Entrepreneurs

The NFT Emperor Is Wearing No Clothes

NFTsroughly described as digital collectiblesare climbing in value. Albert Fox Cahn is a technologist, social entrepreneur, lawyer, and civil rights activist with a skeptical take on the matter. 

Konstanze Frischen: Albert, NFTs—or non-fungible tokens—are digital assets driven by blockchain technology, and NFTs representing digital artwork can sell for millions. What do you say?

Albert Fox Cahn: When people spend a lot of money on something, we often think they have a good reason. When you see a pair of jeans going for $2,000, there’s the moment when you assume, “there must be something special about those.” But sometimes you see them up close and realize they’re just some overpriced denim. Just because someone’s willing to pay a lot of money in the moment, that doesn’t mean there’s truly long-term value there. Increasingly, it looks as if the NFT emperor is wearing no clothes.

Frischen: Why not?

Cahn: NFT backers will endlessly repeat a single word as their mantra of innovation: Authenticity. We are told how NFTs can create trust, prove authorship, and ensure that digital items are truly authentic. Except in rare cases, they do nothing of the sort. NFTs are a cryptographic receipt, but that’s all. If I sold you the Mona Lisa, you’d still be arrested if you tried to take it off the wall. And if I did the same via NFT, the process would be much more sophisticated, but the end result would be identical: you’d end up with nothing more than a receipt to something you didn’t own.

Frischen: What about digital art though?

Cahn: NFTs may represent an art piece—for instance a jpeg file. But anyone can download and copy that. NFTs are the digital equivalent of a graffiti tag in a world where everyone else also has spray paint. I can’t sell you the Brooklyn Bridge, but I can sell you an NFT of it. And so can anyone else. A bad NFT is like a notary’s stamp on a forged contract. The notary may assure you that the signature is valid even when nothing else in the contract is. There are a small number of artworks that are created by the NFTs themselves, where you have much more certainty the NFT is genuine, but that only represents a small fraction of the money invested in the field.

Frischen: What about the digital footprint of the author of the NFT that is contained in the encrypted data, vouching for authenticity?

Cahn: That proof of authenticity—I created that NFT—is just not worth the hype in my view. The reason is simple: An NFT does not prove the accuracy of a document’s content. The NFTs that can memorialize historic coverages from Time Magazine and the South China Morning News can also vouch for QAnon anti-vaxxer blogposts. The NFT can prove authorship—but it can’t say anything about the trustworthiness and ethics of the content of those posts. Garbage in, garbage out. 

Frischen: You’re saying NFTs are no more trustworthy than the human being who created them in the first place: They will be a tool for good actors, and for bad actors. 

Cahn: Exactly. It will be interesting to watch how artists and nonprofits will make use of NFTs to raise funds. But it will also be terrifying to see how violent extremists to do the exact same thing. And it will be fascinating to watch once the bubble bursts. And the bubble will burst. It’s a question of “when,” not “if.” 

Frischen: How can you be so sure this is a bubble and not long-term value?

Cahn: NFTs are just the latest part of a pattern of speculative technologies that get overvalued by the markets because they allow investors to make a quick buck. Once a new technology is making people lots of money, advocates are eager to justify its alleged social impact. This is how a digital notary stamp grew into the technosolutionism dream the NFTs present today. Those who are profiting off of record sales need a narrative that justifies their work as more than a crass cash grab. And those who have come to rely on the market as the ultimate barometer of value have to retcon a rationale for rampant speculation. What is so dangerous about this particular moment in my view is that we see this mindset moving from the fringes of discourse to our most trusted institutions. Not only are legacy media channels cashing in on NFTs, with The Economist being the latest—it just announced it will auction off its cover as NFT this coming week—but even our largest financial and civil society organizations are considering new block-chain based assets. But no matter how many billions we see pouring into this bubble, it doesn’t mean we’ll be any better prepared for the day it finally pops. 

Albert Fox Cahn (@FoxCahn) is the founder and executive director of the Surveillance Technology Oversight Project (S.T.O.P.), a New York-based civil rights and privacy group, and a visiting fellow at Yale Law School’s Information Society Project. 



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