So-called “Non Fungible Tokens” are set to revolutionize the digital art market. But insiders and fraudsters in particular benefit from the new technology.
If parties can take place again in the spring, you should prepare yourself for 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, an NFT billion-dollar market emerged out of nowhere with the help of NFT influencers. But at best, NFTs are a mirage, at worst a pyramid scheme.
An NFT is intended 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, however, the question of ownership quickly arises. For two decades, music labels and film studios fought their way through people who downloaded songs and films and didn’t see that they were “stealing”. NFTs should rule out such misunderstandings: property on the net should be clearly assigned.
Blockchain technology is intended to make this possible: A blockchain is unchangeable, an – unofficial – digital land register, in it lies the token, immovable and cannot be deleted. It refers to another file on the net – such as a digital image. The idea has something: Artists who create their works purely digitally on the computer make money when they sell NFTs of their pictures or animations. You can’t sell prints in the art trade or at exhibitions. Celebrities such as Paris Hilton or rapper Snoop Dogg promote the technique, as does an army of NFT believers online.
You can see NFTs as a parody of social media capitalism: someone says that this square meter of air is valuable, and has the price driven up by mini, medium, and mega-influencers. Some stupid person – or someone with as much humor as money – then buys the whole thing. And the whole world thinks that values are being created here. Or as a parody of the art market, which has long been accused of being an outbidding competition of the super-rich.
There are a few nice applications
But the matter is more serious than that, it is about an extension of financialization to digital “objects”, since everything in the physical world can already be made a commodity. Even image pixels are now supposed to be objects of speculation.
There are even a handful of nice applications like digital trading cards for basketball players. And it is to be hoped that digital artists will find sources of income. But NFTs is a shaky concept for this. Because an NFT is little more than a link to an image on the net. 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 to get rich quickly by auctioning off a picture as an NFT. Unfortunately, the ecosystem is not only incredibly power-intensive because it uses cryptocurrencies but is also contaminated by fraud. Countless are only the so-called rug pulls of the past year – the proverbial carpet is pulled away from under the feet of investors: Unknowns award tokens on cheaply produced pictures, sell them to gullible people, and disappear. Last year, an analysis showed that a small circle of insiders who were allowed to buy such tokens early on benefited from all sales.
The more unclear the benefits, the louder the rhetoric of revolution: freedom, decentralization, and liberation from the yoke of any institutions. But the auction sites are already the new platforms that, according to crypto logic, should not actually exist at all. If you buy too expensive, you have to see how you can still sell the NFTs on secondary markets, such as pyramid schemes. Thus, the alleged revolution only rescinds the worst sides of the financial and art markets: insider trading, pump-and-dump tricks, fantasy prices, and bubble formation – this was shown by the dramatic NFT price crash last summer.
The smart investments are once again made by the professionals. For example, the investment firms Sequoia and KKR do not invest in NFTs themselves, but through acquisitions in auction and gaming platforms for NFTs. So they earn from the hype without sitting on a bunch of worthless links at the end.
Maybe you simply can’t create a uniqueness on the Internet – and that’s a good thing. After all, the strengths of the network are copying, sharing, and cooperation. And not the pursuit of even more things to own.