NFTs Are Signatures That Come with Artworks
Non-Fungible Tokens are a real mind fuck. It forces the question—why does art have value and where does the value reside?
In traditional fine art, the artwork and the stamp of authenticity are fused as one. When you buy a Picasso, the signature is embedded in the artwork. Some artworks come with a separate certificate of authenticity. When the artwork is sold, the buyer gets both the art and the certificate. If the artwork is not provably authentic, it is worthless. Likewise, the certificate is worthless without the art.
NFTs de-couple the art and the certificate. The art itself is often just a high resolution JPEG stored on the public cloud. The certificate is an ERC-721 token on the ethereum blockchain. The JPEG has no digital protection of any kind and can be replicated infinite times. The certificate is protected by strong cryptography and cannot be replicated.
When an NFT is sold, in theory the buyer gets both the art and the certificate. But in practice, they are really buying the certificate. The underlying artwork is just a file in the cloud—anyone with the link can download it, replicate it, and enjoy it. But only the buyer gets the certificate—the string of magic numbers that say—I am the true owner of this work.
NFTs are a mind fuck because they decouple the art from the signature. Never in history has an artwork and the abstract idea of its authenticity been de-coupled. When this occurs, where does value reside? Common intuition would say the value resides in the artwork. Empirical evidence—in the form of people voting with their wallets—suggests the value resides in the signature.
What do “signature”, “certificate”, and “authenticity” mean? It is the artist’s declaration that “this is a genuine article of my work”. A Picasso that has a perfect chain of evidence proving its authenticity is worth millions. A perfect replica without proof of authenticity is worth nothing. The fact that both pictures have equal “utility” as wall decorations do not influence their respective value.
At the end of the day, NFTs have value because society values the artist’s intention. Each NFT is minted by the artist. It is the artist saying: “here is my work, there is only one of this piece1, and here is the secure token to prove it.” Society respects this narrative and pays handsomely for it.
Someone who stumbles upon the source file, copies it, then tries to sell it will find no buyer because the artist did not authorize the new copy. It is a bootleg—a perfect bootleg—but a bootleg nonetheless. And society does not value bootlegs.
Ultimately, NFTs prove that society respects artists.
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Credit goes to Nic Carter and Griffin Cock Foster for inspiring this piece. Thanks to Nic Carter, JD, and Althéa Labré for providing comments and feedback.
Even when multiple copies are issued for the same work, each copy has a unique number. The lower numbered copies tend to be more valuable.
A week or so ago, neitherconfirm exposed an exploit where he used the edit feature to replace purchased jpgs. It reminds us that the system is a little immature still, and has its bugs to work out. I have spent so many hours seeking exploits in software, and its kind of neverending. Do these services have a bug hunter program like other well endowed companies use? How fast can we expect NFT blockchain systems to mature to the point we feel our purchases are safe?
The interesting take in all of this is that value is conferred to the NFT-backed certificates (and not the art itself) because as you put it "people are voting with their wallets -- and that means society respects artists" (my paraphrasing of your point).
I respectfully disagree *at this point in time.*
My conjecture is that it's more likely than not that the money in the wallets used to buy the beeple, etc. NFTs that we see being purchased recently is a bit different than money used to buy an iPhone or a sandwich, i.e., it's *probably* coming from people who have been the beneficiaries of large gains in crypto value appreciation -- as opposed to money earned by your plumber for his plumbing job. If you're a newly minted crypto millionaire, or even *just* a hundred thousand-aire, and you use $40,000 USD worth of your crypto lottery winnings (not meant to be derogatory, but lets call a spade a spade) to buy a beeple... is the beeple really worth the same as a $40,000 Picasso?
Think about it :)