Why is something you can copy for free valued at tens of thousands of dollars?
Many years ago I was at the San Francisco Museum of Modern Art and had an experience that prepared me for the coming of NFT’s.
As we were walking through I was struck by a particular piece. Not because of how remarkable it was, but by how unremarkable it was. It was a painting of a square, inside of three more squares:
I thought to myself: What in the world am I looking at? It’s literally just some squares. The plaque read: Josef Albers, Homage to the Square.
“This is the dumbest thing I have ever seen,” I told my wife. “I could paint this. Anyone could paint this. Why is this valuable?” I left the museum feeling slightly annoyed.
It wasn’t until later that I had a complete change of heart.
It’s true that even me, a complete non-painter, could probably reproduce this painting easily. That would not be difficult.
But creating a painting of squares is not the performance. The performance is having a painting of squares displayed at the Museum of Modern Art.
That is not something I had the ability to do. There is a difference. Hanging up on that wall means prestige, rarity, value, and scarcity.
NFT’s are obviously having a moment. The basic concept is that you can have an image (or any file really) that instead of being a file sitting on a computer, its ownership is inscribed on a crypto blockchain. Since this record is strewn across a multitude of computers that all need to agree, no one can create another one, and no one can claim ownership except the designated owner. (There are caveats but that’s the gist)
One hilarious part of this is the practice of seeing someone pay tens of thousands of dollars for an NFT image, displaying it proudly as their Twitter profile, and then getting trolled by others who right-click, save, and display it on their own profiles.
“This is the dumbest thing I have ever seen. I can just right-click and save. Why is this so valuable?”
I didn’t know the answer to this question until recently when Twitter shared their early rollout for upcoming NFT integrations:
The special profile shape certifies that Twitter was able to verify that the owner of this account does in fact own this particular NFT on the blockchain. Similar to the “verified” blue check, it is a marker of authenticity by their platform.
That verification cannot be replicated by right-clicking and saving. It can only be replicated by purchasing the NFT.
That is the conceptual leap that crypto enthusiasts have already made, and expect the rest of us to make. Right now we are in a nascent wild west period where very little of our world acknowledges the blockchain as the source of truth.
However, presumably that period will eventually end. As more and more products and platforms shift their sources of truth to the blockchain, this will add new functionality to NFT’s and other crypto assets that cannot be replicated. Sites, apps, social networks, and products will be verifying crypto ownership and working it into their experiences.
Anyone who has purchased a virtual good in a free-to-play game is familiar with this concept. An example: In the free-to-play game Genshin Impact you can pay big money to acquire valuable character like Zhongli:
“Why would anyone pay money for this? I can just take a screenshot of it.”
Well obviously, no, you can’t. A screenshot of this character will not let you play with him. A screenshot will not let you attack with it, level it up, use it in your gameplay. It’s just a picture.
That is to say: the game Genshin Impact has built additional functionality around the ownership of this character. This additional, exclusive functionality is what makes it so much more valuable than a free screenshot.
Right-Click While You Still Can
This is the future that may be coming. Over the next few years, more and more functionality will be built around these NFTs that right now are simply screenshots. There will be platforms that do not allow them to be displayed without blockchain verification. There will be digital art displays that can only display the NFT-verified version. There will be animations, visual effects, or interactions that don’t work unless it’s the real deal. There will be use cases, things you can do with it, that only work with the original NFT.
In other words: the differences between an original and a copy will not be indistinguishable. They will be obvious.
How long will this take? How many platforms need to get on board? What are these new use cases? Will negative backlash (like what is currently happening in the gaming community) prevent it? And will anyone care?
We don’t know the answers to all these questions yet – there could be a whole other post on the downsides facing NFT’s versus the upsides. I personally think while there are enormous challenges to overcome, the opportunity and incentive is enough that NFT functionality (and thus value) will continue to grow. And if there are enough uses built, we can bet that people will likely care very much.
Thanks to Brian Tinsman and Devesh Khanal for feedback on this post.
Opinions are my own and not of my employer, and do not reflect knowledge of any upcoming releases.