The Puzzling Case of NFT Ownership

People are spending millions on NFTs. But what does it really mean to own something on the internet?

More than a decade ago, Anand Venkateswaran, an app developer and Vignesh Sundaresan, a journalist, met at a canteen in Chennai. On March 11, they paid $69.3 million dollars for a piece of artwork that does not exist, at least in the physical realm.

The said piece, titled ‘Everydays: the First 5000 Days’, is a giant collage of digital artworks made every single day over the last thirteen years by the prolific digital artist Beeple, or Mike Winkelmann. Spanning almost half a billion pixels, it was sold as an NFT, or a ‘non-fungible token’, thus becoming the third-most expensive artwork by a living artist.

NFTs are the new biggest thing in the world of cryptocurrencies. In the simplest of terms, they are digital certificates of authentication that can be attached to any media file, from a basic image or a gif to MP3 or video files. NFTs work on the same principles of blockchain technology, a decentralised digital record of information stored across thousands of computers that is virtually impossible to hack or forge. Thus, each file attached with an NFT becomes a unique token which can be then bought and sold over the internet using cryptocurrencies (like Bitcoin or Ethereum), but is not exchangeable — or, — with another token.

Back in 2014, when the notion of verifying digital artwork was first conceived, it was done so with the intention of supporting artists and protecting their creations. Even though the internet has made showcasing your work easier than ever before, it has also rendered artists prey to piracy and left them helplessly at the mercy of giants like Spotify and Youtube. NFTs could have been a solution, but today, just like any other tech-world innovation, it has been grappled by those doggedly in power. So, while they have done little to support the lesser-known creators, NFTs are now also responsible for releasing obscene amounts of carbon emissions into the atmosphere.

Beeple, however, was no such lesser-known artist. He had already collaborated with Apple, Louis Vuitton and several high-profile music artists like Justin Bieber and Imagine Dragons. He had previously sold a few of his artworks to Vignesh, who goes by the pseudonym of Metakovan and is a self-described blockchain and crypto investor based in Singapore.

Beeple posts his Everdays on his social media platforms, and organises them in ‘rounds’ on his website — one round for one year’s worth of daily work. These images, dabbling in genres from neon Suprematism to kitsch political and social satire, are all accessible at zero cost to the public. So what are Vignesh and Anand (who goes by Twobadour) paying the big bucks for?

Beeple’s “Everydays: the First 5000 Days”

Experts will observe that when you are paying for an NFT, you are paying for owning a private authorised piece of artwork in a sea of widely circulated images on the web. Caitlin Ostroff, Markets Reporter for The Wall Street Journal says, “The idea of NFTs is that you have this digital signature in the way that a work of art would have the signature of its creator.”

It isn’t the first time that an art auction has people scorning at the ginormous price paid for an artwork. The commodification of art began well in the late seventies, with American artists like Warhol and Lichtenstein succeeded in creating a brand surrounding their name and started specifically catering to collectors.

In the subsequent decade, the art world was overrun by the top one per cent posing as collectors. Aided by art advisors, for them, buying paintings was akin to building an investment portfolio; bidding in auctions like trading in the stock market. By the turn of the century, the perverse correlation of art and money had already taken root in the society. However, the dawn of NFTs has brought about the shelling of similarly exorbitant amounts for things which have no real, physical existence.

This begs the question, what does it mean to own something completely virtual on the internet, a question which can be circled all the way back to the very premise of ownership of an artwork. But the dynamics of ownership are significantly different here, for instead of owning a piece of art, or even the rights to that art, what you’re buying is essentially a token; as Caitlin Ostroff puts it, “a string of numbers and letters containing encrypted information, thus ensuring its authenticity and scarcity.”

While the authenticity is true for every NFT, the ‘ensuring scarcity’ part is where the idea loses some of its charm. NBA has recently launched Top Shot, a platform where fans can trade ‘moments’, or officially-licensed video highlights from NBA games as NFTs. These videos are available to watch on the internet, even as the exact replicas of the digital cards. Currently, the most expensive traded moment stands at $387,600. In February, the famous 2011 meme gif Nyan Cat — a cartoon cat hopping through space with a Japanese pop song in the background — went for just under $600,000.

This mind-boggling state of affairs is most likely a sign of the times we’re in: transitioning from an age of mechanical reproductions to that of digital ones. Not more than two decades ago, if you had to watch a movie or listen to an album, you had to go to a store and buy physical media. Today, you can stream virtually anything on the internet. So while you don’t possess any of it, with internet, you gain access to all of it.

Philosophers have long argued about the aura of possessing material things. Owning a signed copy is just a way of augmenting that aura. By associating historicity or verifiability with an object — from a Monet to meme gifs — you are increasing its sociocultural, and thus its economic value. “When you can endlessly reproduce things you lose the aura,” says The Verge’s deputy editor Elizabeth Lopatto. “NFTs could be a way to reintroduce the aura of a physical object back to an infinitely reproducible digital object.”

Regaining this feeling of ownership may be alluring, but as of now, it is merely that: a feeling. Still in its nascent stage, while there is no clear set of rules or regulations to define the ownership of NFTs, an even bigger issue looms: the technical difficulties associated with safeguarding this feeling of ownership.

Most popular NFTs today are built on the same fundamental principles: The blockchain token you buy points to either a URL on the internet hosted on a server, or more securely, an IPFS hash using a gateway. These contain the JSON metadata referring to the actual file. However, these servers and gateways are mostly run by NFT startups. Both of Beeple’s major sales so far have taken place on such platforms: Nifty Gateway hosting a server for his first sale, and Makersplace running an IPFS gateway for his second sale at Christie’s.

Nifty Gateway says that it is a ‘premier marketplace for digital items you can ’; Makersplace’s description of itself is not much dissimilar. These startups were founded barely a few years ago, capitalising at a time when people needed a platform for trading NFTs. If, or when these startups go out of business, they’ll almost certainly cease to host any servers or run any gateways, and without them you’ll lose the metadata and the digital file, which the precious NFTs point to. In other words, if Makersplace were to go bust tomorrow, Metakovan and Twobadour’s $69 million investment could potentially end up as a 404 error.

This lands digital ownership on a very slippery slope. Software engineer Jonty Wareing wrote on Twitter, “Right now NFTs are built on an absolute house of cards constructed by the people selling them.” Although new technologies are being developed for safer storage for NFTs, without any regulating body, there’s little to no incentive for those already in the business to switch to a different protocol in the future, nor is there any scope for an industry standard that can incorporate ownership of digital properties into something tangible.

Although some see the idea of NFTs and digital ownership as a disruptor in the art market, I can’t help but think that this is only a natural progression for the field. As for all the other gifs and basketball highlights, it simply appears to be a case of rich people left stuck inside their homes for too long. On March 4, a blockchain firm burnt an original Banksy and broadcasted it live on Twitter. The print itself was a critique of the art market, depicting the pandemonium at a Christie’s auction. The company bought it at $95,000 and then sold the video of its incineration as an NFT for $380,000. The original title of the artwork? “Morons”.

Reading and writing about tech, culture, history and business most of the time. Find me at adwipal@gmail.com

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