Estimated reading time: 7 minutes

v1 of this article has been published on Nov 25th, 2021 under the same title.
Following great additional feedback, here is v2.

Unless you have been living under a rock in recent months, you’ve probably heard of NFTs. 

I certainly have, and I am trying to document my discovery of web3 technology, philosophy, and memes, mainly to gather and organise my thoughts. I hope that this can be helpful to anyone following the same journey.

This piece is not an in-depth analysis and won’t be very technical; you probably won’t learn much if you already know what NFTs are. If you don’t, though, I hope to shed a little light on the matter, starting with some parallels between NFTs and the world you already know.

Definition

Let’s start by unwrapping the acronym. NFT stands for Non-Fungible Token. “Fungible” is the characteristic of something that one can replace with something similar that performs the same function—like money, for instance. 

Speaking of money, an old joke I heard as a kid about this dude asking his employee to go buy him stamps and cigarettes illustrates quite well what “fungible” and “non-fungible” mean. 

“Here’s 20 bucks for the stamps, and here’s 20 for the cigarettes.” 

So, the employee leaves, but he still isn’t back an hour later. Angry at this point, the boss goes out looking for him and finds him sitting on the curb, a $20 bill in each hand, looking lost. 

“What are you doing?” he yells. “I have been waiting for you for an hour!”

“Sorry, boss. By the time I got here, I couldn’t remember which bill was for the stamps and which one was for the cigarettes.” 

The boss, angrier now, replies, “Did you lose your mind? So you can’t remember which bill is which? And you waited here for one hour? How do you think I can remember now, an hour later, which bill is which?”

It’s moderately funny and illustrates quite well that money is fungible. A $20 bill is a $20 bill, regardless of its purpose. It can be used for something different and replaced by another bill of the same amount, or even a mix of different ones.

Non-fungible is the opposite; it characterises something unique that one can’t replace. Paintings, sculptures, antiques, domain names, apartments—the list is long and probably open to debate as the fungibility of some items might be subjective. What’s unique for one of us can be a commodity for another. An apartment can be the irreplaceable acquisition of a lifetime or just a place to stay for a bit when any other would do. You can buy a painting because it makes you feel something unique or decorate an Airbnb where you’ll never even sleep.

For the sake of simplicity, let’s limit today’s exploration to art, specifically digital art. 

Property

For better or worse, the notion of private property is at the core of our societies. It is interpreted and handled differently depending on each country’s regime but is always central to it. Current capitalist societies rely on protecting private property as the primary source of value creation. Communist governments have tried suppressing it, and aristocracies around Europe wanted to limit it to an elite for a very long time.

Various ways to certify property and enforce ownership have existed for years in the online world, the most common being end-user license agreements (EULA), software licenses, and Digital Rights Management (DRM).

These mechanisms are better suited to manage one-to-many or many-to-many relationships like proprietary or open software licenses, music or movie distribution. 

Until recent years, no mechanism was available to reliably certify an individual’s ownership of a single digital artefact.

The first role of an NFT is to provide a property certificate that is easily verifiable and impossible to falsify. (This is where I usually feel the need to add a caveat because I fundamentally do not believe in anything being absolutely secure, but we’ll leave my paranoia for another day).

Originality

You’ll hear this time and time again: “In the digital world, there are no originals because digital copies are perfectly identical to the original. Therefore, they are all originals; it’s all the same”.

While this is technically true, it’s also not new to the digital world. Several techniques existed before computers and the internet to create identical copies, like photography, serigraphy, and cast metal sculptures.

I am not an expert in this field, and I suspect that laws regulating these matters are quite different across countries. Still, let’s take the example of France, where I studied photography, and which has a very mature art market. The law defines a limited number of copies, signed and numbered, that the author has directly contributed to as originals. 

(From: Décret n°95-172 du 17 février 1995)

While the maximum number of originals varies across media of expression, the central ideas are the involvement of the artist across the entire process; their signature; and a limited, numbered series.

There is an anecdote about Pablo Picasso having dinner in a restaurant and drawing on a napkin. At the end of the meal, the restaurant owner allegedly offered to not charge for the meal in exchange for the doodle, to which Picasso agreed. When the owner remarked he had not signed the napkin, Picasso replied: “I want to pay for my dinner, not buy your restaurant”.

It is another way to say that most commercial value comes from the certification that the drawing is an original Picasso than the doodle itself.

The second role an NFT plays is to provide a digital signature of the artist and proof of uniqueness. If part of a limited series, the NFT can certify that the work is part of the collection.

Protection

“But I can right-click and save, duh!”

Yes, you can go to a museum and take photos of the artwork there. You can even buy relatively cheap copies of any painting by any master in the world, made with paint and brushes, just like the original. You can hang them on your wall, and that’s fine. 

Similarly, you can right-click on any digital artwork, save it, and use it as your desktop background. That doesn’t make you the owner of it.

And you might be perfectly ok with this. And it’s ok to be perfectly ok with this. As long as it is for your usage, no one cares. But, if you try to profit commercially from these, then digital or not, the law will remind you that there is indeed a difference between an original and a copy, no matter how similar they look.

It is the beauty of art, and it’s even better with digital art. Some people don’t care, some like looking at or listening to something, and some people like to collect. Others use it as value storage and invest in art. Al these approaches and many others are simultaneously possible.

For those who care about ownership of the originals, NFTs make it possible to buy and sell digital works of art while guaranteeing each piece only has a single owner at any given time.

Transparency

While the roles described above are merely the digital transposition of legal instruments available offline for years, what is new with NFTs is the visibility and transparency of transactions.

It’s not always possible to know who is behind each NFT purchase, but the transactions and amounts are public—unlike most traditional art markets.

Transparency is a fundamental improvement in any market or industry. I can’t think of an area where secrecy is fundamentally positive for users and maximises the overall value. The domination of the software industry by Open Source is an excellent example of that.

Future

I get a sense that, by being deeply anchored in modern technologies and memes, NFTs are attractive to a much younger population than traditional art markets. And, on the other hand, considering we are already 20% done with the 21st century, it’s probably good to refresh things a bit. (Picasso, after all, would be 140 years old by now.)
I warned you at the top that I wasn’t going to go very deep. I am still in the exploration phase. If you are impatient, I recommend checking out these Twitter threads. Still, I will circle back to NFTs soon to relate my practical experiences registering p3ob7o.eth, a domain name living on the blockchain as an NFT, and my first collection of photographic NFTs, “Bims”.


Many thanks to Sam for the incredible feedback.