There’s a pretty good chance you hadn’t heard the words “NFT”, “Beeple” and “Crypto Art” before 2021 began. I hadn’t. So when a digital artwork by the artist Beeple sold for the equivalent of $69 million about a month ago, it really set off my bullshit alarm bells and I couldn’t help but go down the rabbit hole of NFTs to try and understand what they were. Here’s what I found.
Many of you may be familiar with cryptocurrency but, for those who aren’t, it’s a form of digital currency where, among other things, everyone’s holdings and transactions are logged on a distributed digital ledger known as the blockchain.
Think of a traditional ledger or account book, or even an excel sheet, where accounts and transactions are entered in a single place. A blockchain is a distributed version of it, where the whole ledger is hosted across a vast network of systems and everyone can see and verify the transactions being recorded in the ledger. To give a crude analogy, think of it as what Wikipedia is to traditional encyclopedias.
NFTs, or non-fungible tokens, use this same blockchain technology to sell “tokens” of ownership to buyers, over digital artworks. To draw a personal analogy here, I’m a photographer and sell prints of my photos. Usually I do a limited run of prints, for each image, and I sign and number each of these prints, so that the person buying the print knows that they are buying one of a scarce number of printed manifestations of the artwork that I have created.
Now, of course, I could simply claim to be printing only a limited number while actually printing as many as I want and my buyers would be none the wiser. They have to trust me, my numbering and my signature. An NFT is a digital version of the print that I create, except that its uniqueness and scarcity are verified by the fact that it is logged on a blockchain. So they don’t have to trust the artist, the system itself verifies this aspect.
People who buy my prints, however, do get a nice physical copy of the photo that they can hold in their hands, and put in a frame and show off on their wall, if they so wish. So what do people who buy NFTs get? This is where things get murky. Apart from this token, and a digital copy of the artwork (in jpeg, or whatever format it’s created in), the buyer really gets nothing much. What they mainly get is the fact that they are its owner. This fact is unique, it’s verifiable, it’s show-off-able, it can be sold to someone else, but that’s really about the size of it.
Many wrongly assume that buying the NFT gets the buyer some rights to the artwork, but this is false. Much like the people who buy prints of my photographs, all they get is ownership of that specific manifestation of the artwork – the token and not any further rights to it. The creator of the artwork can still sell other manifestations of that artwork, or adapt the artwork and so on. The buyer’s right is limited to displaying and further selling…