You don't need to be angry about NFTs (Part I)
If you were never angry about JPEGs, you don't need to be angry about JPEGs people can own.
This post first appeared in Cointelegraph Magazine. The content is almost the same but Cointelegraph elected not to include the majority of the links, so while both make the same argument in the same way the posts here include more context, detail and footnotes.
You don’t need to be angry about NFTs
Towards the end of January one of my favorite content producers on the internet Dan Olson (aka Folding Ideas) published a video titled Line Goes Up — The Problem with NFTs outlining his complaints about non-fungible tokens (or NFTs). At time of writing Line Goes Up has accumulated >6m views — almost twice as many views as his next most successful video. That’s an impressive reach for a 2.5 hour documentary with very little marketing behind it.
In the film Olson lays out the following argument:
Cryptocurrency is useless except to sell to a greater fool.
NFTs [and DAOs and play-to-earn games] are just ways to find more fools.
The fools who buy in become accomplices in marketing the scam.
NFTs are ugly, centralized, pointless, exploit artists and damage the environment.
To be honest, the movie bums me out. Not because Olson doesn’t like NFTs — it is perfectly reasonable to not like NFTs. It bums me out because one of my favorite things about the Folding Ideas canon was how much sympathy he brought to previous subjects. Consider how hard Olson worked to humanize flat earthers or 50 Shades of Gray. In contrast Olson describes NFTs as ‘incomprehensibly tasteless’ and cryptocurrency enthusiasts as ‘terrible people’ with ‘poor judgment’ and ‘low social literacy.’ He calls Ethereum founder Vitalik Buterin a ‘butthurt warlock.’ He summarizes the entire space as ‘Amway but with ugly ass ape cartoons.’
In short, NFTs make Olson angry. He is not alone.
To be clear, I agree with a lot of Olson’s criticisms of the space. It attracts gamblers, fraudsters and fools. Motivated reasoning and dishonest marketing are everywhere. I have written extensively about what I think are the fatal flaws of Ethereum. I am very skeptical of DAOs and I don’t think the current generation of P2E games are compelling. Olson describes a lot of examples of shitty behavior and for the most part they are accurate descriptions — certainly there are plenty of similar examples that he could have used to make the same points. The history of crypto is littered with failed projects and overt scams.
The problem is not that Olson is wrong about the examples he identifies — the problem is that he is wrong about the conclusion that he draws. Some people misunderstand cryptocurrency but that doesn’t make cryptocurrency useless. Some people make bad art with NFTs but that doesn’t make NFTs bad art. Explaining the value of NFTs by finding the worst possible examples of how they are used is like explaining the value of the internet by making a list of the worst possible websites.
Olson sampled the NFT projects he describes by accepting random spam discord invites — which is roughly like evaluating average website quality by clicking on every spam email link. It’s a foolish way to measure average quality and average quality is a foolish thing to measure in the first place. The quality of the “average” website doesn’t really mean anything and doesn’t matter anyway — what matters is the quality of the websites you choose to interact with. The same is true of NFTs.
There is no such thing as NFT art
A common complaint about NFTs is that they are ugly (In Line Goes Up Olson describes them as ‘fugly,’ ‘garish’ and ‘incredibly cringeworthy’). But to anyone who understands NFTs it is immediately obvious that criticism makes no sense. Not just because art is subjective and no one has the authority to dismiss a genre of art as unworthy — but because NFTs are not a genre of art at all. NFTs don’t look like anything. They can be associated with literally any visuals or with no visuals at all. NFTs aren’t a style of art, they are a tool that artists can use.
There are NFTs for portrait photography, generative art, songs, virtual real estate, poems, memes, mood stones, video game items, financial contracts and athletic accomplishments. Here is an NFT that represents a work of 10^10 x 10^10 transparent pixels arranged recursively. Anyone who tells you that NFTs are ugly is telling you more about the limits of their imagination than about the limits of NFTs. It is like someone who has only ever watched Marvel films confidently asserting that movies are inherently unrealistic.
Cryptocurrency is useful (that’s why people use it)
Olson opens Line Goes Up with a description of the 2008 mortgage crisis and how Bitcoin emerged from it. His criticisms of Bitcoin are weak but are mostly not relevant to the argument he is making about NFTs — if you are curious to explore the case for Bitcoin in greater detail I recommend Letter to a Bitcoin Skeptic. It is interesting though to examine the broad strokes of the argument he makes because it is emblematic of how he misunderstands NFTs. According to Olson Bitcoin does not solve anything. As he puts it:
“Crypto does nothing to address 99% of the problems with the banking industry, because those are problems of human behavior. They are incentives, they are social structures, they are modalities. The problem is what people are doing to others — not that the building they are doing it in has the word bank on the outside.”
It is true that Bitcoin does not eliminate banks or the excesses of capitalism but in fairness I am not aware of any technology that does that. The idea that Bitcoin was meant to eliminate banks is a weirdly ahistorical straw argument. Satoshi himself talked about how banks would use Bitcoin. The purpose of Bitcoin was never to fix every problem in the economy — it was to make it impossible to debase wealth or censor transactions. Reasonable people can disagree about whether those problems are worth solving but Bitcoin does solve them.
Bitcoin may seem useless to Olson but it is useful to Alexei Navalny and the political opposition to Putin. It is useful to citizens of countries with struggling local currencies like Nigeria and Venezuela and Turkey and to ordinary people trying to flee Ukraine and Russia. It is useful to feminist protestors in Africa who were debanked by their governments and to women in Afghanistan who are not allowed bank accounts at all. Olson calls Bitcoin “the hobbyhorse of a few hundred thousand gambling addicts” perhaps because he does not know that Coinbase alone has tens of millions of active users worldwide.
You don’t have to believe Bitcoin is good to believe some people find it useful. But anyone claiming that Bitcoin is useless is ignoring the many ways it is already being used. Line Goes Up keeps returning to variations on this flawed approach: Olson lays out a problem he says NFTs were meant to solve, shows how that problem isn’t solved and then concludes that NFTs are therefore useless — without examining why people are actually using them.
NFTs are not pointless they are pointers
Olson argues that NFTs are pointless because they do not work as advertised. The images they reference can be lost or replaced. The same image can be minted into more than one token or into tokens on more than one chain. NFTs don’t prove the token creator was the artist and they don’t stop anyone else from having access to the image even without the token. Olson (correctly) points out that NFTs are not useful for proving authenticity and then (incorrectly) concludes that they aren’t useful at all.
NFTs cannot prove the authenticity of art because authenticity is a subjective assessment by the audience not a quality of the art itself. Different people can disagree about which version of a work of art is the most authentic or how much authenticity should matter. There is no technology that can prove authenticity because authenticity is not a technical property. That was never the point of NFTs.
What NFTs can prove is who made the token, who has held it and who owns it now. As Olson explains that isn’t the same as authenticity — but that doesn’t make it worthless. Documenting provenance for fine art is an expensive and valuable service in spite of the limitations — NFTs can provide the same service with much stronger guarantees.
Viewed through that lens it becomes clear why the critiques above are not interesting. Some NFTs have malleable images, some have permanent images and some have no images at all. Whether there are images and whether they can change is not a property of NFTs, it is a result of choices made by the artists. Concluding that NFTs are useless because the artist might surprise you with their choices is like concluding that paintings are useless because Banksy shredded one at an auction once.
There is nothing evil about Etsy
Of course, the argument that NFTs are pointless and bad art would be incomplete by itself because there is lots of pointless and bad art in the world and there is nothing wrong with that. Two thirds of Etsy would qualify as pointless and bad but no one would make (or watch) a two hour documentary about it. Arguing that NFTs are not good is not enough. Olson’s real argument is that NFTs are bad. He argues that NFTs are bad for three reasons:
NFTs are harmful to the environment
NFTs are dangerous to users
NFTs exploit artists
In the next post we’ll explore each of these arguments in greater detail.