As someone who writes about cryptocurrency and art (separately) for Aspire Research and other publications, I’ve been getting a lot of public relation emails about NFTs. A lot. I know earlier this year, an artist named Beeple sold “Everydays: The First 5000 Days” for $69.3M at an auction at Christies’ so maybe it’s big money that’s getting people’s attention.
I read this humorous example from a user named “queersamus”:
Imagine if you went up to the mona lisa and you were like “I’d like to own this” and someone nearby went “give me 65 million dollars and I’ll burn down an unspecified amount of the amazon rainforest in order to give you this receipt of the purchase” so you paid them and they went ‘here’s your receipt, thank you for the purchase” and went to an unmarked supply closet in the bank of the museum and posted a handmade label inside it behind the brooms that said “mona lisa currently owned by jacobgalapagos” so if anyone wants to know who owns it they’d have to find this specific closet in the specific hallway and look behind the correct brooms, and you went “can I take the mona lisa home now?” and they went “oh god no are you stupid? You only bought the receipt that says you won it, you didn’t actually buy the mona lisa itself, you can’t take the real mona lisa you idiot. You CAN take this though, and gave you the replica print in a cardboard tube that’s sold in a gift shop. Also the person selling you the receipt of purchase has at no point in time ever owned the mona lisa.
Unfortunately, if this doesn’t really make sense or seem like any logical person would be happy about this exchange, then you’ve understood it perfectly.
I vaguely knew what they were – something to do with unique digital images – but knew there was a lot of backlash against them from the artists I follow on Twitter. An artist tweeted last week that they discovered that their early work was turned into NFTs without their consent. The Atlantic previously published a piece about how NFTs don’t help artists. There’s also concerns about the environmental costs to compute NFTS.
But there was a lot of money involved so, as a researcher, I became naturally curious about what was going on. Chronicle of Philanthropy reported that New Jersey based health clinic Sostento received about $58K from the sale of “The NFT Guild Philanthropist – Healthcare Heroes.” The artist also matched the sale price. And most intriguing, Chronicle reports, “The NFT will also continue to benefit charities in the future. It was created with a provision that obliges proceeds of future sales to be given to charity.”
Light bulbs went off in my head, much like when I realized how useful 3D printing is after watching a TED talk on 3D printing organs to solve the organ donor crisis.
So, What Exactly is an NFT?
NFT stands for Non-Fungible Token. Investopedia defines it as “a cryptographic assets on blockchain with unique identification codes and metadata that distinguish them from each other.” Or more simply, it is a digital asset, such as a picture, a sound, etc. Wall Street Journal defines NFTs as “vouchers of authenticity for digital assets.” Someone likened it to like a trading card, which makes sense for me.
Harvard Business Review provides an in-depth explanation of what that exactly means:
NFTs have fundamentally changed the market for digital assets. Historically there was no way to separate the “owner” of a digital artwork from someone who just saved a copy to their desktop. Markets can’t operate without clear property rights: Before someone can buy a good, it has to be clear who has the right to sell it, and once someone does buy, you need to be able to transfer ownership from the seller to the buyer. NFTs solve this problem by giving parties something they can agree represents ownership. In doing so, they make it possible to build markets around new types of transactions — buying and selling products that could never be sold before, or enabling transactions to happen in innovative ways that are more efficient and valuable.
The thing that gets me in that description is the idea that “markets can’t operate without clear property rights.” Not sure if that makes sense since we have been functioning just fine on the internet without NFTs – for decades. Sharing images and videos without attribution is a problem, and tagging with data would help with that. Except you can still download an image and share it without crediting the creator if I understand things correctly.
Plus, there’s big concerns on how it isn’t doing what people hoped – helping artists. In the Atlantic earlier this year, Anil Dash who worked on putting together one of the first NFTs with artist Kevin McCoy in 2014 said, “Our dream of empowering artists hasn’t yet come true, but it has yielded a lot of commercially exploitable hype.”
He later writes, “In the meantime, the current NFT market is drawing an extraordinary range of grifters and spammers. People are creating NFTs of artists’ works without asking permission or even letting the artists know.”
Harvard Business Review does point out that NFTs are “a completely novel asset class and we don’t see new assets classes appear that often.” Granted we just saw the creation of crypto as its own asset, but it’s useful to think of it in those terms. Designating NFTs as an asset puts it in the same category as real estate, jewelry, and stocks and bonds.
And because it really sounds like an Onion article, Wall Street Journal recently tweeted: “Your grandmother gave you cash in an envelope for the holidays. Should you consider giving her an NFT or cryptocurrency?”
The Chronicle of Philanthropy pointed out that NFTs occupy an in-between space from a regulatory standpoint: “Regulators, including the Securities and Exchange Commission, are beginning to examine how and when to treat NFTs as collectibles or securities. The eventual result of those decisions could have ramifications for charitable-accounting offices.” Cryptocurrencies, in contrast, right now are treated as property, not securities.
The Gift that Keeps on Giving
But the second part of the explanation about “enabling transactions to happen in innovative ways” does catch my eye. We already see it with respect to the Sostento gift above; subsequent sales of the NFT will give a portion back to charity.
Chronicle of Philanthropy also reported how other nonprofits are making money off of NFTs, like Beneath the Waves that auctioned off “dozens of NFTs that each represent a real-life shark tag, with starting prices ranging from $500 to $20,000. The owners get the right to name their tagged shark and will receive updates on its movement through the oceans.”
Macy’s auctioned off ten of its Thanksgiving Day parade balloons as NFTs and planned to give the money to Make-A-Wish Foundation of America. And if they are resold, 10% will go to Make-A-Wish.
Recently, Shutterfly announced that it was auctioning off NFTs featuring fashion icon Iris Apfel to raise money for Boys & Girls Clubs of America. One-hundred percent of the proceeds will be given to the nonprofit, including a $25K donation from Shutterfly.
Now all that is very intriguing to me.
But that’s not all. Harvard Business Review points out that NFTs are almost functioning like memberships that get you into special communities. For example, “The Bored Ape Yacht Club, comprises a series of NFT ape images conferring membership in an online community. The project started with a series of private chat rooms and a graffiti board, and has grown to include high-end merchandise, social events, and even an actual yacht party.” Restaurants are reportedly using NFTs for reservations as well.
This might have some interesting uses by nonprofits, especially museums and other membership based nonprofits.
Digging into NFTs has been useful to deepen my understanding on a topic that I had initially written off. I see the potential, but the environmental costs, the unregulated landscape, and the challenges that artists are facing are some big problems. I’m not quite on board in the same way that I am with cryptocurrencies.
NFTs are so new, in a way that cryptos are not, that I think with time and some regulation, maybe NFTs could develop from “passing fad” and grow some legs. I’m thrilled that charities are using NFTs to generate donations, whether by accepting NFTs (through sales) or auctioning them off.
What is your organization doing about NFTs? Is your organization ready to accept cryptocurrencies? Please comment and let me know. I’d love to hear your experiences and thoughts about it!
- Crypto, NFTs and Tungsten Cubes: A Guide to Giving Cash in 2021 l Wall Street Journal, 12/21
- Crypto-Based Digital Art Frenzy Draws in Charities l Chronicle of Philanthropy, 12/21
- Macy’s Turns Thanksgiving Day Parade Balloons Into NFTs l Wall Street Journal, 11/21
- NFT / Non-Fungible Token / Crypto Art – A quick analogy on what an NFT is l Know Your Meme 2021
- NFTs Weren’t’ Supposed to End Like This l The Atlantic 4/2021
- Non-Fungible Token (NFT) Definition l Investopedia
- Printing a Human Kidney l TED Talk
- Shutterfly Partners with Fashion Icon Iris Apfel to Launch Exclusive NFT Holiday CryptoCard Collection l Business Wire 11/29/21
- What is an NFT, and how did an artist called Beeple sell one for $69 million at Christie’s? l Washington Post 3/2021