Why Non-Fungible Tokens Suck

NFTs

NFTs are the newest rage from the libertarian tech-farms. You haven’t heard of them yet? Well, let me ruin your day.

What are NFTs?

NFTs, or Non-Fungible Tokens are, according to Wikipedia:

A unique and non-interchangeable unit of data stored on a blockchain, a form of digital ledger.

Er… what? Okay, so that was a really complicated way of saying ‘digital receipts’.

First things first: let’s talk about blockchain. Blockchain is the basis of Bitcoin and its progeny. For blockchain, you run a mathematical algorithm against a block of data to produce a digital signature. Then you can do that again with a new block of data, creating a signed chain that you cannot modify afterwards. You can build bitcoin ledgers from that tech, or things like NFTs.

An NFT uses the blockchain to store a specific bit of data combined with an owner of that data. That data can be a piece of digital art, or just a pointer to an internet address. The idea is that the NFT is a kind of receipt, allowing people to pass ownership around. That way, you can buy and sell things anonymously.

The libertarian wet Dream

I’ve already written a lengthy post about my dislike for Libertarianism. TL;DR: Libertarians believe that all individuals should act in their own best interest, and if we also declare ownership and contracts sacred and forbid violence, the world will become a utopia.

I believe that’s complete bollocks, because the possibilities of abuse are limitless, and it would almost certainly lead to a kind of feudal hell-hole of a society. I also think most of the people parroting the libertarian gospel would be stripped of their privilege and end up at the bottom of that particular food chain.

However, in the fantasy world of the libertarian, governments and institutions are what is holding their utopia back. So, they wish to abolish governments, banks, and anything that could infringe on their freedoms. They also love the idea of things like the gold standard, because they believe governments creating money from nothing creates inflation and dangerous currency bubbles.

But they need some way to replace contracts, ownership, and money, which are now concentrated in banks and governments. Enter blockchain. Blockchain allows immutable ledgers to be created, so you can create a currency without needing a centralized bank. And there’s Bitcoin.

NFTs are the logical next step, reframing ownership in a decentralized way by putting in on the blockchain. The idea is that you won’t need a government to enforce it. You’ve got the blockchain!

I guess the next thing on the list will be contracts and loans. Somebody is going to try and create blockchain contracts and some bitcoin exchanges will offer loans… Oh, those both already exist.

Over the Moon

Alright, so far for the theory. Now let me put my money where my mouth is and explain why NFTs are also inherently flawed.

For any system, NFTs included, it’s interesting to see how you could abuse it. If it’s easy to do, and hard to prevent or punish, you have a problem. Let’s look at the ways to game NFTs.

First off, NFTs are a receipt. They have a pretty limited legal status. It’s basically a digital piece of paper on which somebody wrote ‘User X owns Y’ and put it in an immutable data store. If you thought that NFTs actually grant you copyright of a digital piece of art, guess again. They don’t. They make you the owner of a single instance of a file.

So, if I wanted to sell my art multiple times as different NFTs, I could. Of course, that would probably torpedo my reputation the same way xeroxing a poster multiple times and selling it as original art would. Still, there’s nothing preventing me. And it’s decentralized, so it’s hard to check.

But, I could make it even less work for myself. I could sell somebody else’s art work! That does pose some risks, because I might be violating actual copyright law. Although policing copyright with anonymous owners and against a decentralized exchange would be problematic. Of course, I could also mint an NFT for some public work or other, no problem.

Finally, have you ever heard of websites where you can buy land on the moon? They exist, and you’ll get a certificate and everything. Legally speaking, they really offer you nothing — and violate an international treaty to boot. And that is what NFTs are: digital pieces of paper that supposedly say you own something with zero legality to them. You can sell anything, it means squat, and nobody is policing it.

Other problems

Aside from the above problems, NFTs suffer from three other problems.

The first and most prominent problem is the environmental impact of blockchain. NFT are the digital equivalent of using a world-wide network of oil-spill powered smoke signals to copy these vapid receipt ledgers. They are very energy-intensive and damaging to the environment. And in a time when we are on the brink of making the world uninhabitable for ourselves, maybe that’s not the best idea.

The second problem is fragmentation. Like the websites selling you the moon, there are many ways to run blockchains, and on any incarnation of blockchain you can run NFTs. So there are multiple ways to mint NFTs, and your precious receipt could vanish tomorrow if the exchanges and miners behind your brand of NFT go bankrupt or call it quits.

Although, if you cut out the static you’ll also find that actually, 90% of the NFT and blockchain markets are dominated by a small group of players. It’s not as decentralized as some of those in power of the scam like you to think.

In short, disastrous for the climate, and dubiously backed.

Bursting the bubble

NFTs are pretty worthless, but like tulips and any other goods, it is possible to get people to pour money in. Until the bubble bursts. In other words, you can run it as a gambling scam.

The problem is, NFTs are a nice libertarian gimmick, but without laws and a centralized government to enforce actual ownership and ensure continuity of the blockchain, they are nothing but digital vapor. People are now trading NFTs like crazy, claiming they’re in the ‘digital art’ business, but that’s BS. People are in the ‘digital art (re-)selling‘ business. NFTs have very little to do with art, they’re just a complicated way to make receipts that have been hyped into a gambling fad.

Because gambling fad is what it really is. People pour money in, hoping to get more money out when they sell the NFTs again. Heck, people are buying their own NFTs just to jack up the price (isn’t anonymity great, libertarians, protecting you from the bad government?). You can’t hang your NFT on the wall. Maybe you can put it in your Twitter status, but that’s about it.

It’s all about the quick cash grab, folks. When the wheel stops turning, some folk will be very rich, while others will be left with nothing. In other words: a scam.

Unless…

There is a chance that the NFT exchanges and reputed auction houses get on board and clean up their act. If they all band together to come to proper oversight, NFTs might actually become a way to own digital art. That’s what the NFT fanboys are proclaiming has already happened, and it might end up that way.

However, that won’t save all the folks getting scammed right now. I’ll be very surprised if the NFT of Jack Dorsey’s first Tweet will still be worth millions in a decade or so.

And I personally see NFTs as a failure state regardless of the outcome. Because a simple centralized registry for digital ownership would be far easier to build, and far better for the environment. But that requires something we seem to have abandoned in this age: trust. Even then, it makes digital goods, which are very cheap to copy, artificially scarce, which is just sad.

And so, the libertarian wet dream scam that is NFTs continues to slowly kill our environment.

For now.

Martin Stellinga Written by:

I'm a science fiction and fantasy writer from the Netherlands

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