NFT for Art, Music: What Is Non-Fungible Token Cryptocurrency?
In 2008, the year Kings of Leon dominated airwaves with one-two punch of ”Sex on Fire” and “Use Somebody,” a mysterious figure named Satoshi Nakamoto appeared online with an obscure idea for the first-ever truly digital form of money: bitcoin. More than twelve years later, the Southern Rock band is now trying to use the hot technology at the core of cryptocurrencies to re-ignite their career, in what tech boosters say could make for a revolution in how artists sell their work and support themselves.
The technology is called an NFT, short for a non-fungible token, a cryptocurrency that’s basically a certificate of authenticity. What makes them so interesting — or “nifty,” as its backers like to say — is that the tokens can be attached to just about anything, like digital artwork, videos, or other exclusives for an artist’s fanbase. Kings of Leon, for instance, are bundling their album with an exclusive NFT that gives the buyer four front-row seats and a heap of merch and other perks.
That the emergence of this game-changing technology came during the pandemic is no accident. Artists haven’t been able to sell their works in galleries, and musicians who relied on touring revenue are scraping by from meager streaming royalties. Behind the NFT is the blockchain, an unhackable digital spreadsheet that logs a record of sales and ownership, and can cut out middlemen like labels or agents who typically control distribution and promotion. But its detractors have also pointed out that cryptocurrencies often don’t live up to the hype. “Even with this, 99 percent of the artists are still going to starve,” Mark Cuban, the Shark Tank investor and owner of the Dallas Mavericks, said during a livestream on Tuesday. “But the difference is the gatekeepers have changed.”
What exactly are NFTs, and what do they mean for the future of creative industries?
While technophobic art fans might be wondering where the token is, the important word here is “fungible,” an uptown word for “replaceable.” For instance, paper money is fungible because, if a friend owes you $20, she can give you back another $20 bill, not that exact $20 bill. NFTs, on the other hand are basically limited-edition digital assets that come pinned to another piece of artwork, be it an image or a piece of music. If a consumer buys an NFT directly from an artist, the buyer essentially gets the reassurance and bragging right that what they own is a literal one-of-a-kind work.
The hype around this particular cryptocurrency has exploded during the last few weeks as buyers have flooded the unregulated NFT markets with billions of dollars, hoping to strike it rich. Cuban has touted them as the future of digital commerce. The artist Beeple used an NFT to sell a piece of digital artwork, a jpeg called “Everydays — The First 5000 Days,” for a record $69.3 million at a Christie’s auction. Twitter CEO Jack Dorsey sold his first tweet with an NFT for $2.5 million in a charity auction. The NBA has gotten in the game with Top Shots, tokens bundled with collectible video “moments” like a LeBron James dunk, that are selling for hundreds of thousands of dollars. And in one stunt earlier in March, a tech company filmed the burning of a rare $95,000 Banksy print — and then sold the video of the art’s destruction through an NFT for four times the artwork’s original value.
These NFTs are bought and sold on the same idea that baseball cards and stamps can reach nose-bleed valuations even though you can download copy of an “Inverted Jenny” for free. In other words, it’s not just about being have access to it, it’s about owning something no one else does, something original. What makes it new is that these assets were never physical to begin with — and in the case of the burned Banksy, might not even exist at all.
In all these cases, what the buyer gets is the satisfaction of owning the NFT — not the exclusive rights to experience the object. In fact, the value of the clips or art that come doesn’t necessarily have anything to do with the token. The guy who buys the video of the King James play doesn’t own the copyright of the footage, and can’t collect royalties if it’s used in a highlight reel — something that would make the clip valuable to whoever owns the copyright. The video of the burning Banksy is likewise free to watch. But NFTs can be sold to somebody else, potentially for huge profits. In fact, some of the NBA Top Shot moments that sold for a few bucks just a few months ago are already selling for thousands of times more.
Is this a bubble?
Yeah, probably. The euphoria around NFTs resemble the precipitous rise of another bitcoin-like money raising scheme called Initial Coin Offerings, which blockchain enthusiasts touted as the future of fundraising for small businesses. Barely-there business of sketchy provenance quickly raised huge sums of money, but soon federal regulators cracked down and the Justice Department started suing for fraud.
There are differences, though. In a way, NFTs are a total mirrorworld of how we’ve thought about art in the age of digital reproduction. What’s valuable isn’t the art, which can be endlessly copies and manipulated. It’s the vessel that it comes with. It’s as if someone buys a Picasso in order to get the frame it came with, or gets an album because the vinyl itself will be worth money.
There’s still a long way to go in ironing out the technology, which can be slow and clunky, and even figuring out where it would be most useful. Stunts aside, the idea behind NFTs is a recognition that an increasing amount of what we value in the world is entirely digital and never really “existed” in the first place.