(Image: Mitchell Squire/Private Media)

The first time most of us heard of the NFT — the non-fungible token — was in April last year when an NFT of the collected works of the digital artist “Beeple” sold for $69 million. But they’d been selling for a couple of years before that, at ever-rising prices, among the digirati and cryptocurrency worlds.

The astronomical price for the Beeple archive brought them into our world, as did a few other gimmicky events, such as Jack Dorsey selling an NFT of the first tweet for $3 million.

The immediate problem for most of us with this new phenomenon was the question of what “NFT of x” could possibly mean. The experts began to explain, rather badly. The non-fungible token is a certificate on a blockchain “attached” to a digital image or recording or artefact which, it was suggested, guaranteed unique ownership of the digital element in question. However, the ownership of the NFT doesn’t include the copyright or any capacity to prevent the circulation of the digital element as infinitely as it was possible to do before. 

So what do you actually own? What you own is the blockchain certificate itself, which states its own relationship to the digital element in question. The value is ostensibly anchored in scarcity — the blockchain ensures that your NFT certificate cannot be faked (the blockchain being the mass distributed digital ledger ensuring the authenticity of cryptocurrencies, i.e. fungible tokens. The creation and reproduction of the blockchain is the hardcore maths that constitutes the “mining” by which new bitcoins, etc come into being. Sorta). 

That, among other things, is what appears to be so strange about the rise of the NFT. They’ve been around since 2014 when they were created more as part of the experimental interface of digital art and the new blockchain technology, then in its brief flourish as a utopian, libertarian technology, promising liberation from state control. A video called Quantum was registered and then sold from one artist to another — for $4. 

But the expansion of NFTs went nowhere, with collections released on the Ethereum platform (the second most prestigious cryptocurrency after Bitcoin) going unsold. It took the development of a bunch of other things — simplified smart contracts, “stablecoin” (less fluctuating crypto) and DeFi or decentralised (i.e. blockchain) finance — before NFTs started to gather pace. Celebrity adoption across 2020 was crucial. And then in 2021 it exploded. 

One could see that as a “threshold push” event — buying, owning and selling NFTs was now so smooth as to remove all specialisation to it — but also as a result of wider events, that being that there is so much money floating around untethered to the ground level economy, or accumulating in mid-level wealth, that it is continually seeking out new sources of sudden growth arising from early market entry. NFTs, as currently constituted, are an indication that a new level of economic imbalance has occurred. 

Imbalance of a more than economic nature, of course. For what is bizarre is that NFTs are not merely a bubble dependent on “late, stupid money” buying out early money, but a bubble which is completely and visibly so. For crucially, in most NFTs’ smart contracts, no intellectual property is written in — the artist or issuer retains it. Now most issuers aren’t the artists themselves, and there’s no visible distinction between IP and non-IP NFTs. Indeed, not only does the NFT not confer commercial IP rights, it limits the holder’s rights to non-commercial personal use. 

So what is being bought, and who’s buying it?

According to a Harris Poll study, purchasers are overwhelmingly millennials who divide sharply into two groups: investors and collectors. No surprises there. Any such market depends on collectors to provide the base value that the investors can build on, even if, as with the art market from the 1980s onwards, investors price the class of objects (a Van Gogh, for instance) out of collectors’ reach. For the investor, the object is literally nothing — oftentimes they want it transferred to a storage facility, so long as they have a provenance document. 

What’s new is that the “something” in which the collector invests value is now nothing. The relentless hype of NFTs throughout 2019 and 2020 appears to have convinced enough early adopters that they are purchasing some sort of relationship with admired works, even though they acquire no unique presence of the work — or notified investors that collectors were on the way. And they came. People who collected “nothing”.

This is a strange form of exchange and valuation. Is it time limited, parasitic on existing collection, so that it will eventually and rapidly fade? In eastern Europe, after the fall of the Wall, the most ludicrous Ponzi schemes flourished in the Balkan backwoods, one bankrupting the entire nation of Albania. They worked once, because people had no experience of money as anything other than scrip for purchase, non-investible. When the first huge returns from these schemes started to pay out, they had no way to assess their own magical thinking about money’s capacities.

Does the continued collector demand for NFTs indicate a strange new relation to the loved object, so vestigial that the collector does not care that none of it is going to the artist, to another collector, to the community — but is instead going in the other direction, away from direct creators? This is particularly so, as the NFT, far from securing value, can be diluted by multiplication.

The new site Hitpiece, which promised to issue an NFT for “every song in the world”, has taken its site down because it didn’t own the rights to any songs at all. But it wasn’t breaking any laws — it’s just the actual artists were so pissed off it was causing bad publicity. And nothing could stop anyone from starting “Token Sounds” and issue new, parallel NFTs for the same songs. NFTs’ most promising application appears to be in money-laundering, where users are willing to take a loss so long as they can rapidly jump in and out the other side of a sale in an unregulated market. 

The celebrity link would appear to be the “external guarantor” — or purported guarantor — of value. When Paris Hilton and US late-night TV host Jimmy Fallon discussed their purchase of Bored Ape NFTs live on air, the values of these things went through the roof. In that respect it appears to act as an analogue to the notion of “genius” that helps secure the art market — the agreed-upon cultural valorisation of a Van Gogh or a Jackson Pollock.

Such valorisation only starts to become wobbly when the art in question is that of the ’80s or later, and was clearly, self-consciously made for the market. At that point, works such as those of Damien Hirst and others rise and fall more precipitously. The initial valorising appears to occur only with works that were done without reference to money or accumulation, the myth of the unrecognised genius, thus anchoring their works’ subsequent total exchangeability and status value. Celebrity boosting is usually the sign of a Ponzi scheme, and it may be in this case. But it is also possible that celebrity is now such a part of a global cultural system that it can sustain such instruments well beyond their expected life. 

Whatever the historical lead-up to this strange situation — in which the bubbled object does not end but starts by offering no ownership of concrete value whatsoever — what does the NFT craze say about the economy now? In the scheme of things, they’re a small and specific market so far, which institutional investors have only just started to move into. But they are rising in an economy where everything else — major stocks, turnover, even bonds — are falling as the globe tightens. Is this a sign that magical thinking is seeping from the wilder parts of tech into the culture itself as the dolorous truth revealed by COVID becomes ever more visible? Are people that delusional?

Which reminds me, this article will soon be available for your personal collection…