Non-Fungible Tokens are taking the world by storm, bringing together art collectors and financial speculators. Many tout NFTs as the best thing since sliced bread, at least as far as digital art is concerned. As Time.com puts it: “[I]t’s possible to truly “own” and sell digital art for the first time.”
But as much as we love digital art and want digital artists to be able to support themselves from their bewildering and captivating work, these conspicuous scare-quotes in Time’s otherwise glowing profile of NFTs are quite telling.
To understand what’s going on, we first need to unwrap a lot of technical jargon (which itself sometimes rises almost to an artform). Please note that we are focusing solely on the “owning of digital artwork” question, and will not dive into other, no less relevant, issues with NFTs here.
Let’s start with this: NFTs are blockchain-based tokens that are not interchangable (aka fungible). Bear with us, we will decipher it step by step below.
Examples of physical things that are fungible include lumps of coal or grains of sand: there is nothing special about any individual lump or grain, each is perfectly replaceable by any other lump of the same kind of coal or grain of the same type of sand. Example of non-physical items that are fungible is money: a particular dollar or euro is exactly the same as any other dollar or euro. We don’t care which ones end up on our bank account, as long as there’s enough of them.
This also holds for blockchain-based currencies like Bitcoin (we’re going to use Bitcoin as an example, but of course other cryptocurrencies would work just as well). We don’t care “which” Bitcoins we own, if we own any.
So, what’s a blockchain? Not to wander too deep into the woods, suffice to say it’s a ledger, a record of transactions that can only be added to, where trying to remove or modify anything already added to it is practically impossible, and that (at least in theory) anyone using a given blockchain-based system can verify any record anyone else added at any time.
This makes each Bitcoin in existence a fungible token on a Bitcoin blockchain – in other words, a record in a digital append-only database that is for all practical purposes interchangable with any other entry in that same digital database (provided that amounts match). On the other hand, NFTs are non-interchangable records in digital append-only databases – akin to how one physical painting is not interchangable with another.
Banks each have their own databases showing transactions and account standing for their customers; similarly, there are many different blockchains. Some are used for cryptocurrencies like Bitcoin. Others, like Ethereum, are used for more funky things – including NFTs. In fact, anyone can create their own blockchain and start adding, fungible and non-fungible, records on it.
“But wait”, you might ask like the savvy reader you are, “if there are many different ‘databases’ of NFTs, and if anyone can create their own, which ones are ‘real’?” That’s a big part of the problem with NFTs: there is no good answer to that question. It’s what people agree on – either due to a given artist choosing to use a particular flavour of NFTs to “sell” their digital artwork, or due to large art auction houses deciding to use them, or because there are more people familiar with a given blockchain-based system. Or some combination of these and other reasons.
Yes, that means that there can be NFTs for the same artwork on different blockchains, often without artwork’s author’s knowledge or consent. It also means that whatever NFTs you “own” can quickly become worthless (regardless of the worth of the artwork itself) if the interest moves to a different NFT system.
And to make matters worse, depending on how exactly the information about the artwork is recorded on the token, it’s possible for that information to become useless, or to point to a completely different artwork – or a
404 Not Found error. There is also no recourse available in such a case, as the information recorded on the NFT is immutable.
So what are you actually buying when you buy an NFT for a digital artwork? An entry in an append-only database, which one way or another references that digital artwork. No guarantees are made if that reference is enough to effectively identify that artwork for years to come, nor if the artist had anything to do with at all, and it remains unclear what (if at any) copyright implications NFTs have. “The most generous reading of what an NFT can bring its ‘owner’ is that it potentially may provide proof of the existence of a certain digital file at a certain time. However, even this tangential use case has yet to play out in the courts,” notes Walter van Holst, an experienced IT lawyer.
All of this is to say that this is nowhere near what anyone would usually understand “owning something” to mean.
Non-fungible tokens are an interesting technology that can be used by digital artists to create new revenue streams. But claiming that they let anyone actually own digital artworks is at best naïveté or disingenuous hype (and we’d rather not consider the worst).
“For me it seems as ridiculous as street-art museums,” says digital artist Natalia Vish.