NFTs & The Illusion of Value

Photo by Markus Spiske on

If you haven’t heard, the CEO of Twitter is selling the first ever published tweet. The price someone is willing to pay? $2.5 million. That’s seven figures of cash, all for a message that reads: “just setting up my twttr”.

The reason people might be willing to pay that much money is because the tweet is getting sold as a non-fungible token (“NFT”). The BBC explains that NFTs are “unique digital tokens.” They’re created using blockchain, the same system more famously used with cryptocurrency. By using blockchain and certificates of ownership (as well as some other stuff explained in the linked articles), sellers are able to tag certain digital files as being unique.

Hence the label, “non-fungible.” Fungibility, in an economic sense, is how interchangeable something is. I can buy a postcard with a picture of the Mona Lisa on it. It doesn’t matter which postcard I use, because they’re all sold at the same price. Compare this to the actual Mona Lisa, which I’m told is worth more money than the image on the postcard. Yes, the postcard will look like the painting, but there’s only one painting.

This raises some interesting issues.

The BBC and Creativebloq articles raise the issue of environmental damage that creating these tokens causes. Blockchain isn’t easy to make – part of the reason why a purchaser can be sure forgeries and duplicates can’t exist. Ethereum, the company that forges the digital blockchain for NFTs, uses an amount of energy comparable to the countries of Libya or Ireland.

But carbon footprint isn’t the only controversy here. YouTuber Jim Sterling points out in a recent video that NFTs are, for all intents and purposes, worthless. This is because the token is a digital copy and not the actual rights to artwork. So, the difference between an NFT of the Mona Lisa and the Mona Lisa is that rights to the latter transfer when the painting is sold. For the NFT, there’s no rights to the underlying artwork.

This raises intellectual property issues. Consider this artwork I created for my book:

Yeah, I’m the next stick figure Rembrandt.

Say I sold a license for it to Bob, who uses it in his videogame, “DURGALON: NAKED PROPHET.” The legal significance is that Bob doesn’t have rights to my sublime and evocative artwork. He’s got the ability to put it in his videogame. But Bob is a greedy piece of shit, and he wants to make more cash than the videogame earns him.

So, Bob takes the file in his videogame with my artwork on it and turns it into an NFT. He sells that NFT at auction for $80 million. Bob’s just made a ton of money, and he says he doesn’t have to give me a dime. Because he was selling part of his videogame, not the amazing artwork that took me days to draw on Microsoft Paint.

If you’re confused or maybe have a headache, you’re not alone. Property law is confusing at the best of times. But at its core, Bob basically took something that didn’t belong to him, changed it, and then sold that changed thing as his own. At the outset, one consequence of Bob getting away with it is that artists won’t be able to sell their work to digital developers, as it would open them to all kinds of digital theft.

But the biggest issue? Having more money than sense.

I don’t want to dislike the hyper-wealthy, but this kind of thing makes it hard. Wealthy people can’t find the cash to pay taxes, but they can splurge on one jackass’s first tweet. One could argue that the bid of $2.5 million isn’t even for that first tweet, but the blockchain copy of that tweet. It’s bragging rights, no different than selling the postcard of the Mona Lisa as the original copy of the Mona Lisa.

Underlying all of this are the issues of what happens when wealthy people wake up and decide they don’t want to pay that much cash for a bunch of ones and zeroes. Who’s going to bail them out and give them their money back? They can’t make it all back by selling more NFTs to smaller buyers too stupid to realize what’s going on. If everyone is lucky, wealthy people will just increase prices on stuff everyone needs to make up what they lost.

In the meantime, we can watch people spend obscene amounts of money for literally nothing.