Are NFTs Monkey business?
New technology, new use-cases, a gold rush backed by JPGs, massive FOMO and brands jumping on the bandwagon... It feels like we have all the ingredients for some monkey business!
Yet, just saying that NFTs are stupid because they’re virtual is like being in 1992 and saying that the internet is stupid because goods only exist in the physical world…
There is a lot more to NFTs than the monkey that meet the eye. In this article, I will take an FAQ approach and address the most common questions that are being asked as well as a few that should be asked.
Here is what we’ll cover:
What does NFT mean?
What’s their real purpose?
Why are NFTs associated with monkeys?
What’s currently wrong for content creators?
What is the value of digital art?
Can’t I just right-click and save?
Why is it a game changer?
Give me practical examples!
Is it a fad?
Is it just speculation?
What about the scams?
Are NFTs bad for the environment?
Are digital assets stored in the blockchain?
Which NFT should you buy?
What does the future hold?
A lot of ground to cover, let’s get started!
What does NFT mean?
Definition is always a safe place to start. NFT stands for Non Fungible Token. Non-fungible means that it cannot be replaced by something of equal value, as opposed for example to the “tokens” we use every day, money . A pound is a pound, a dollar is a dollar, they are fungible or interchangeable. In other words an NFT is a token that is unique and cannot be replaced, faked or messed with because it lives in the blockchain.
But what’s the real purpose?
The simplest way to look at an NFT in its simplest form, is as a digital asset with a certificate of authenticity. At the risk of explaining through a parallel with similar levels of obscurity, an NFT is like a lithograph in the painting world. Those are limited editions, technically more complex to produce, numbered and signed by the artist. Looking at them, they might look exactly like a print but they are technically very different and much more valuable.
One of the main aspects of NFTs is that they can be used to create digital scarcity in the same way that the painter can sell a single original or just 10 lithographs as a numbered and limited edition of an artwork.
But this is just one use case and the digital asset behind a NFT could also be a photo, a text, a game artefact or a video. More importantly, it can hold logic (a smart contract) and it can link back to real-life items or experiences. We’ll explore those a bit further.
Why are NFTs associated with monkeys?
Just because one of the most renowned NFT collection is called Bored Ape Yacht Club. There are only 10,000 of those and they’ve initially all been sold for 0.08ETH each (£163 at current exchange rate). Right now, buying one on the secondary market will set you back about 70ETH (£142,000). The market cap of those Ape NFTs is just about $2B, hence the slight fame.
Those bored Apes gave birth to the Mutant Ape Yacht Club, a collection that will reach a maximum of 20,000 items, created by exposing a Bored Ape to a vial of Mutant serum (obviously). The market cap of this side experiment is $700M.
What’s currently wrong for content creators?
Not a question you were going to ask but it matters to provide context. Put simply, Web 2.0, the internet as we know it, is really bad for content creators.
The current model we have is dominated by of few private businesses who have convinced us (the creators) to exchange our content (pictures, videos, meme, thoughts, etc…) for little hearts and thumbs up (Instagram pays you 0%, Facebook 0%, Twitter 0%, LinkedIn 0%). The “fairest” platforms still take margins that would sink most businesses (YouTube takes 45%, Google Play store and Apple’s app store take 30%, Amazon KDP takes 40% royalties share, Adobe Stock Images take 33%, TikTok pays $40 per 1M views, etc.).
Another example is Spotify, they have 8M artists on the platform but only 0.2% of them make a living (earn over $50k a year), even if to be fair it is also due to revenues needing to be shared with record labels, publishers and associations.
YouTube offers similar statistics with 97.5% of the creators on the partner programme earning less than $12,140/year, the U.S. poverty line. We’ll leave aside the fact that not all content creators are good, the main issue is that banner ads are not a great monetisation model.
The background to all this is that digital content is undervalued, we’ve got used to get it free because we both give it away or get it in exchange for our attention or our data (things we somehow don’t value at all). The losers are the content creators and the content consumers (even if we don’t realise it). There is potential for a fairer model with fewer (or less greedy) middlemen and NFTs could be a substantial part of the solution.
What is the value of digital art?
The question of whether digital art can be valuable has already been answered. The $20B+ market cap and continuous growth shows that, this ship has sailed.
We’re left with the question of whether the NFT market is currently over-valued. Everyone will agree that any piece of art can either have high or low value depending on whether or not it is in demand. The value we attribute to art specifically is extremely subjective because it is mostly decorrelated1 from the ressources taken to produce it.
Similarly, there are as many rubbish NFTs as there are unappreciated paintings in a car boot sale. Any piece of artwork only has the value that we attribute to them. I wouldn’t pay £10 for half the content of the Tate modern if I found it in a car boot sale, whilst I would spend £200 for a piece from an unknown artist because I just like it. Value is a matter of taste and means, it is subjective in the real and in the digital world.
What we also struggle to grasp is the concept of scarcity. Is there such a thing as a “digital original”? In the real world, the original is the very canvas that was painted on by the artist himself. In the digital world it cannot be the original 0s and 1s on a hard-drive, but it can now be the first NFT minted as a 1/1 by the artist himself.
Can’t I just right-click and save?
Yes you can right-click and save any NFT image, in the same way that you can take a picture of the Mona Lisa in the Louvre or find a photograph from David Yarrow online and print it yourself to save yourself £42,000. But you won’t own the Mona Lisa nor a David Yarrow.
The ownership has multiple aspects, from intrinsic resell value to the bond with the artist. If there is no difference to you then simple artwork-based NFTs are not for you and that’s not a problem, there are plenty more use-cases.
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