The investing world is exploding with news about the latest trendy asset for everyone’s portfolio. It is called a Non-Fungible Token (NFT). The virtual commodity is not only non-fungible but also intangible. It exists only as a unit of data. However, people are paying millions of very real dollars for the surreal NFTs.
Skeptics look at NFTs as a virtual reincarnation of the Dutch tulip mania. Others have mentioned the beanie babies and dot.com crazes that fooled so many investors in the nineties. Enthusiasts insist the NFTs are the cyber wave of the future. Regardless of the perspective, the frenetic intemperance surrounding the new assets causes everyone some uneasiness about their future.
Definition of Terms
Fungibility is the key to understand the NFT. Fungibility is the capacity of a good to be readily interchanged for another of like kind. Grains, for example, can be traded in markets since one bushel of wheat is interchangeable with another, facilitating trade. This interchangeability makes them trustworthy and valuable.
A non-fungible good is characterized by its uniqueness. A work of art fits into this category. A masterpiece gains value when it is rare. However, it is valuable only as long as someone wants to buy it.
NFT Is a Unit of Data
The problem with an NFT is that it does not fit into neat categories. It is not a thing with a material presence. It is not even an intellectual right that expresses ownership of copyrights, patents, trademarks, or trade secrets. In some ways, an NFT is even fungible since it is replicable and not rare. However, there is no shortage of speculators that want to buy them.
An NFT is a unit of data recorded on a digital ledger. It uses a blockchain platform like that employed by Bitcoin or Ethereum. The unchangeable public record certifies that the digital data is unique and was sold to the buyer. However, the person buys the certification, not the data content.
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Things start looking more like “the Emperor’s new clothes” when trying to determine what exactly the buyers have bought. The content of the data file usually consists of some kind of digital “art.” However, the NFT owner does not own the copyright that the digital artist can retain. The artist can even make a contract that allows for an additional royalty payment should the NFT be resold.
The buyer’s file is fungible in the sense that it can easily be copied legally, thus allowing millions of exact copies to co-exist together with the original authenticated data file.
Thus, the buyer does not buy the art but the documented block-chained record with a unique code signaling ownership. The person ends up with little more than “digital bragging rights” to an original file that can be reproduced with the click of a mouse, albeit without authentication, by anyone on the Internet.
Minting NFTs
Just about anything digital can be “minted” into an NFT. Like most modern “art,” it need not be real art. An NFT can be pictures, GIFs, audio, music, video clips, avatars, video game skins or other pop culture representations that reflect a society in decay.
Artists try to attach some importance to the item offered by associating them with something sensational. Thus, an authenticated video clip of an iconic winning shot in a basketball game might be turned into an NFT, giving the buyer the impression of “owning” that moment. Indeed, NBA Top Shot, a clearinghouse for top basketball moments, has made over $500 million in such sales. A single LeBron James NFT sold for over $200,000.
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The actual NFTs are of little aesthetic value. Digital artist Mike Winklemann, known as “Beeple,” put together a collage of 5,000 daily drawings and called it “EVERYDAYS: The First 5000 Days.” Christie’s sold the freely available piece for a record-breaking $69.3 million.
“Nyan Cat,” a GIF of a cat with a pop-tart body, sold for nearly $600,000. Twitter co-founder Jack Dorsey sold his first tweet as an NFT for more than $2.9 million. When Merriam-Webster introduced “NFT” into the dictionary, it turned the first record of the entry into an NFT and auctioned it on OpenSea.
NFTs don’t have to be sublime. They only have to be dramatic enough to provoke a desire to own a moment, experience or absurdity.
The Frenetic Intemperance of Monetizing Everything
The most logical question to ask about NFTs is what can be done with them. Their value as art is very limited since they usually are not displayed. They cannot even be kept with the person since they reside in digital wallets rather than physical thumb drives. Their digital representations have no greater significance than any of the millions of copies that can be made.
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NFTs thrive on the frenetic intemperance of monetizing everything. Even a tiny unit of data becomes the object of drama and sensation. People stampede virtual markets to gain the appearance of owning absurd “Nyan Cats,” dramatic basketball shots or unhistoric first tweets. Without aesthetic value, NFTs rely upon resale for their worth.
Like rare tulip bulbs during the Dutch Tulip mania, buyers assume someone will want their units of data certification in the future. Such assumptions are risky in a world where nothing is certain.
Financial Postmodernism
However, the NFT boom is not just a random craze or thoughtless trend. The tokens reflect the philosophy of a society that lives amid fantasy and imagery. The NFT applies irrational postmodern thought to an investment model that is ever more removed from reality.
In the postmodern thought idealized by French philosopher Jean Baudrillard (1929-2007), postindustrial society has lost contact with the real world and is absorbed by simulacra or image representations. These simulacra become more real (hyperreal) than the things themselves. Worse yet, reality then imitates the image that now precedes and determines its course. Thus, fantasy rules over reality.
The NFT contains this bizarre postmodern notion. It recognizes that the image or experience of an event becomes more valuable than the real event or object. However, it departs from reality a step further by giving more value, not to the image but its certification. This certification determines the value of this artless “art.”
A society like this loses any distinction between reality and its representation. Everything is determined by image representations and individual validation, whether it be NFTs or “transgender” identities. Indeed, today simulacrum rules . . . and sells.
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