Cryptocurrency is bunk. Bitcoin is absolute garbage. Elon Musk is a weirdo.
Okay, now that we’ve gotten rid of those folks (0r at least moved them to the comments), let’s talk about NFTs, or what I like to call “the worst acronym since PCMCIA.” NFTs sound to me like an alien encounter mixed with some kind of low-fee investment fund. But don’t worry, what they’re known as will probably change in the future as they become widely adopted. And they will. NFTs are going to change how future Earthlings think about digital information, art, and ownership.
Before we get to the good, a note about the bad. Like other crypto nonsense, NFTs rely on very powerful computers crunching very difficult equations, which uses a lot of power. Pretty much everything crypto is bad for the environment. That’s an issue that needs to be solved, and it will be. Cryptophiles will claim that many server farms are built near hydro and sources of green energy, but that ignores the fact that demand for energy is growing and for very silly reasons. So yeah, right now NFTs are contributing to greenhouse emissions, and that will only change when all power is green or blockchains are handled differently.
What the hell is a blockchain, you might ask? It’s just an online database. It’s an Excel spreadsheet in the cloud. Nothing more complicated than that.
Okay, it’s a little more complicated. Blockchains are a supposedly un-hackable and un-fakable shared database. Everyone can trust what’s in there, because it’s been verified by other users. The blockchain is public, so people can see who owns what. Now, the accounts used to make transactions are often opaque, so all you can often see is what account now owns how much of a thing, which is why crypto is often used for terrible and nefarious purposes (or for glorified gambling).
NFTs are a little different. This awful acronym stands for non-fungible token, which basically means a unique and indestructible digital commodity. This blog post could be an NFT. As the creator of this blog post, I could agree to sell it to my friend Hank Green for the princely sum of $1. Hank now owns this blog post. Nobody else does. And he can easily verify his ownership because the transaction is on the blockchain (that Excel spreadsheet).
“What’s the big deal?” you might ask. There are tons of big deals, and the more I listen to discussions about NFTs and read others’ thoughts on them, the more I see folks getting this all wrong. NFTs aren’t important because of what the people who don’t care about them think; NFTs are massively important because of what the actual users think. There’s nothing stopping someone from copying and pasting this blog post and sharing it wherever they like. They can do the same for any of my ebooks. There’s a lot of illegal stuff you can already do with digital content that people will continue to do with NFTs. Want to steal music and ebooks all day long? Go right ahead. But those are still multi-billion dollar markets supported by the legitimate users.
So here’s your first lesson on anything to do with NFTs: When you hear someone say, “What’s to stop someone from making a copy of that art?” just walk away. Pretty much any sentence that begins with “What’s to stop someone…” is a sign that this person wants to discuss the criminal activity of an enterprise rather than its uses. Walk away. Nothing interesting will be learned there. All digital art is steal-able right now, and yet the markets for digital art persist and thrive. People pay for it. They pay for Netflix and Disney+ instead of torrenting everything.
Rule #1: Ignore all discussions that focus on the criminal activity.
Side note: this is a little different from crypto, where pretty much the only thing you should discuss is the criminal activity.
So let’s say Hank Green puts together a book about NFTs, or terrible blog posts, or does an audio series on explaining these things. He owns this post now, is its sole owner, so he can do whatever he wants. He can use the blog post in his book and charge money for it. There will be no disputes about the legality of this, because the transaction is on the ledger. Imagine this for stock image photography, cover art, so much else of how digital art is created. In a far enough future, attribution will always be included, and if it isn’t, one can infer that stolen goods are being transacted. NFTs are going to be great for artists.
Many artists are already enjoying income and residuals from the sales of their goods. An original Rick and Morty doodle went for a princely sum. But there will be plenty of uses for not-yet-famous artists as well. Let me give you an example.
Now, keep in mind that this space is in its infancy. NFTs have only been around for a few years, and almost zero innovation has gone into their deployment and use. Right now, NFTs are mostly digital collector’s coins, which have value simply because people value them. Nothing wrong with that. Beanie Babies were a thing, and stamps were not meant to have value above and beyond sending a letter.
But NFTs will become so much more than this. Let’s say I write a book like BEACON 23, and instead of self-publishing it or selling the rights to a publisher, I decide to create 10,000 official numbered copies of this book. I’m going to sell each one for $5. My hope is to sell out of them eventually. But the fun only begins there.
When I set up the BEACON 23 NFT, I include illustrations from Ben Adams and make sure the art is attributed to him. Every original transaction of BEACON 23 sends $0.20 to Ben. Mike Corely, who did the cover art, gets attribution and $0.20. David Gatewood, who edited the book, also gets $0.20. They get a percentage of every transaction, but they also have their names attached to the work in a way that can’t be destroyed or altered. No more wondering who did a piece of art. The creators are intimately tied to the piece. As is the current owner.
But it gets cooler. Once you sell an NFT, the new owner can now do what they please. They might try to sell it for more or less money. Some NFT exchanges will be set up to leave original creators out of these transactions, but I believe the mature NFTs that will come to dominate this space will give the originator full control of all transactions going forward. Which simply means that if someone sells a copy of this book again, the author gets X percentage of that sale. The cover artist gets X percent. And so on.
These will be very small percentages. The owner of the art will be able to recoup most or all of their original investment. But it won’t be insignificant. Think about how used books are currently handled. You buy a book for full price, and the author gets about 15% of what you paid. That’s the last time they’ll make money from that copy of the book. After you read it, you take it to a used bookstore, where you get a measly dollar. Two if you take store credit. The bookstore will then turn around and sell that ratty copy for five bucks, keeping all the profit. This is the prevalent system today that we all know and probably love. It’s terrible for authors and publishers.
In the future, there will be a secondhand market for digital art that includes the artist in every transaction. And I believe legitimate users will see this as far superior. They will enjoy knowing that some of what they are spending is going to support the creators of the art. We know this is true because Patreon does considerable business. But here, the transaction is more transparent: I’m paying you for THIS piece of art. I own it now. I can keep it or sell it to another user.
Consider for a moment your favorite artists and what you would pay to own an original piece from them, even if it’s digital. Would I pay $5 for a Stephen King short story that I really own? Of course I would. I already do that on Amazon, and I don’t really own that work. Amazon could decide to remove it from my device or from sale altogether. I also don’t have the ability to sell this story to someone else. I basically pay for the right to read it, to borrow it, and that’s it.
Same goes for all the music, TV, and cinema we consume. We don’t own it. Never will. With NFTs, that’s no longer true. We not only own a thing, we can prove it.
The major market for NFTs will probably be in the videogame space. You’ll own a sword that’s really yours, that you can sell or trade. Or a castle or a spaceship. These are already massive economies, but it will all become more legitimate. Think it’ll only be gaming and media consumption? The future will only become more digital-centric. Meeting spaces for business, avatars, animations, backdrops, attire, will all be a part of our online lives, and people are going to pay real money to stand apart, to signify their interests and personalities, no different than how we wear t-shirts, watches, or carry expensive handbags today.
Our world is getting more and more digital. How we parcel that world out and assign ownership is tricky, precisely because of all the nefarious “What’s to stop someone from…?” questions. Well, NFTs answer those issues. They will create a marketplace for us legitimate users. And the only rule of NFTs is that these are the only people we concern ourselves with.