notice: This comment is the contra-piece of our discussion on so-called Non Fungible Tokens (NFT). The pro comment can be found at the end of the text.
Should parties be able to take place again in the spring, you should arm yourself for the small talk with three letters: NFT.
Non-fungible tokens – non-exchangeable virtual coins – are the digital hype that has pushed its close relatives, the cryptocurrencies, out of the media attention cycle. In 2021, a billion-dollar NFT market emerged from nothing. But NFTs are at best a mirage, at worst a pyramid scheme.
An NFT is meant to be a digital proof of uniqueness, a certificate of originality. Because the digital has it in itself that practically all data can be easily copied without loss of quality. If everything can be copied infinitely, the question of ownership quickly arises. For two decades, music labels and movie studios struggled with people downloading songs and movies who didn’t realize they were “stealing.” NFTs are intended to rule out such misunderstandings: it should be possible to clearly allocate property on the Internet.
Blockchain technology is supposed to make this possible: A blockchain is unchangeable, an – unofficial – digital land register, it contains the token, immovable and cannot be deleted. It points to another file on the web – such as a digital image. There’s something to the idea: Artists who create their works purely digitally on the computer make money by selling NFTs of their images or animations. You can’t sell prints in the art trade or at exhibitions. Celebrities such as Paris Hilton and rapper Snoop Dogg are promoting the technology, as is an army of NFT believers online.
You can see NFTs as a parody of social media capitalism: someone says that square meter of air is valuable and lets mini, medi and mega influencers inflate the price. Some fool – or someone with as much humor as money – then buys the whole thing. And everyone thinks that values are created here. Or as a parody of the art market, which has long been accused of being an outbidding competition for the super-rich.
There are a few nice applications
But the matter is more serious than that, it is about extending financialization to digital “objects” after everything can be commodified in the physical world. Even image pixels should now be objects of speculation.
There are even a handful of neat uses like digital basketball player trading cards. And digital artists are to be wished that they find sources of income. But NFTs are a shaky concept. Because an NFT is little more than a link to an image on the web. Anyone can create an NFT from a link to the online version of this article with just a few clicks and a bit of cryptocurrency.
However, most NFT fans are not attracted by the supposedly clever technology anyway, but by the promise of getting rich quick by auctioning off a picture as an NFT. Unfortunately, not only is the ecosystem incredibly power-hungry because of its use of cryptocurrencies, but it is also infested with fraud. The so-called alone are innumerable rug pulls of the past year – the proverbial rug is being pulled out from under investors’ feet: strangers allocate tokens to cheaply produced pictures, sell them to the gullible and disappear. Last year revealed an analysis that a small circle of insiders, who were allowed to buy such tokens early on, benefited from all sales.
The more unclear the benefit, the louder the revolutionary rhetoric: freedom, decentralization and liberation from the yoke of any institutions. But the auction sites are already the new platforms that shouldn’t actually exist according to crypto logic. If you buy too expensive, you have to see how you sell the NFTs on secondary markets, like in pyramid schemes. The alleged revolution only recreates the worst aspects of the financial and art markets: insider trading, pump-and-dump tricks, fantasy prices, bubble formation – this was shown by the dramatic NFT price drop last summer.
The smart investments are once again made by the professionals. The investment companies Sequoia and KKR do not invest in NFTs themselves, but through acquisitions in auction and gaming platforms for NFTs. This is how they earn from the hype without ending up with a pile of worthless links.
Maybe you just can’t create uniqueness on the internet – and that’s a good thing. After all, the strengths of the network are: copying, sharing, cooperating. And not striving for more things to own.