The NFT (non-fungible token) craze is the latest example of people embracing technology for all the wrong reasons. As with cryptocurrencies like Bitcoin, the enthusiasm is driven by a desire to trade and collect unique digital objects that have some monetary value. But despite all the hype, there are some serious questions about this new space.
The main selling point of nfts is that they make it possible to trade and sell “artworks” or other digital creations with an official proof-of-ownership certificate, stored on the blockchain. The blockchain is a database that is maintained by thousands of computers around the world, so the records cannot be forged. This makes nfts more secure and reliable than traditional digital files that could be stolen or lost.
NFTs are also supposed to bring scarcity to a world of digital abundance, much like a piece of art or a ticket to a Foo Fighters concert is more valuable than a general admission ticket. But it isn’t clear that nfts will really do this, as most of the media they link to already exists in some form somewhere else online — and it often won’t be preserved forever. Dead links, defunct servers, and incompatible legacy platforms are just some of the many reasons why digital media can disappear.
For instance, an NFT pointing to an NBA game video might only be accessible for a while, until the company that hosted it shuts down. Similarly, a screenshot might prove you watched a particular TV show, but it won’t do you any good when that show’s network decides to change its URL scheme or rebrand. To be meaningful, NFTs need to be stored in a way that will survive such occurrences. This is where the blockchain comes in, as it offers a record of ownership that is immutable, and that is maintained by a global community of computers.
Another benefit of NFTs is that they can help to decentralize the existing Internet. Right now, most people who create media on the Internet (artists, musicians, video game streamers) put their work on big platforms that get a cut of the revenue. NFTs, on the other hand, allow creators to keep a bigger chunk of their earnings.
NFTs can also be used to democratize investment by making it easier for people to purchase small shares of assets. The most famous NFT was a composite of 5,000 daily drawings, created by artist Mike Winklemann and sold at auction for $69.3 million in 2021. It would be easy to see how this model could expand to other kinds of investments, such as real estate.