In the last two weeks, I wrote two articles about the blockchain, the underlying technology of cryptocurrency, and illustrated how its functionality is lacking, especially if the desired outcome is the wide adoption of blockchain in all aspects of life.
This week we can finally get to the topic of non-fungible tokens.
With the hype around NFTs exploding in the last half of 2021 and into 2022, it’s important to dive into the actual functionality surrounding it before we can dive into the cancerous cesspool that makes up its community of supporters because the claimed functionality is often hard to decipher from the actual functionality.
When first explained, NFTs seem like a couple things that they really are not.
One, no one else can own that piece of digital media anymore, two, the purchased item is the original media just transferred over to you, and three, the digital media is stored on the blockchain.
To illustrate why the first one isn’t really true, I want you to think of the Creightonian newspaper you are holding in your hand, and if you’re reading this online, then imagine your weekly, local newspaper. There is a limited number of that newspaper in existence, but the one in your hands is entirely unique.
If you were to trade that newspaper for a different copy, you would have received a different item back even though the content is all the same.
From this, NFTs are the attempt to assign a uniqueness to a digital object in the same way that your copy of the newspaper is strictly unique through the usage of the blockchain its stored on.
This means that you can’t be sued for right-clicking and saving someone’s NFT profile picture because they don’t own the digital art over all mediums just like how the French government doesn’t own every picture taken of the Mona Lisa.
The second isn’t true because of how NFTs actually work, and to explain this, we have to get a bit technical.
Starting with Ethereum, blocks put on the chain no longer had to be just made up of transactions. Instead, you could put small programs into a token, allowing for what are called “smart contracts,” that are then added to the chain.
When it comes to the standard, static images that come to mind when you think of NFTs, images like those horrendous cartoon monkeys, these are oftentimes connected to the tokens through a simple URL to the location of an image.
As a result, there is no guarantee that the image you bought as an NFT is actually the original; instead, it could be a copy that someone assigned a static URL to. It also doesn’t guarantee that what you bought was the photo in the link; it could just be the token and its corresponding link.
This revelation leads us to the third assumption made about NFTs, which is that NFTs are stored on the blockchain.
While it is true that some NFTs are stored there, most of the popular ones are either stored using an HTTP or IPFS protocol.
The former is how the vast majority of websites communicate data amongst themselves. Without getting too technical, websites are hypertext files stored on servers, and computers use HTTP to access those files. As a result, as long as those servers are up, then you can use HTTP to access your photo via the URL in your token.
However, because what you bought isn’t on the blockchain, you are entirely dependent on the server storing the image’s hypertext file staying online. The moment it’s turned off is the moment you no longer have access to your NFT, making ownership dubious at best.
IPFS allows for storage to exist on a network, so as long as one server in the network is still online, then your link won’t rot. This doesn’t solve one of the underlying issues though because anyone with access to the server could simply change the file name and suddenly you own a token that links you to a completely different image than at the time of transaction.
Altogether, this points to a multitude of problems that render the niche quirks of NFTs to a mere fantasy and highlight one of the glaring issues with not only NFTs but also the blockchain.
As mentioned earlier, NFTs are an attempt to replicate the scarcity of real-world objects like the finite number of copies of the Creightonian newspaper, yet what you’re buying as an NFT is really just the token, not the digital media itself.
In other words, it’s as if you bought the permission to read the newspaper, not the newspaper itself, and that right can be rescinded by anyone with access to the newspaper’s location.
Following from this, because there is no connection between the token and the image, you won’t be notified that your URL has now become a dead link or that your image has changed.
The relationships between the token and the image that you think isn’t important and the ownership you think you have are really just shams that can be used to trick you.
But why would an honest creator of a piece of digital media or art try to scam me?
Well, how do you know you’re being sold the original creator’s work?
Because of the nature of how blockchains are set up, there aren’t any mechanisms that can stop bad data from being posted to the chain so long as the data doesn’t contradict previous blocks. As a result, the beginning of the NFT craze in the summer of 2021 saw the selling of many artists’ digital work not by the creator but by actual thieves, but there was no system in place to stop it.
It is here that we run into two of the biggest failures of the blockchain. It incentivizes fraud, and the only way to fix it is to bring in the one thing cryptocurrency enthusiasts claimed they could do without, regulation.