I'm struggling with non-fungible tokens (NFTs). I previously wrote about NFTs when Jack Dorsey sold his first tweet, and I was dismissive about the idea of them. NFTs have cropped up a lot since then. Even John Cleese had something to say about them. He said “the world has gone terminally insane” and subsequently put his drawing of the Brooklyn Bridge on the market as an NFT for $69.3 million. Cleese was trying to point out how ludicrous it all is, but someone still offered him $36,000 for it.
It's hard to tell when money was invented because it pre-dates written history. It came about because barter was tedious. If I wanted the socks you'd knitted from mammoth wool and only had a pet sabre-toothed tiger to barter with, I'd think a straight swap was a raw deal for me. My tiger is worth more than your socks. But I might go ahead with the exchange if you gave me some credit against future purchases I might make. We'd make marks on a stick to record that credit — a tally stick — and I'd hang on to that until you had something else I wanted. They've found tally sticks from 30,000 years ago, so this form of credit has been around for a while. It was the forerunner of Wonga in a way.
I now have a plain old stick that has value, and I can spend the tally marks on that stick when you make other mammoth-based apparel I'm interested in. If we dragged a few more people into things, we'd all be walking around with valuable sticks. The idea probably ran out of steam when you thought a few suspicious tallies had appeared on my stick, which you were sure weren't there at the start. So we'd use something like beads instead. It would take more effort to make a bead that's distinguishable from any old pebble, but it would be more resilient against fraud. This system eventually then led to coinage, cheques, credit cards and banks.
That takes care of the money side of things, but where does that value come into it? I guess it's about purchasing power. The bunch of electrons on my bank's computer in the shape of £10 are worth nothing on their own. I could work out how many electrons the £10 on my bank's computer was made of. But if I sent that many electrons to you in an email as payment for something, you might be inclined to pay me a visit in a foul temper. However, those electrons, shaped correctly in the bank's computer, bestow upon me a purchasing power. Me, my bank and society in general have reached a consensus about those electrons representing something of value to me. I can use them to buy an ice cream or a cabbage, or indeed some socks. I have to decide that ice cream, cabbages and socks are valuable to me in the first place, and my valuation has to agree, at least broadly, with the shop's valuation or there'll be no transaction.
There are many things that feed into value. An item's scarcity, originality and usefulness will all influence how much both the shop and I think it is worth. Supply and demand will establish a market rate for things. That's all well and good for essential items, but it gets more complicated when it comes to the arts and creative works. The qualities I've mentioned still factor in to creative things, but a lot of it comes down to what someone's willing to pay. If I have a rare painting by Da Vinci and would rather have some money instead, I can get valuers in to try and judge the market, but it's really about the subjective value my potential buyers and I put on it.
This is what gets us to NFTs. Jack Dorsey's first tweet isn't going anywhere. It will remain on twitter for all to see. But Dorsey decided it had value, and a buyer agreed with him and paid $2.9m for a non-fungible token that confirms the buyer 'owns' the digital representation of that tweet. The electrons that make up Dorsey's tweet have the same sort of value-by-agreement as the ones that make the £10 in my bank account. None of that means the buyer can do as he pleases with the tweet, though. He's buying an intangible thing, not the tweet in any physical sense. He has something nobody else has. Is that any different to having the Mona Lisa on your wall? Sure, the Mona Lisa's a physical object, but it's only valuable because people say it is. Plenty better artists than Da Vinci don't make a penny. NFTs are a way to attach value to digital creativity. It's the digital equivalent of art dealing.
From a technical perspective, an NFT is an entry on a computer — specifically it's in a blockchain — that confirms the buyer is now the owner of that tweet. The tweet is unique because there will only ever be one first tweet by Dorsey. The tweet can't be sold again by Dorsey even though it could easily be copied. In issuing the NFT, Dorsey vouched that it was unique and genuine. The buyer bought it for that reason. To the buyer it might represent history, or it could be that he thinks Jack Dorsey's tweet will be worth more in the future.
If you're still uncomfortable after my attempt to justify NFTs, you're not alone. So am I. It's the immediacy and lack of effort that bothers me. Dorsey wakes up one morning, looks at his first tweet and decides it's worth a couple of million dollars. It all seems a bit ephemeral.
Emily Ratajkowski is a model and actress. She has decided to sell a link that represents a photo of her standing in front of another photo of her that's on the wall behind. The piece is called Buying Myself Back. Ratajkowski was paid $150 to pose for the photo she's standing in front of, and she gives the reason for dipping her toes in the NFT world as follows:
As somebody who has built a career off of sharing my image, so many times — even though that’s my livelihood — it’s taken from me and then somebody else profits off of it.
To me, this digital marketplace is a way to communicate this specific idea that couldn’t exist in a different way.
It goes on sale on 14 May if you're interested. There is history behind that image if you read the articled I linked to, but it's personal history to her rather than something historians of the future will pore over. Again, though, maybe it's valuable just because she thinks it is and a potential buyer thinks it is. Who am I to question what someone else considers valuable?
But I'm still struggling with why someone would pay good money for what is essentially just a link. The buyer will not get the actual photo (nor the photo in the photo). And it's the immediacy again; she woke up one morning and simply decided this was worth money. What's to stop anyone waking up and deciding any old nonsense they have — or better still, just a link to that nonsense — is worth, say, £50k? I doubt I could do that with any success, and I suppose the people (mainly) doing this are leveraging their public profile.
I think the world has left me behind, which is odd because I was sure it had already done that in 1989.