NFTs are both priceless and worthless

It is no longer possible to ignore NFTs, the crypto off-shoot that can tie intangible assets to specific, unalterable tokens. Interest in NFTs (non-fungible tokens) has spiked over the last year, and is now breaking into the mainstream with several headline-grabbing deals. On March 6th, Twitter co-founder Jack Dorsey announced that he would “sell” the first ever tweet on an NFT auction site. Right now, the current high bid for Dorsey’s initial missive stands at $2.5 million.

If Bitcoin has become the cryptocurrency world’s version of gold, a method of exchange that its boosters hope will always gain value, then NFTs are its asset class. Bitcoins are all equal, and can be broken down into chunks — much like turning a dollar into change — but NFTs are not, and cannot. They are intentionally unique and inviolable, allowing you to permanently tie them to a digital or real-world asset. It’s possible to produce a home ownership document as an NFT, but the world’s attention right now is on digital art, music and collectibles.

The point of tying a digital object to an NFT is to create a lasting record which can prove its identity and provenance. Because blockchain is a public ledger, it means that there’s an added layer of security and transparency which should make it harder to defraud people. Plus, in the digital world, where everything can be replicated without penalty, you can attempt to give a single copy the prominence and weight it would receive if it was a real-world asset. Yes, you can duplicate a file a thousand times and they’ll all turn out the same, but only the one tied to an NFT is the real deal.

Digitization means that you can easily and endlessly create a perfect copy of something, making it harder for creators to be compensated for their work. (Naturally, there are legal remedies for copyright infringement, but that’s a different story.) The band Kings of Leon, for instance, will sell its next album as an NFT for around $50, for which you’ll get both a physical and digital copy of the music. And, naturally, the added prestige of being able to tell your friends that you own the token that connects to the album.

To a certain extent, that is the lie agreed upon that underpins why NFTs are so in-vogue right now: Despite all digital copies being equal, the tokenized copy is more equal than others. That this one copy, out of all of those that exists, is the one that carries any value. And, if you tell enough people that this token is worth money, they’ll buy into the idea as well. Ownership of the token does not, however, convey additional rights to the buyer, you don’t own the copyright, and can’t loan the file out to others in the hope of earning an income.

IOTA co-founder Dominik Schiener explained how the process works: You create something, let’s say an image that you have painted. You upload that file to a website, and then include the URL of that file inside the smart token that you then “mint” onto the blockchain of whichever platform you’re using. From there, you can then sell the token yourself, or more likely, using a third-party retail platform that specializes in crypto art. “What makes NFTs so unique,” said Schiener, “is that you can verify their authenticity.”

Musician Claire Boucher, who records under the name Grimes, recently sold NFTs of digital artwork made in collaboration with their brother, Mac Boucher. The Guardian said that the series, WarNymph Collection Volume 1, made more than $6 million in sales, with up to 300 copies of one piece selling for a fixed price of $7,500. In February, Chris Torres, creator of Nyan Cat, sold an NFT version of the internet-famous animation for $650,000.

Crossroad 1/1 is a looping video, 10 seconds long, created by the digital artist Mike Winklemann, who works under the name Beeple. It was one of a pair of artworks prepared in anticipation of the outcome of the 2020 US elections, depending on the result. The clip features a nude, orange-haired, overweight figure, several meters tall, lying prone in a public park. The body has been covered in graffiti while indifferent pedestrians go about their day, oblivious to the spectacle beside them. On November 1st, 2020, the clip was published on the Ethereum blockchain and purchased by collector Pablo Rodriguez-Fraile for $66,666.60. On February 5th, 2020, an anonymous buyer bought the same artwork from Rodriguez-Fraile for $6.6 million.

But NFTs aren’t just the reserve of oblique art collections and musicians looking for ways to monetize their work. The NBA, in partnership with Dapper Labs, the Canadian company behind Cryptokitties (essentially digital Beanie Babies), launched Top Shot in October 2020. Top Shot is, essentially, a form of card collecting, but rather than static images, you’re buying “moments.” These are short video clips highlighting a specific basketball play that is worthy of commemoration.

On Top Shot, you can buy a 12-second clip of Orlando Magic forward Aaron Gordon’s dunk against the LA Lakers on January 15th, 2020. At the time of writing, there are five copies of that dunk, with various serial numbers, on sale from private collectors. Prices from the clip range from $74,000 for serial number 41, through to $129,000 for serial number 12. The company says that more than $200 million in sales has been made since the site launched.

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