In 1964, media theorist Marshall McLuhan wrote that “The medium is the message.” At the time, print, radio, and television were the dominant media. Today, McLuhan’s observation feels more prescient than ever. Consider NFTs, or non-fungible tokens, the provably scarce digital artwork and other digital goods that are enabled by blockchain.
NFTs have taken the art world by storm and are spreading through the culture. In Damien Hirst’s foray into NFTs, called The Currency, he sold 10,000 unique hand-painted variations on his “dot” works. Buyers also got an NFT of their piece. There’s a catch: In a year, buyers must choose between the physical painting or its NFT. Whichever the buyer doesn’t choose is going to be destroyed. Which medium do you think buyers will choose? McLuhan would recognize the significance of that choice instantly.
Art and other so-called crypto-collectibles are the main use-case for NFTs today, but in the future a wide array of unique digital goods and items will be NFT-based and allow individuals to move seamlessly their identity and digital possessions between different online ecosystems, platforms, games, and universes.
NFTs upend art and collectibles
There are three main categories of art/collectible NFTs. The first are collectibles tied to familiar cultural assets. For example, NBA TopShots NFTs capture highlights of favorite NBA players. The second are unique pieces of art, such as Beeple’s Everydays: The First 5,000 Days. The final and most viral category is generative art, often created algorithmically and usually issued in a series with a cap on the total supply, such as CryptoPunks. These have become the calling cards and digital identifiers of online communities of early adopters and because of that cache, certain series have become more and more valuable.
So why would someone buy an art NFT?
NFTs are financial assets that we can buy and sell. August 2021 smashed all records for NFT transaction values: OpenSea, a leading NFT platform, surpassed $3 billion in sales volume that month. Speculators are spending thousands and sometimes millions of dollars on the rights to own rare images. Tom Brady launched the NFT platform Autograph, and Steph Curry changed his Twitter avatar to an NFT he bought for $180,000 to align his brand with this emerging asset class.
NFTs are status symbols. As we spend a fourth of our time online, we care more about the presentation of ourselves in everyday digital life—the performative aspect of social interactions, as sociologist Erving Goffman described in his seminal work The Presentation of Self in Everyday Life. Costumes matter. When someone’s avatar is a provably scarce visual that the owner verifiably bought for $100,000, that image says a lot about its owner—namely, that the person is in on NFTs and immersed in cryptoassets (and probably quite wealthy).
NFTs enable fans and artists to connect. Of course, we could be cynical about NFTs as playthings for the super-rich. But most NFTs cost very little, and anyone can buy them. Many NFT collectors are fans; they don’t expect to sell their NFTs at a higher price. And many NFT creators are bypassing galleries and auction houses—centralized intermediaries and gatekeepers to the collector world—to reach their fans directly, engage with them around art, and retain more of the value they create.
The future of NFTs
Today, innovators are using NFTs primarily for art and collectibles, but we can harness them for greater ends. For example, NFTs will be essential to the growth of the shared-state metaverse, a super-immersive shared online state (perhaps one day paired with hyper-realistic virtual reality) where we can move digital objects between online environments in real time. For example, in the metaverse pioneer Decentraland, we can buy and sell virtual property among other things using the native cryptocurrency MANA. Decentraland helped seed the development and adoption of some of the more creative metaverse-crypto collaborations we’ve seen so far.
Consider Loot, created by prolific crypto entrepreneur Dom Hofmann, creator of Vine. Hofmann created 8,000 “LootBags” where fans could spend ETH (the native cryptocurrency of Ethereum) to create lists of words such as “Gold Ring” and “Divine Hood,” for some future undeveloped videogame. Within moments, all the Loot Bags were claimed. That’s when the fun really started: Communities of fans, artists and creators emerged to imagine how these assets might look, even minting NFTs of these derivative works. The value of LootBags with “rare” words skyrocketed in value. A whole game of games arose around Hofmann’s idea of a videogame—not an actual game.
In McLuhan’s day, an analog broadcast medium was transforming how we consumed information. NFTs and the underlying blockchain are a digital medium for value, changing the nature of digital goods, and how we consume culture and interact online. Why is this important? Enabling Digital assets that we can own, trade, and transport across different environments and jurisdictions could change our relationship to the Internet and each other.
Chris Dixon, a partner at Andreesen Horowitz, says, “Tokens give users property rights: the ability to own a piece of the Internet.” The ability to own unique and scarce digital assets—such as our digital identities—and move freely around the Internet without the risk of duplication or seizure by a centralized platform is a profound shift from how things work today. The medium is the message. Time to tune in.
Alex Tapscott is managing director of the Ninepoint Digital Assets Group (a division of Ninepoint Partners LP) and co-author of Blockchain Revolution. This article is for information purposes only and should not be relied upon as investment advice. The author or his employer may have investments in some of the companies mentioned.
More must-read commentary published by Fortune:
- Historically Black colleges can’t solve tech’s diversity problem alone
- Conservative business groups support the Equality Act. Congress should heed their call
- Stop shaming corporations with meaninglessly low effective tax rates
- How companies can capitalize on the coming boom in “smart assistants”
- The Great Resignation is upon us, and purpose can help you resist its siren call