Wednesday 31 March 2021

What the Non-Fungible Token

At the time of writing, non-fungible tokens, or NFT's, are digital ledgers that are sometimes sold for large lumps of money when they are related to 'art', or rather digital image files. This has created some speculation in the media about NFT's as the future of the digital art market. 
Given that the world of NFT's involve technology, legal issues and money, there is naturally a lot of interest from an art public. Just as predictably, much of that interest is founded on poor understanding of the relevant concepts.
For example, it's sometimes claimed that an NFT makes the buyer the 'owner' of an image. This isn't true as a buyer doesn't gain any rights pertaining a file by obtaining an NFT. 
Another common misinterpretation is that an NFT is akin to possession of an autographed copy, in other words, a non-unique item that is nevertheless verified as something unique by a (digital) autograph. This also isn't true, as the NFT doesn't contain any data related to the art/file in itself, but merely a pointer to where the file in question can be found. The NFT isn't a copy of a work, it is instead nothing but the autograph and furthermore, that autograph is only the autograph of the person who issued the NFT, which doesn't necessarily need to be the original creator.

In fact, the closest analogy in the traditional art world to an NFT is not a certificate of ownership as is sometimes claimed, but rather a certificate of authenticity. Like an NFT, at its core a certificate of authenticity is nothing but a pinky swear by somebody that something is 'authentic'.
Imagine that I've made a sculpture and instead of selling you this sculpture, or even a cast or a photograph of this sculpture, I sell to you nothing but a piece of paper stating that this sculpture is an genuine work made by me and that it can presently be found in my studio. That piece of paper is what an NFT is. 
A buyer of this piece of paper doesn't own the work, they don't own any rights to the work, they don't even own anything pertaining to the work that by and of itself can guarantee its authenticity. All they own is my claim that I've made this work and my assurance that it exists at the present time in some location, with no guarantee about its existence in the future.
Now, while such a certificate may be largely pointless, it isn't inherently worthless, so that a market for them makes sense to some degree. Imagine for example if I owned a certificate of authenticity of a Van Gogh painting signed by Van Gogh himself, yet I don't own the painting, have access to the painting or even know what it looks like. That certificate would still be worth something by virtue of its historical value and general demand for Van Gogh related items. This is true even if the original purpose of the certificate has vanished, with the actual painting belonging to a museum collection for example, where the authenticity of the work has already been established by other means such as chemical analysis of the painting and a detailed provenance record.
So while these NFT's may themselves hold some value as certificates, the prices they are fetching now rely on faulty assumptions of value based on an utility they don't posses.