Non Fungible Tokens

An interesting question last week.

A reader emailed to ask if I plan to release any NFTs of my work.

I’m going to say no. If you’re not familiar with the term NFT, it’s an acronym for Non Fungible Token. Basically, an NFT is a unique identifier that is stored on a distributed digital ledger (commonly called a “blockchain”) of the sort that is used to power digital currencies like Bitcoin and Etherium. The idea is that you purchase this unique identifier, and then it’s permanently written into the distributed digital ledger that you are the owner of this unique identifier. The NFT can be used to identify the purchaser as the exclusive owner of some sort of limited-edition digital property – a song or a picture or something of that sort. Of course, there’s nothing to stop other people from copying the actual song or picture or digital property, but you have this NFT that says you’re the exclusive owner.  It’s sort of like a Certificate of Authenticity.

Now, if this sounds like you’re basically just buying a database entry instead of something of actual value, like land, lumber, a savings bond, or a bag of potatoes, then you see the basic problem with NFTs.

Anyway, I don’t plan to release any NFTs for five reasons.

1.) I don’t have the time, and the reward doesn’t seem worth the effort. And, overall, NFTs seem like a solution in search of a problem.

2.) NFTs right now are in the “financial craze” or “gold rush” state, like tulips in 17th century Netherlands or Beanie Babies in 1990s America. Remember Beanie Babies? They were people – actual people with apparently actually functioning brains – who thought that Beanie Babies were a sound investment that would hold their value in the future, and so spent vast sums acquiring Beanie Babies. This didn’t work out so well. A few people actually do make money during these sort of crazes, but most people don’t, and really unlucky people lose a whole bunch of money.

3.) Individual blockchains appear and disappear all the time. You could buy an NFT tied to a specific blockchain, but if people stop using that particular blockchain, the NFT will be worthless.

4.) Cryptocurrency in general is too unstable for me. I’m also unsure about its long-term viability. People like to talk about the difficulties with “fiat currency” – ie, currency backed by a government, but for all its many well-documented problems, fiat currency generally works because the government has more guns and nuclear weapons than anyone else. Governments, in general, do not care for competitors. My gut feeling is that cryptocurrency will last right up until major governments decide it’s a threat to tax revenue, and then they’ll simply make it illegal with the penalty of long prison terms.

Or, perhaps, this is a more likely outcome:

5.) Cryptocurrency/blockchains/NFT are a viable technology, but it’s too early, and the ultimate boring practical use for them hasn’t been found yet. Like, for example, a technology for encrypting Internet traffic called Transport Layer Security, which grew out of an older protocol called Secure Sockets Layer. If you’re looking at this website, you’re using TLS, and you likely didn’t even realize it. Computer cryptography in general used to be very dramatized and contentious – people used to think it would make institutions and governments obsolete, while governments feared unbreakable encryption would make it impossible to maintain public order. But computer cryptography now is simply part of the boring background tools of everyday life. Everybody uses it, and usually without thinking too much about it. (Indeed, with all the high-profile hacks lately, we probably need more computer cryptography, not less!)

Probably that will be the fate of blockchain-based technology – eventually it will be integrated into other things in a way that average person simply doesn’t think about, the way most people don’t think about Transport Layer Security, public/private key encryption, and TCP/IP when they buy something off Amazon, even though those technologies are integral to the experience. (Kickstarter is starting to experiment with something like that with blockchain technology.)

However, it’s too early to know what form that will take.

In the end, I think NFTs are like Betamax, HD-DVD, and perhaps the NeXT computer – too-early forms of an eventually mainstream technology.

-JM