NFT Art Is All About the Hype
(Bloomberg Opinion) -- A publicly available 10-second video clip for $6.6 million and another digital work by the same artist — similarly impossible to take out of free circulation — about to sell for millions of dollars at Christie’s? A clip of a LeBron James slam dunk for $200,000? If you can’t believe it, OK boomer. The Non-Fungible Token (NFT) phenomenon is for real.
But let’s be clear here: The multimillion-dollar hype around it isn’t necessarily revolutionizing art, the collectibles industry or the concept of property. More likely, a specific community whose members have amassed fortunes thanks to cryptocurrency windfalls (or those who are trying to get in on the game) is spending some of this wealth to advertise the blockchain technology so that the money rain never stops. And certain NFT applications are, indeed, worth attention, even if those applications aren’t necessarily the ones in the news these days.
An NFT’s meaning is the registration of a digital object’s “ownership” on a blockchain. The token is “non-fungible” because it represents a unique object and is itself unique. It makes the most traditional sense in the digital gaming world, where characters and other properties can’t be used by those who haven’t bought them, and where money can be made, for example, by owning a virtual race track for which race participants pay “rent.” Not surprisingly, the biggest NFT market is in such game-related items.
When it comes to a digital collage or a memorable sports moment, the sale and purchase of an NFT involving it don’t prevent the object from being viewed or shared freely by non-owners. Think of it as a geeky implementation of bragging rights or a way to channel financial support from fans to artists (or athletes, or anyone doing anything admirable from the fans’ point of view).
You could also see it as a new concept of property, which communist dreamers of centuries past would have found to their liking: It’s communal in all practical applications even as it feeds the creator and honors the supporter.
The cryptocurrency and blockchain community, however, is hardly communist or even altruistic in nature — it’s built around making money (sometimes literally — think Bitcoin mining). Its well-being depends on driving the adoption of blockchain applications, and that requires constant hype. The art market is uniquely suited to providing that hype: Big sales generate lots of coverage, especially if both journalists and their readers wonder why anyone would pay so much money for something that’s simply not worth it to most people. So far, the cumulative volume of crypto art sales is estimated at $193 million; that money has bought NFT invaluable publicity in U.S. media ranging from tech websites to TV networks.
Anybody hooked by the news of (pretty unremarkable) videos and collages selling for lots of money will quickly find out that the NFT concept can be applied to property rights on everything under the sun (or, as the community would hope, that Bitcoin moon), from financial instruments to land. In some real-world applications, NFTs can even do a lot of good. Event ticketing is one of these: The use of NFTs would enable, for example, concert organizers to limit resale prices and drive even the most tech-savvy, robot-using scalpers out of business. Tokens could be used to sell digital wildlife to fund conservation efforts. Or they could be employed to track entire supply chains from their origins to the end consumer, making the value-creation process transparent.
There are powerful reasons why blockchain technology hasn’t captured the world yet despite its obvious allure; it has issues with scalability, security, transaction speed and cost. Lots of competing implementations seek to solve these problems. They need wins and backers. For these firms, the interest of traditional brands and institutions — Christie’s, the National Basketball Association — in the New New Thing is a stroke of luck even if the artist known as Beeple, he of the $6.6 million fame, is not the next Picasso and the digital collectibles sold on NBA Top Shot are not necessarily going to enjoy the lasting popularity of trading cards.
The crypto world produces, lives, breathes, monetizes hype. It’s using radically creative ways to involve the non-crypto world in this process, and it’s spreading around plenty of money. One can only hope that this eventually leads to tangible benefits for a lot of people — be they concert-goers, equity-minded consumers, conservationists or those whom a digital property title could save days of bureaucratic tedium. But Beeple’s moment in the sun is already a benefit to anyone who makes art not suited for the traditional market: Even if not all of them will monetize their art the way he has, his example gives them hope of inclusion.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is a member of the Bloomberg News Automation team based in Berlin. He was previously Bloomberg Opinion's Europe columnist. He recently authored a Russian translation of George Orwell's "1984."
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