A Blog by Jonathan Low


Apr 27, 2021

The One Redeeming Quality of NFTs Might Not Even Exist

Purchasers of NFTs own an original, not the original. JL

Kal Raustiala and Christopher Sprigman report in Slate:

Owning an NFT combines traditional status seeking with a 21st-century icing of crypto-cool. (But) the  technology used to store the work—the peer-to-peer “InterPlanetary File System”—creates many copies of the file and distributes them to many computers connected to the network as a form of distributed storage. “Whoever got that Monet can actually appreciate it as a physical object. With digital art, a copy is literally as good as the original.” What’s important is “the flex of owning an original Beeple.”  Except, of course, the owner doesn’t actually own it.

When Christie’s auctioned for $69 million a “nonfungible token,” or NFT, linked to the digital collage Everydays: The First 5000 Days, many people asked WTF was an NFT? And why was a relative unknown artist by the name of Beeple now the third-highest selling living artist—for a digital work that the new owner can’t even hang on the wall?

The ensuing media frenzy proved that NFTs have successfully consummated a buzzy marriage of cryptocurrency and contemporary art. But they have also been touted as solving the authenticity problem that plagues digital art.

The hallmark of any digital work is that it can be replicated—perfectly, endlessly, and virtually without cost. But if you bundle the artwork with an NFT, then you have a way, some argue, of identifying the “authentic” copy. As the New Yorker recently put it, “imagine digital Beanie Babies, but with only one existing copy of each.” That supposed rarity helps make sense of the lofty price tag for Everydays, as well as for the many other NFTs out there linked to digital works ranging from tweets to music videos.

David Hockney, the 83-year-old British painter whose pop-art masterpiece Portrait of an Artist (Pool With Two Figures) briefly held the record ($90.3 million auction price in November 2018) for price paid for the work of a living artist before losing that title to Jeff Koons’ sculpture Rabbit ($91.1 million auction price in May 2019), is skeptical. On an art podcast, Hockney recently said, “What is it that they’re owning? I don’t really know.” NFTs, Hockney said, are the domain of “international crooks and swindlers.”

Hockney may have a point. If you look at them closely, NFTs do almost nothing to guarantee authenticity. In fact, for reasons we’ll explain, NFTs may actually make the problem of authenticity in digital art worse.

The first barrier to understanding NFTs is the amalgam of techno-babble and art-world nonsense used to describe what they are. The difficulty starts with the name. On one level, it usefully distinguishes NFTs, which are a blockchain-based technology, from other blockchain-based currencies like Bitcoin or Ethereum. The latter are “fungible” in the sense that any one Bitcoin is worth the same as any other. NFTs are “nonfungible” in the sense that each is unique. It is this feature that people point to when they say that an NFT can be used as a token to identify an “authentic” digital artwork.

Let’s turn back to Everydays and see if that argument holds up. The Christie’s description of the auction states that Beeple will deliver a copy of Everydays—a 500-megapixel image with a file size of about 300 megabytes—to the buyer. That feature makes this transaction resemble a typical art sale—buyer pays money; artist delivers “authentic” artwork. But unlike a painting or a sculpture or even a traditional photograph that has been created by the hand of the artist, there are countless perfect copies of Everydays floating around on the internet, copies that are indistinguishable from the one Beeple delivered to the buyer.

In fact, the very technology used to store the work—the peer-to-peer “InterPlanetary File System”—creates many copies of the file containing Everydays and distributes them to many computers connected to the network as a form of distributed storage. If you want a copy of Everydays, just go here.

Because there are so many copies of Everydays floating around, and because those copies are precisely the same down to the last pixel, it is very difficult to assure anyone that what they have is the original/authentic/canonical copy. That’s true even if we agree on a convention that would anoint the copy Beeple delivered as the “real” one. In any future transaction, making sure that the seller delivers that same copy to the buyer, and that the copy previously transferred has not been replaced by another, identical copy, would be very difficult or even practically impossible. But once you understand what the NFT is and how it actually works, you can see that it does nothing to permit the buyer, as the New Yorker put it, to own a “digital Beanie Baby” with only one existing copy. In fact, the NFT may make the authenticity question even more difficult to resolve.

First, the “nonfungible” in “nonfungible token” refers to the token itself—that is, to the block of code that makes up the NFT, and not to the artwork that an NFT is associated with. NFTs are often shorthanded as “linking” to an artwork, or “pointing to” or “representing” it. But those characterizations are misleading. NFTs identify a particular digital artwork only in the most general way: They contain a “hash” of the artwork as part of the code that makes up the NFT, and some contain a link to an internet address that displays a copy of the artwork.

A hash is a code that’s generated by passing all the data in a digital file through an algorithm that outputs a short alphanumeric “signature.” Here’s the hash for Everydays:


A 256-bit hash like this one is surpassingly difficult to hack. So for all practical purposes, no two files that contain different data, even if the differences are small, can have the same hash. However—and this is the most important point—if the same encryption algorithm is used, every file containing the same data has the same hash.

What does that mean for the Everydays NFT the buyer at Christie’s paid $69 million for? The NFT’s code contains the hash for the Everydays file, Beeple’s cryptocurrency wallet address, and the address for a smart contract that governs how transactions in the token will take place. And that’s basically it. Which means that the NFT Christie’s auctioned is useless to identify an “authentic” copy of Everydays, assuming we can even agree which copy of Everydays is the authentic one. (Perhaps it’s the copy that Beeple generated originally, which is probably not the copy that the Beeple delivered to the Christie’s auction buyer, unless Beeple also delivered the storage media originally used when the image was created.)

Whatever the “original” copy of a digital work like Everydays might be, the NFT doesn’t help identify it, because the NFT does not identify a particular copy at all. All it does is tell you whether any particular putative copy of Everydays contains the same data as the file from which the hash was originally generated.

In other words, the NFT tells you whether you have a copy. It does not tell you whether you have the copy.

It’s true that some NFTs contain a link to an internet address that displays a copy of the artwork. But that doesn’t help resolve the authenticity question, either. There’s no easy way to establish whether the copy linked to the NFT is the authentic copy, assuming, again, that we even have agreement on what the “authentic” copy is. Indeed, even the image that appears on your screen when you access the link recorded in an NFT isn’t the authentic copy—it’s a display of another copy that is made in the memory of your computer.

Understood this way, NFTs sound less like guarantors of authenticity and more like an updated version of Sol LeWitt’s wall drawings. LeWitt famously broke new ground in the art world by selling artworks that consisted of instructions explaining how to make a drawing, along with the right to create the drawing the instructions described. All the instructions can tell you, standing alone, is whether a particular piece of wall art conforms with what the instructions describe.

So to understand whether a drawing you see on a wall that corresponds to the LeWitt instructions is an “authentic” LeWitt, you have to know something about who produced that particular drawing, and whether they did so with LeWitt’s authorization and according to LeWitt’s instructions for that work. You have to know, in other words, all the messy details—chain of title governing the property and the rules governing its use—that are difficult enough in the physical world but much worse in the digital world, where perfect, exact copies proliferate by design. (Note that unlike with LeWitt’s instructions, you can’t use an NFT’s hash to actually create the artwork. Hashing works in only one direction.)

The Christie’s auction isn’t purporting to sell art that’s an executable idea, like a Sol LeWitt wall drawing; it’s purporting to sell a Beeple artwork, the “monumental digital collage” Everydays. But Christie’s hasn’t sold the artwork Everydays. Nor has it sold a unique copy of Everydays. Nor has it sold a piece of technology that is capable of identifying a unique copy of Everydays. It’s simply sold an NFT.

All of which opens up some interesting possibilities. What if Beeple creates another copy of Everydays, generates a new NFT, and Christie’s auctions that? The terms of the auction—at least judging by the information that Christie’s has made public—do not seem to prohibit this. But if making new copies has been banned, that has nothing to do with NFTs. Nor has it anything to do with copyright law. In fact, copyright law explicitly reserves to the artist the exclusive right to make copies of her work. Remember that when an artist sells an artwork, she retains the copyright unless that is also sold—a transaction that copyright law requires to be in writing. And so any commitment by the artist not to proliferate copies of a digital artwork, which she might then issue accompanied by new NFTs, would be written into an old-fashioned contract.

So, NFTs don’t help resolve the question of authenticity, and in fact, they might make things more complicated. How? Because anyone can make an NFT of any digital artwork. Making an NFT doesn’t involve copying, distributing, or displaying the artwork itself, and so copyright law is not implicated. And in fact, many people have made NFTs of others’ artwork, and each one is owned by a different person. Which means that not only are NFTs useless at distinguishing the authentic copy, they also can add a lot of spurious and potentially confusing information about ownership—at least if you take NFTs seriously as stating some sort of ownership claim to a particular piece of art.

In short, NFTs may seem to have repealed the laws of economics, but they cannot repeal the laws of intellectual property

So what explains the NFT gold rush? Some allege pandemic boredom; others, an undue fascination with anything blockchain. (Remember the Long Island Iced Tea Corp.’s stock went up 432 percent after it changed its name to Long Blockchain Corp.?) In the case of Everydays, some even allege an elaborate conspiracy between Beeple and the buyer.

But NFTs are probably better explained as a 21st-century potlatch. As Thorstein Veblen famously explained more than a century ago in The Theory of the Leisure Class, the wealthy, especially the newly so, are drawn to “conspicuous consumption.” Displaying, and even heedlessly destroying, wealth becomes a mark of status.

What makes NFTs especially interesting as a social matter is that they are the latest and greatest example of what we might call “virtual Veblen goods.” To economists, a Veblen good is something consumed for its ability to (supposedly) confer status through conspicuous consumption (say, fancy Champagne brought over in a nightclub by servers holding sparklers). Veblen goods are more attractive the more expensive they are. The cost is the point.

And just as more of life has moved online, so too has status competition. Instagram is perhaps Exhibit A—all that thirst!—but while you can buy followers and fake photos, what’s depicted in your feed is usually tangible, real things and places (even if you didn’t visit them).

NFTs are different. The consumption depicted is not lapping up a lovely scene in Bali but a digital product that no one can ever touch or feel. It references an artwork as a signal of connoisseurship but actually dematerializes the act of consumption. What’s purchased is not the art but a token of it—something no one can see, or, in all likelihood, resell. (Who would want to be the second person who pays to not own Everydays?)

In short, owning an NFT combines traditional Veblenesque status seeking with a 21st-century icing of crypto-cool. As the Verge wrote in its NFT explainer, “Whoever got that Monet can actually appreciate it as a physical object. With digital art, a copy is literally as good as the original.” What’s important is “the flex of owning an original Beeple.”

Except, of course, the owner doesn’t actually own it.


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