NFTs and the Copy-Paste Conundrum
Happy Monday!
Every week, I find there are more people who want to know about NFTs. A lot of people when they first see NFTs (and see how much people are spending on them) have a similar reaction – “what gives this value? Why can’t I just right-click copy-paste and have the same thing?”
It’s an appropriately skeptical and by all accounts practical question!
In this week’s article I wanted to take the time and thoroughly explore + address the “copy-paste” question. I believe that the answer to this question will elucidate for everyone exactly why NFTs are so important and so revolutionary, and why they will give rise to a “creator economy” unlike anything we have ever seen.
There are two central points I want to make on why “copy-paste” doesn’t capture the value of an NFT.
1. Provenance & authenticity have value
Imagine for a second you are in a marketplace with two galleries. Each gallery has seemingly identical works for sale – beautiful pieces of art! The only difference is you know that one of the galleries is selling the authentic artworks, whereas the other gallery is only selling fakes. You can prove beyond a shadow of a doubt which one is real and which one is fake through an app on your phone or a simple browser add-on (if you’re viewing these galleries online or in VR).
You also know that buying the real work means your money goes to the artist(s), whereas when you buy the fake work the money goes to whoever copy-pasted it. Which one would you rather buy? Which one do you think has more value?
Now let’s say you’re attending a party, in real life or in VR. There are two rooms, beautifully decorated. However in one of the rooms all of the artworks are authentic, and in the other room they are not. Where would you rather spend your time? Where do you think all the “cool kids” are going to hang out?
An NFT creates a digital signature on blockchain ledger that is tied to some online metadata (e.g., a JPEG image like the one above). It essentially acts as a traceable, un-counterfeit-able, fingerprint – an ID. The NFT is what allows us to determine which pieces are authentic (say created by a certain artist), vs which ones have been copy-pasted. The rest is our decision.
Authenticity has value. An artist or creator’s time, effort, and creativity have value. The linkage between the artist and their work has value. The ability to support that has value.
2. Composability has value
Now let’s imagine we are playing a game. We defeat a boss monster and obtain some rare loot, which is represented by an NFT in our player inventory (i.e., a wallet). In our wallet it just looks like an image, so why can’t we just copy-paste it?
Well imagine the game developer builds a special level of the game that can only be accessed with that loot. The game’s smart contract will only accept the unique NFT, it won’t accept a copy-paste.
If our NFT loot is on an open public network, such as Ethereum (or maybe Polygon for cheaper fees), then in fact anyone could build an experience that works with our NFT. In each of these cases the NFT has obvious value, whereas a copy-pasted version would not.
NFTs are programmable objects in the metaverse. The only limits to their use will be the creators’ own imagination. Within the context of what these creators design, whether it’s a game or a marketplace or some sort of VR experience, the authentic NFTs will have value whereas any “fake” would not.
I believe NFTs will give rise to a creator economy the likes of which we have never seen. Thanks to authenticity and composability (read: automated royalties), creators will be able to directly monetize their content or artwork in a sustainable way. No longer will they have to be “serfs” to the content platforms such as Facebook or Spotify. The net result will be that making a good living as an artist/creator will become more viable than ever.
Viewed through this lens, NFTs are just a primitive (base layer) to enable the new creator economy… This is just the beginning.
Crypto News:
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SEC Rejects VanEck’s Spot Bitcoin ETF Proposal (LEARN MORE)
Twitter's Coming NFT Profile Images will be Displayed in a Different Shape to Signify Ownership (LEARN MORE)
US Claims Bitcoin Mining Crown Following China Crackdown (LEARN MORE)
Have a great week!
Shahar
This newsletter is meant for informational purposes only. It is not meant to serve as financial advice. If you are interested in financial advice, please schedule a personal consultation with me, and be sure to read the accompanying disclaimer.
