What's the Point of NFTs?
The digital tokens, secured by the blockchain, could revolutionize art markets, reduce animal poaching, and provide a cool new way for NBA fans to flaunt their collectibles.
Imagine if the sought-after horns, tusks, and furs of animals facing extinction could be replaced by digital tokens that could satisfy would-be poachers. In Limpopo, South Africa, Derek Lewitton is trying to make that happen. Lewitton, who runs the Black Rock Rhino wildlife preserve, has long been a proponent of legalizing the international trade of rhino horns and harvesting them humanely so that increased supply will drive horn prices down, making poaching and horn harvesting less lucrative.
Cracking down on poaching rarely eliminates the demand for horns, instead incentivizing poachers to hide their activity. So Lewitton's preserve is now looking at non-fungible tokens (NFTs) as solutions for the challenges of rhino conservation. Earlier this month, the inaugural rhino horn NFT—a digital replica paired with a humanely harvested horn which is locked away for safekeeping—was auctioned off for 105,000 South African rand ($6,782) on Momint, the continent's first NFT marketplace. The idea is for these NFTs, not real-world tusks and horns obtained via illegal hunting, to serve as substitutes for the animal trophies these poachers desire. For some trophy collectors, who use these animal parts as stores of value they can gaudily display, this may be desirable—and indeed it was to Cape Town businessman Charl Jacobs, the highest bidder.
Reducing poaching is just one potential use for these digital assets that live on the blockchain, with verifiable transaction histories and owners. Sports fans have already gotten in on the craze; the NBA's sales pitch tells fans to "own your fandom" via its Top Shot NFTs, created by Dapper Labs—basically digital snippets of high-profile on-court moments. Collectors can choose different tiers of NFTs, in ascending order of scarcity and thus exclusivity. Dapper Labs CEO Roham Gharegozlou reported to Tech Crunch that the product has been quite popular among fans so far, ratcheting up "from 4,000 to 400,000 users in a matter of weeks." Just two months later, Top Shot now boasts 600,000 users. Demand for NFTs is high elsewhere, too; During the first two months of 2021, there were almost 150,000 NFT sales, totaling some $310 million, which Forbes reports is "almost quintuple the amount sold in all of 2020."
But so far NFTs have primarily been a useful evolution within the art world—a way for collectors to verify the authenticity of the assets they're buying, to ensure that they're not reproductions. Think of NFTs as original Picassos or Monets, while other digital art that looks the same as the NFT is akin to a Picasso or Monet print you can buy on Amazon. The difference with NFTs compared with traditional art is that blockchain technology assures the buyer that the NFT is the true original, no forgeries allowed. For those who—irrationally or not—care about exclusivity and authenticity, the assurances provided by the blockchain provide a lot of value for which collectors (and crypto enthusiasts) are willing to pay top dollar.
Despite high-profile entrées into the NFT space by auction houses like Sotheby's—which auctioned off the first-ever NFT by Kevin McCoy for $1.4 million earlier this year—and Christie's—which auctioned off a $69 million work by Beeple—NFTs have pruned away some of the middlemen and traditional gatekeepers, thus their allure. In traditional markets, artists have to pay their dues, currying favor with auction houses or galleries or collectors if they want to make it in that world. Digital artists are now able to go onto a platform where they can sell directly to buyers. There's no multi-year career process or secretive set of collectors where only a specific broker can get in touch with them. "Having represented artists who feel like the internet has robbed them of their choice of where their work lands (i.e., Instagram), to me it's a positive spin to be able to add a digital fingerprint and provenance to art in the digital age," writes gallery owner Danny Fuentes in Rolling Stone. "Artists can attach a royalty arrangement to their NFT, meaning every time the NFT is resold, the artist gets a percentage" which allows less famous artists to make a living if they have a loyal-but-small group of fans.
NFTs also allow some interesting experimentation that was formerly just possible at in-person installations: Terra0's Two Degrees, sold by Sotheby's, is programmed to fully destroy itself if Earth's temperature "reaches at least 2 degrees Celsius above average global temperatures" today. Artist Damien Hirst is experimenting with the destruction of his own art; his project "The Currency" involves selling 10,000 unique works of physical art, each of which corresponds to an NFT. "Buyers would have one year to decide if they wanted to keep the NFT, in which case the physical artwork would be ceremonially burned," reports artnet news. "Or they could keep the physical work, and relinquish rights to the blockchain-based artwork." This allows individuals in the market to bet on which form of art ownership is more valuable to them, offering Hirst and onlookers valuable data about how people, in the aggregate, perceive the promise of NFTs.
Some worry that NFTs are overhyped, while others are convinced they're a subpar application of blockchain technology. "Over the past decade, the blockchain has become a refuge for people who need another place to rest their assets," writes skeptic Anil Dash, who worked with McCoy on creating the first-ever NFT, in The Atlantic. Since few apps are blockchain-based other than cryptocurrency trading marketplaces, argues Dash, this "hermetically sealed economy" means "people who have made those bets can't cash in their chips anywhere," so they resort to buying art, in NFT form, with their crypto. "Think of a kid who's spent the day playing Skee-Ball and now has a whole lot of tickets to spend. Every toy looks enticing. NFTs have become just such a plaything."
At their core, NFTs are the current means creators can use to capitalize on the fact that people still seek ownership and value exclusivity even in the digital age. Whether warranted or not, whether for bragging rights or personal satisfaction, people prefer real Vermeers to dupes; real Birkin bags to replicas; authentic Cartier watches to fakes. NFTs can be considered a blockchain-age extension of the allure Veblen goods have long carried.
"The technique of reproduction detaches the reproduced object from the domain of tradition," philosophized Walter Benjamin in 1935, for "even the most perfect reproduction of a work of art is lacking in one element: Its presence in time and space, its unique existence at the place where it happens to be." NFTs are necessarily untethered from a specific point in space the way Benjamin probably meant it, but they're in a way still tapping into what he remarks on; people long for authenticity, and are, for now, willing to pay for it. "For the first time ever, images of art have become ephemeral, ubiquitous, insubstantial, available, valueless, free," John Berger said in 1972, working off of Benjamin's ideas and arguing that artwork has been degraded with such easily-available means of reproducing them. Though Berger's words ring true today, NFTs are an attempt to tap into this market for authenticity amid ubiquity.
