What will you hear if you stop someone on the street and ask them what non-fungible tokens (NFT) are all about? Something about exorbitant fees for monkey drawings and maybe Twitter profile images. Mumbling incoherently about cryptocurrencies. Several celebrities name. The phrase “bubble.”
In summary, this is a story about frivolity, bling, and unreasonable excitement. Which isn’t entirely incorrect.
However, NFTs can and will be much more. They already do if you dig under the surface.
As the market value and popularity of NFTs have plummeted, many are doubting their viability as a technology and a cultural movement. Were these merely speculative assets destined to vanish as the NFT-market matured? After all, what use do NFTs serve?
Today, though, utility isn’t exactly the objective of aesthetic or collectible NFTs. After all, it’s not the standard by which we judge the importance of tangible works of art by Rembrandt or Damien Hirst, musical works by Mozart or The Beatles, or luxury items like Fabergé eggs or Birkin bags. Although most NFT artists aren’t Rembrandt, at least one is Damien Hirst.
Another major method to consider NFTs is as a new medium for creating art and collectibles. Throughout the ages, technical advances ranging from oil paints to the electric guitar to photography have irreversibly altered the way works of art are created and displayed.
NFTs are a part of this lengthy history. A thriving community is exploring its creative possibilities through machine learning-generated art, art that alters as its surroundings changes, community-driven artistic output, and much more.
Furthermore, NFTs may and will increasingly have usefulness. NFTs, for example, can assist in addressing significant difficulties in conventional art markets. Provenance and royalty payments are two examples.
Former Metropolitan Museum of Art director Thomas Hoving believed that around 40% of the pieces he studied, including many in the museum itself, were forgeries, forgeries, or misattributions. While many people challenge this statistic – and even the classification of fakes – it is evident that there are issues in conventional art markets.
Many of these issues are related to genealogy, or the history of an artwork’s creation and subsequent ownership. Provenance is important in determining the validity and worth of a work of art. Where it is inadequate, unpleasant discoveries might occur, such as Steven Spielberg discovering that he had a stolen Norman Rockwell artwork or the Getty Museum spending $10 million for a disputed ancient Greek statue.
Lineage is recorded immutably on a blockchain with NFTs. Ownership – at least as indicated by blockchain addresses – is publicly available and immune to fabrication. Strong provenance can assist solve a handful of other prevalent issues in art markets, such as money laundering, by making bids and identities clear.
There are several accounts of artists who died impoverished before becoming renowned, such as Vincent van Gogh. These anecdotes serve as a reminder of how frequently artists fall short in art markets. It is notable that they do not typically get royalties for sales of their works in secondary marketplaces in the United States, despite the practice being widespread abroad. The artist Robert Rauschenberg was famously present at the Sotheby’s auction where his painting “Thaw” was sold for $85,000 by a collector who had purchased it from the artist for $900. “I’ve been slaving my a$$ off only for you to earn that profit,” Rauschenberg shouted at the collector.
NFTs enable automated enforcement of royalty payments (although some poor technical choices have created loopholes). Perhaps more crucially, artists can in theory decide the conditions of future sales of their works. For example, an artist may determine that she does not want her NFT to ever sell for greater than $1,000. Or she may decide she wishes to exercise a right similar to France’s droit d’auteur, which gives artists some continuous control over their creations after they are sold. They can even ruin them in rare situations.
While some purchasers may object to the level of control exercised by NFT developers, the openness of blockchain technology allows all parties to make an educated decision.
Issues and potential alternatives
Today’s NFT marketplaces are riddled with issues. Unauthorized copying is widespread. Wash trading, or artificially produced trade volume, is also prohibited. It is difficult to prevent the degradation of tangible works of art, such as sharks in formaldehyde. In digital form, NFTs present the same issue. The archival integrity of the NFT ecosystem might be a ticking time bomb, as many NFTs have information saved with commercial cloud services that could evaporate if payment falls behind.
Another major issue is the invasion of bots. NFTs are frequently sold in drops, which are collections of thousands of NFTs offered for sale all at once. When a popular drop occurs, schemers will frequently utilize bots to buy NFTs and resale them at a profit Enforcing a reasonable limit on per-customer purchases has proven difficult.
Fortunately, blockchain systems are growing in such a manner that people will be able to confirm facts about themselves and exhibit distinct identities while maintaining their anonymity. My Cornell Tech group, for example, raffled off an NFT built by a digital artist. We designed the raffle such that individual participants could only get one raffle ticket (for free) by confirming their Social Security number to us using privacy-protecting Oracle technology.
The blockchain community is collaborating on a broad idea known as decentralized identification. This is essentially a user-controlled credential system that protects privacy. Consider having a digital copy of your driver’s license that you may offer selectively online, such as demonstrating your California residency but concealing your birthday A decentralized identification system will allow NFT markets to impose purchasing limitations and much more. For example, one NFT artist has told my group that he’d like to be able to automatically provide discounts to fellow artists. There is now no viable method to do so, but with a decentralized identification system that certifies artists, such a thing will be conceivable.
A solid identity system can also assist guarantee that customers acquire NFTs from authentic inventors rather than impersonators.
Finally, NFT markets can incorporate a “policy engine” that allows producers to define the lifetime of their works in a wide range of ways. They have the authority to establish the terms of selling and resale. They have the ability to make their NFTs dynamic. They can provide discounts and incentives to fans. They may create devotees in the realm of NFTs, much as galleries strive to do in traditional art markets. Perhaps a policy engine can solve issues such as the “speculative pricing and investing attitude” that drove Microsoft (MSFT)-owned video game Minecraft to prohibit NFTs earlier this year.
Aside from digital art
The human race is migrating online, engaged in digital material and visual experiences known colloquially as the metaverse. Physical things are being abandoned by young adults. A lot of engineers predict that NFTs may eventually be used to represent things in the metaverse, such as land parcels and magical swords.
They will mold our experiences in the metaverse, whatever shape it eventually takes. It’s no surprise that Facebook, which recently called itself Meta (META) in honor of the metaverse’s birth, has just integrated NFTs into Instagram.
NFTs have several more uses, including the depiction of real-world items. An apartment was sold as an NFT, which might be a sign of the future real-estate market. They are used or issued by mainstream firms such as Nike (NKE), TIME Magazine, and Tiffany & Co. (TIF), and they also provide a vehicle for a far more profoundly immersive system of event ticketing.
Make no doubt about it. Despite their promise, NFTs are not a perfect force for good. Nobody should act as an apologist for the excesses they’ve encouraged, such as fraudulent sales in some bitcoin exchanges, as well as new crimes such artist identity theft For these reasons, technology solutions like those discussed here, as well as community-based consumer protection measures, will be critical.
In any case, NFTs will continue to advance in strong and fascinating ways. Whether you like it or not, they – or something akin to them – are a cultural force that is here to stay.