When you buy an NFT, what are you actually getting?
Behind the glamour, NFTs are more like hyperlinks than like files.
Non-fungible tokens (NFTs) are unique digital objects, traded on the blockchain. Mainstream observers have been suprised by the thriving market in art and collectibles managed as NFTs. Newcomers are curious where the value is, if the digital assets can be so easily copied. When you buy an NFT, you are purchasing your name at the top of the list of holders, as the current holder. You don't own the art, you own your position on this list. The value in the token comes from the link to the creator encoded as the cryptgraphic list of previous holders, more than the image, video or other asset. You are also buying the right to decide who is the next token holder. You could sell it or give it away. This ability to decide who is the next holder of the NFT is the core of what you are purchasing.
None of this has much to do with the copyright of the linked artwork. Does a spam NFT linking to a stolen image violate copyright? What about users minting “their” version of a famous meme, and trading the NFT with friends? By setting aside concerns about the attached content (image, video, html), we can see that the power is in the link itself.
NFTs are not about the scarcity of the linked image, they are a new type of link. A link that memorializes how it is shared through a community, and becomes valuable because of its history. A link that gains its uniqueness from human interactions.
There is enough power in this new kind of link, just because it tracks how it changed hands, to enable a market. A market of links!
Where does the value come from?
(This post is based on a twitter thread you can find here.)
When you buy an NFT, what are you actually getting?
— index.html (@jchris) January 24, 2022
The authentic link to the creator and the community of buyers, is encoded in that cryptographic list of holders. Without it, the NFT loses value. In the extreme case, machines link to an unsuspecting artist’s image, and make money from uneducated buyers. As more people understand that what they’re buying is a link with the artist and community, not the image itself, the public will become more educated about what’s worth buying.
Tools owe it to users to make validating the provenance of NFTs a core part of the experience. If my pfp is legendary because it used to be owned by a celebrity, I want the world to know. Those same tools will help devalue spam, and put guardrails to prevent accidentally purchasing stolen NFTs. Over time, people will learn what makes a good NFT, and scammers will find another playground. This same dynamic applies to any other market where counterfeits can make money.
The value we can draw from this interlocking web of cryptographic links is still unknown, we are lucky to be in a time when there is so much experimentation happening.