On March 22, Twitter CEO and co-founder Jack Dorsey sold the first tweet for $2.9 million. The sale brought attention to the growing phenomenon of non-fungible tokens (NFTs). Simply defined, an NFT is a digital item with a unique blockchain-enabled proof of provenance. You can find a more thorough and fun definition of NFTs in this story from The Verge.
NFTs are most commonly used as a means to sell “original” versions of digital art, but as Dorsey’s tweet sale shows, they can also be used to sell historical digital artifacts. Creators of program code, game artwork, early graphics or sound files, or even online forum conversations can place them an NFT platform and offer them for sale.
But should they? And if they do, should you buy an NFT as an historical artifact?
I say no to both. Here’s why:
NFTs aren’t really the original item
This is likely to be debated, but to me the original version of a digital artifact resides on the medium where it was created. If Bill Gates still has the original Altair BASIC lying around, he could theoretically sell it as an NFT. All that NFT is, though, is a copy of the original with a blockchain confirmation that it came from Gates. It’s the only version with that kind of digital provenance (maybe, I’ll get to that later), but it’s not the original. Dorsey’s tweet, for example, is still viewable on Twitter. If you buy an NFT, what you get is essentially a receipt that it came from the creator, not that it was the first version.
There are other ways to prove provenance
Hobbyists, collectors, and historians have many ways to document the authenticity of a digital artifact. The computer industry and internet are young enough that many of the people who created these artifacts are still alive. A rich record of print and photographic evidence exists as well.
NFTs are exactly the same as any other digital copy
With digital artifacts, the medium on which they are found are a big part of their stories. Which would you rather have: the original paper tape version of Altair BASIC or its NFT? The choice is obvious. Again, the only difference between an NFT and the digital item itself is the blockchain receipt.
NFTs appeal to speculators
Was Dorsey’s tweet really worth $2.9 million? Absolutely not. The money went to charity, which always inflates auction prices. The winning bidder said he wanted to “emphasize the importance of NFTs on [the] future of crypto and tech sphere.” By crypto he means the highly volatile cryptocurrency markets. Some NFT platforms are run by cryptocurrency exchanges like Ethereum. NFTs are also believed to be involved in money laundering.
The association with cryptocurrencies makes the NFT market unpredictable. Digital art is bought and sold on NFT platforms for digital art using cryptocurrencies. Let’s say you bought that Altair BASIC NFT for a cool $1 million. A relatively small downward trend in cryptocurrency values could have a disproportionate effect on the value of your investment. On the other hand, a wild upward swing might mean early retirement, if you act fast. NFT markets are not for hobbyists or collectors; they are for speculators looking for trophies and maybe a big payoff later.
You might not really own the NFT
Owning an item usually means you can do whatever you want with it. Not so with NFTs. Buying an NFT is really just buying its token, not the digital artifact. That token might comes with certain rights such as copyright. In some cases, there is nothing preventing the seller from creating another NFT on the same or very similar item.
Blockchain is hackable
Blockchain has a reputation of being bulletproof, but it is hackable and expensive NFTs make an attractive target for cybercriminals.