If it is such a great idea, why is it failing? NFT sales dropped by 92%, and nobody is actually surprised.
I recently watched a TEDx Talk by the Spanish philosopher Fernando Castro about crypto art and the situation of modern art. This video made me start a conversation about NFTs with my husband that evening, who is a software engineer and a videogame developer. He has been reading a lot about the subject and I, as a writer, have my opinions about art. The discussion turned out to be very interesting.
Smoke Sellers. The price of empty art.
What does Non-Fungible Token mean?
When we say token, we are talking about units of value that are given to something, like those tokens you find in a music festival or the chips you need to ride bumper cars. You can get them by paying money. In the case of NFT you get them paying with cryptocurrency. Non-fungible is the quality that ensures these tokens cannot be modified or replaced. This is achieved through a BlockChain (it’s a growing list of records owned by no one and watched by everyone) where the NFT data is stored. Each time the NFT is sold it’s like one more element is added to the chain, and verified by a bunch of people to ensure this new content is valid. This system creates an independent certificate of authenticity.
All of this sounds a bit complicated but if you keep reading you’ll come to understand that it is actually very simple stuff.
What have we been promised?
Art always raises its value during crisis times. This happened too when the pandemic started in the shape of an explosive increase in NFT prices. The explanation that we often got seemed sufficient at the time. We were promised that the NFT market would decentralise the art industry giving artists more agency to get a bigger piece of the cake. This occurs through NFT Royalties, payments that compensate original NFT creators for the use of their NFTs. Artists get a percentage each time one of their NFTs is sold. This way, it doesn’t matter that much if you, as a creator, were tricked into selling your art at a lower price than it’s worth. As an art collector, the system allows you to quickly get your certified digital art and then instantly become unique. That’s how a lazy screenshot of the very first tweet got bought by Sina Estavi for $2,9million.
How has the NFT concept been used?
Buying a random animal with funny colours for thousand of dollars became really appealing because it has an NFT certificate attached to it. Here is an example. You are walking around Montmartre (Paris) and you come to see yourself in an artist market. You see plenty of beautiful pictures but you are disappointed most of them are just another Eifel Tower. Until you suddenly stop to buy a picture from a seller who, next to it, would give you a signed letter in which she states the details of your transaction. You know nothing about art and decide that this must be a good work of art if she is so caring about the authenticity of the pieces she sells.
Not understanding the real use of NFT plenty of people saw here a great opportunity to make money. Speculation became a trend. If you were in the NFT market it was because you understood how progress comes. You were just riding the first wave.
Or was it a tsunami?
In the past couple of months, we have seen a huge crash in the NFT market. One-third of NFTs have no value at all anymore and another third are being sold for a much lower price than when they first got sold. Sina Estavi, the guy with that beautiful screenshot with no interesting content in it, is struggling to even get a 1% of his investment.
But don’t worry, other people, like Gauthier Zuppier, one of the funders of Nonfungible.com (someone bought the right domain at the right time) seemed to find a more intelligent and profitable way of using NFT. He is even talking about a stabilization of the market. He has a lot of hope about its application in the videogame industry. And to prove that, he has launched a videogame himself. It is certainly not the only videogame that brags about using NFTs but before you finish this article you’ll agree it is all bullshit. All those games would have been the same without NFTs involved. The only difference is that in-app purchases look a bit different.
I will explain using an online card game as an example. If you are a bit nerdy, you will know Magic, the card game that still sells very expensive physical cards. Now think about an online version that used NFTs. On one hand, you have the value that a specific card has in the game (points, strength, item, power, etc) and on the other hand, you have the value that that same card has in the NFT market (Ethereum, Solanaor any cryptocurrency). The value in the NFT market might be regulated by a Blockchain but when it comes to the value in the game this will be modified by the game developer. So if the company stops supporting this game, your NFT art will vanish with it, as it would happen if Fortnite closes its doors after you had bought a costume there with regular dollars. You can not use these cards outside of this game, you cannot even frame them and put them on the wall because they are digital pieces of art, so you are just paying (in cryptocurrency) to play a game. Totally legit, but for now, nothing new.
What can actually be done with it?
Indeed, there has been a lot of talk going on about the application of NFT in video games. Some have argued in favour of interoperability as the future of the industry. The idea is that you could be using your nice NFT-avatar in any videogame. You would be identified by it and it would be, again, unique. Or you could buy an item and use it in any of your games. Unfortunately, as Rami Ismail (great game developer) very well explained in his Twitter thread, it is not really possible to do anything remotely close to it. The complication of making a video game goes much further than any advantages that the NFT might bring. Each particular game has so many details that even games of the same company cannot use the same exact images. Because NFTs can not be modified even the smallest adaptation would mean the creation of a totally new NFT, which invalidates their point.
What is the real purpose of NFTs?
As I tried to explain earlier, NFTs are meant to be a certificate of authenticity of a piece of digital art (a file in the form of a photo, video or audio), nothing else. In fact, a detail that a lot of people forget about is that it doesn’t stop anybody from coping that file away. Geoffrey Huntley proves this with his “educational art protect”: the NFT Bay. He collected an incredible amount of files that, at least at some point, have been sold as high valuable works of art and put at disposal of the public.
Photo by Markus Spiske on Unsplash
When writing articles, we all search for pictures in Unsplash because unless we upload our own pictures it is hard to make sure we have the right to use them here. When you buy an NFT certificated piece of art you are simply buying the right to use a file that is stored somewhere. Exactly, in a practical manner, the same thing. That is why it makes no sense to buy some art only for the NFT that comes with it. When you are in Montmartre you don’t buy a painter’s letter in handwriting you cannot understand, you buy a picture that you can enjoy looking at.
Why are there so many websites and video games surrounding this empty business?
The answer is simple. We have another example of the Gold Rush dancing before our eyes. The first individuals who arrived at the place would become insanely rich. Then people would find out about it, and crowds started to show up. Of course, there was not enough gold for everybody, so most diggers only found an unprofitable business. But there were some people who always won. They were the ones setting up shops next to these mining areas. They would earn a lot of money from selling equipment to those who seek a fortune through digging gold. And that’s what it’s happening with all these websites and video games that promise you a bright future in the NFT market. They are playing a different role than all the adventurous buyers, and they are surely going to succeed. They already did.
NFTs do have a place in the future
Before you completely start hating NFTs let me give you my last piece of mind.
The technological world is always facing a challenge when it comes to making things work on two different platforms. It is a challenge for users, nevertheless. That’s why we love standards. Remember how happy we became when Bluetooth came into our lives? Or when we started getting all our devices on our personal wifi? QR? It took me a while to understand its advantages, but it turns out QR is the fastest way of labelling physical items with a huge amount of info. You get where I am coming from. NFT can become a new standard, used by artists and art lovers, in order to simplify the exchange of certified digital files. It could be used on platforms such as Spotify or Netflix, without the need for huge corporations or legal documents to back up and enforce the licensing deals. The advantage is that you would know you get the original version instead of a low-quality one and that somehow in the process the artist will get paid. However, I am quite certain there will still be a possibility to illegally download it.
If you think of NFT as an authenticity certificate it is easy to understand that it has no value by itself but, instead, it adds value to the work of art to which it links.
And that’s why I think it is insane that someone would pay even a dollar for a screenshot.
Unless it is a clever well thought article like this ;) Here you can buy the NFT of this article and support an artist.
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