieces not just because of the bragging rights they bring but because of their history, their aura, their smell, the way they feel. The emotional and visceral connection we have with the physical world cannot be replicated by digital strings of ones and zeroes.
- Financial Times