The original GIF of Nyan Cat sold for about $580,000. Yes, you read that right. Anyone can look up and make a copy of the GIF, yet it sold for over half a million dollars. Lindsay Lohan sold a digital image of her face for $17,000. A tweet from Twitter CEO and co-founder Jack Dorsey sold online for $2.5 million. What is going on? Where is the value? These files exist for anyone to view on the internet.
In the wake of “GameStonks” and the rise of meme stocks this year, a new financial security class is emerging as a viral and disruptive player in both the finance and art worlds. Non-fungible tokens (NFTs) are unique cryptocurrency assets that are growing in popularity on online forums and well-established auction houses, quickly becoming an asset class worth more than $200 million. “What bitcoin has done to banking, NFTs are doing to the world of art and collectible objects,” said Chris Dannen to the WSJ.
While the GIFs or JPEGs in question still exist on the internet for anyone to copy, blockchain technology allows people to certify that they own the original. Merriam-Webster defines something as fungible if it is “something (such as money or a commodity) of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account,” so by definition, the new NFTs are unique assets. This is very different from typical cryptocurrencies like bitcoin, and conventional currency, which are both exchangeable by design.
On March 11, legendary auction house Christie’s oversaw the first-ever major NFT auction, with bidding ending at a staggering $69.3 million. The artwork, Beeple’s “Everydays: The First 5000 Days," marks a potential revolution in the art world. Auction houses may no longer be constrained by selling real assets. The universe of virtual creations is now available to be sold off to the highest bidder at sometimes staggering prices. NBA Top Shot, which is a “blockchain-based trading card system that has generated over $230 in gross sales” in less than a year, offers the opportunity to essentially replicate the trading card experience virtually by buying, selling and collecting NBA highlights.
However, the question remains: do these NFTs actually have value? If anyone can view the GIF or tweet, what is the point of spending exorbitant amounts of money on it? At the same time, if cryptocurrencies are becoming more accepted as valuable assets, then what is stopping NFTs from doing the same? It is important to note that even conventional currencies like the US dollar do not have an inherent value — they are fiat currency, not backed by gold or any other store of value. So, the question of whether something has value should be modified to whether the general public believes that something has value.
We do not yet know how NFTs will disrupt the art and financial world. The innovations of blockchain technology and the democratization of auction processes may allow more consumers to engage in the selling of art. At the same time, this technology may fade into obscurity or become what some critics accuse it of already: a money-laundering scheme where the wealthy can move their money around in murky crypto assets behind internet-based anonymity. When cryptocurrencies emerged in the financial world years ago, many critics laughed them off as ridiculous ideas. Now, however, the financial world is accommodating bitcoins and integrating them into their operations, and Tesla and other companies are accepting bitcoin as payment for products. Ultimately, only time will tell whether NFTs either grow or shrink in prominence. But I would expect a few more memes to sell for more than your house is worth, regardless.