🗝 NFTs are good for us

TL; DR – NFTs can build a healthier digital world. They’ll do this by letting us own digital things people have made: giving our lives more meaning and deeper relationships.

Few technologies split opinion as much as non-fungible tokens, or NFTs.

Most of the time, the debate centres on why they cost so much. Using a few outliers, sceptics focus on the absurdity of paying millions of dollars for some JPEGs. And evangelists claim that their value lies in originality, status, scarcity, or whatever the buyer makes of it in a free market.

Some of the sales are too ludicrous to defend, and I’ll get to that later on in the piece. I’m here, though, to go beyond cost and value and make the ethical case for NFTs centred on the concept of ownership.

By letting us own digital things, NFTs can move us towards a better world.

Ownership is at the essence of what an NFT is. They are digital certificates proving something belongs to you that anyone can verify on a public and distributed blockchain. Just like a receipt might prove you own something in the physical world. An NFT—whether it points to a piece of digital art, digital clothes, digital furniture, or whatever—proves you own something in the digital world.

So why will NFTs – and ownership – move us to a better world?

Ownership is meaning.

To own something is an act of commitment. The thing you own costs something, so you’ve made a material sacrifice to get it. By doing that, you’ve set a stake in the ground for the kind of human you are and want to be.

The Polish sociologist Zygmunt Bauman gave us the concept of liquid modernity.  Modernity, Bauman posed, was defined by constant upheaval in identities and relationships. In this constant change, the individual made sense of their place in the world by understanding themselves as a “tourist”, curating their life with multiple, fleeting experiences. Contrasting the tourist was the “pilgrim”, who searched for deeper, more solid meaning.

Bauman wrote in 2000, but the subscriptions and pay-for-access models most modern internet companies push have accelerated his thesis over the last 10-15 years. You pay for Spotify to access audio. You pay for Netflix to access TV and movies. You pay AirBnB to access a place to stay. You pay Uber to access a ride.

These experiences are defined by their convenience. But with convenience comes a fleeting, ethereal relationship to the things you access. They cost less. They need less sacrifice. And so, they hold less meaning.

By contrast, owning something is investing in it, for its utility and for what it says about you. 

Buying an album or having a collection of movies (on a physical or virtual shelf) states and shapes your identity. Buying a house or car says something about the person you want to become.

Here’s an example with NFTs. Earlier this year, Mike Winklemann (aka Beeple) famously became the world’s third-richest living artist by selling a NFT collage of his digital art. 

The First 5,000 Days, by Beeple. Source: wikiart.org

In their blog, Metakovan and Twobadour write about why they bought it:

And Beeple, the muse for this frontier madness, is the artist of our generation. Look at the first (top-left) picture in his Everyday series all the way diagonally to the bottom-right. The story of the 5000 is simple. Start somewhere, be genuine, be consistent, work hard, and you will find success [my emphasis].

They found meaning in the digital artwork. It says something to them about the life they want, and owning it crystallises that.

Crafting a life that means something to you has been at the centre of philosophical traditions, from Aristotelian telos, to Kirkegaard’s authenticity. Virtue in these traditions requires deliberate action to build the good life. Deliberate action is investment in commitment and finding meaning in things. It means setting a stake in the ground for the person we want to craft.

It means ownership.

The idea of authentic ‘originals’ of virtual things is counter-intuitive. It goes against our “Copy > Paste” mental model of the digital world, where everything is free and infinitely replicable. With an authentic version of a thing, comes scarcity – there’s only one original. With scarcity, comes cost. With cost, comes investment. With investment, comes ownership. With ownership, comes meaning and a flourishing life.

That’s one reason NFTs are good for us. 

Here’s another.

Ownership is a more direct and sincere relationship between creator and buyer.

Humans are social creatures. A great deal of our happiness and meaning comes from our bonds with others. Close relationships, more than money, fame, or even health, are what keep people happy throughout their lives (according to one of the longest ever studies of human life).

The internet was meant to give creators more and deeper connections to people who appreciated and brought their work. Kevin Kelly summed up this optimism in 2008, when he wrote that the internet could connect creators to their 1,000 (or so) “true fans”.

These true fans would give creators a flourishing life. Through the happiness that comes from a close relationship with someone who admires your work. And through financial security from those fans devotedly buying your creations. In turn, we would all get a more social and expressive world.

Reality has worked out differently. In 2021, centralised platforms mediate almost all our relationships on the internet. Most obviously, they take a majority of the buyer’s money, benefiting from the creator’s creativity. Spotify, valued at over US$50bn, pays artists $0.004 per stream. The creators who make YouTube what it is see a small fraction of its US$15bn annual revenue. 

Centralised platforms affect the buyer-creator relationship in other ways too. They provide stringent limits on what a buyer accessing the creator’s work can and cannot do. They channel and funnel what buyers’ access through their algorithms and interfaces. Their incentive in the relationship is to collect data and to leverage network effects, for their own ends.

When there’s an intermediary directing and benefitting from the relationship, the link between buyer and creator is weaker, less genuine, and less sincere. Someone else controls it. 

NFTs can take away this middleman. In this, they represent what’s exciting about all crypto more generally. Cryptocurrency like bitcoin means two parties can transact without a third-party bank needing to record or verify the transaction. And NFTs mean musicians can sell originals of their digital music directly to fans, without Spotify. Or writers can sell originals of their digital writing, without Medium or Substack. 

Without third parties, the creator can take a much larger share of the revenue. The world of 1,000 true fans supporting a creator comes much more financially plausible. 

There’s a few reasons for this. Creator royalties for resales seem to be standard practice for NFT sales. On Foundation (a NFT marketplace for creatives), the creator gets 10% of any secondary sale of their NFT. Platforms also don’t take as big a cut. For instance, Opensea and Mirror take no more than 2.5% of the sale. 

And a lot of the hype and energy in this space is on Reddit threads and Discord servers. Buyers aren’t directed by the incentives and algorithms of big platforms to find and love creators. Instead, people in communities form bonds, buy from and support each other, and bonds are deepened. 

Remember also: an NFT is worth something because of the certificate of authenticity marking it as the creator’s original copy. So the buyer-creator relationship sits at the core of the transaction and the value. It’s hugely significant, and like all significant relationships it makes us happy and gives us meaning.

Say you go out to eat at a local restaurant, where you know the owner. You’d get joy from the food, and more joy from the human connection. NFTs will work the same. You’ll get joy and meaning from the thing, and joy and meaning from knowing, trusting, relating to the person who put their heart and soul into the thing.

Above all, these are direct and sincere relationships. A directness and sincerity born from disintermediation. A directness and sincerity that gives buyers and creators more flourishing lives.

NFTs synthesise the old and the new. They represent the immortal value of ownership and meaningful relationships. Yet, the certificate of authenticity is on the blockchain, and it points to digital goods in an increasingly digital world.

The future is promising. The today is messy.

NFTs are a technology that can take us to a flourishing world. But right now, they’re falling short. 

Here’s three reasons why.

NFT ownership reflects the massive inequality in access to crypto and capital.

Right now, NFTs are a hobby for millionaire crypto enthusiasts. Mostly white, mostly male, mostly wealthy. Case in point: NBA trading cards and highlight reels is one of the highest-earning NFT projects to date.

As is too often the case, tech perpetuates inequality. Those with capital (cryptocurrency + time to dive into the NFT rabbit hole + access to tech) can own NFTs. Those without this capital, can’t. 

This inequality isn’t just true on the buyer’s side. Creators with social capital sell the most expensive NFTs. Beeple already had 1million+ followers on Instagram before he sold the First 5,000 Days. Instead of Kevin Kelly’s world – many creators, each with 1,000 true fans – we have a few getting all the reward, and a long tail getting left further and further behind.

There’s reasons to be hopeful. Conceptually, NFTs are a force for equality. They decentralise power away from platforms and wealth away from institutions, and towards individuals. They’re also a way for people to earn crypto that isn’t mining or trading. Instead, anyone (in theory) can earn through craft and creativity. As more people join, more and more diverse communities will form, more people will buy things, and more creators will create (🤞🏽). 

Besides inequality, I also think the wealthier you are, the less you have to give up to buy something, the less meaning you’ll get from it. As I said earlier, meaning comes from sacrifice and commitment. The smaller the sacrifice, the less it’s part of your journey to craft a good life.

Couldn’t we put that money and creative energy to better use?

To be honest, sceptics are right to say that paying $400k for digital whales, or $70m for Beeple’s digital art, is ridiculous.

Also, this is happening:

NFTs seem absurd because of how trivial they are, compared to the very non-trivial challenges the world faces. It’s not only the money changing hands, but the tremendous amount of talent and creative energy plunging into NFTs. It’s a stretch to accept that it’s a good use of the world’s scarce resources, while millions around the world suffer from illiteracy, infectious disease, climate crises, and anxiety.

But there’s also some incredibly meaningful NFT projects out there. They’re raising money for everything from feeding the hungry to removing ocean waste. Beyond NFTs, tokens are creating communities to mobilise community giving and action in New York and support ecological causes. Yet, for every one of those, there’s 10 NFT projects that feel like rich kids buying toys and moving money around.

NFTs are at the start of their journey. In the long run, that journey can take us to an exciting, flourishing place. Right now, it’s working through a messy phase of speculation, volatility, and hype. It feels like a bubble, though just like the dotcom bubble of the late 1990’s it also feels like there’s something substantial below the hype that needs time to figure out. I’ll be honest: it’s cringe, mad, unethical, exciting and profound all at the same time.

NFTs are being brought for their exchange value (i.e. to sell on for a profit).

This Wild West is breeding a particular kind of NFT owner. One who is only interested in making a quick buck, and doesn’t derive meaning or value from the NFT itself. If this is what you’re using the tech for, then the tech definitely isn’t good for us.

It can be a more nuanced story though. 

Here’s a take from Metakovan and Twobadour (the guys who purchased Beeple’s art), in that same blog I referenced earlier:

As the space expands, it becomes vital to have access to NFTs that carry a narrative, as well as financial upside. You can’t have one without the other. 

And they’re living this perspective. The two are wrapping up their digital art (including the First 5,000 Days) into a museum, and you can own a piece of it in the form of B20 tokens. If the art appreciates in value (as they expect), so does your token. You get rewarded for your support of the art, and the project. The earlier you support it, the bigger your reward.

But this means you also see the art (and every other NFT you own) as an investment. It’s no longer just the actual NFT, or the relationship with its creator, that’s giving you joy and meaning. It’s the financial upside too. Karl Marx would say you’re no longer buying it for its use value (how much it satisfies your needs), but for its exchange value (how much you might get for it at some point in the future). If NFTs scale, everything could be “financialised”.

There’s plenty of scenarios playing out. You might be into NFTs for the financial return (bad). You might be in it for the ownership, meaning, and direct relationship with the NFT’s creator (good). You might be in it for both (okay). The financial return might hook you in, and then lead you to finding meaning through the NFT itself (good). You might be in it for the ownership, get financial upside, and reinvest this in more creators and NFTs you love (great). I’m optimistic, because I think there’s more good scenarios than bad ones. And the status quo today of mediated access is a bad scenario. 

Everyone thinks differently about NFTs. Depending on who you ask they’re a straightforward scam, a reflection of the absurdity of modern life, the future of capitalism in the virtual world, over-hyped, or enlightened. 

For me, they are a signal to a better world. What’s good about NFTs are eternal truths that have always been markers of a good life. What’s bad about them will, hopefully (but not definitely) balance out in the long run.

They’re showing us a better world is possible, but not getting us there yet. We’re just at the beginning. There’s a long way to go. 

Onwards 🚀

🎬 Thanks to Dan Hunt, Zachary Fleischmann, David Burt, Christine Cauthen, Theresa Sam Houghton, and Sam Auch for looking at drafts of this.

🤔 Got thoughts? Don’t keep them to yourself. Email me on asad@asadrahman.io. Let’s figure this out together.

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Banner depicts “Impressionism” by the digital artist Hangmoon, created in Painstorm Studio (digital painting software). From: deviantart.com.