The argument made in a column titled ‘NFTs are overhyped but useful for a creative economy’ (bit.ly/nftoped) that appeared in Mint on 8 December 2021, in which the author contends that non-fungible tokens (NFTs) and the allied technology around this concept can alleviate the work-monetization challenges faced by artists and other independent content creators, who are otherwise at the mercy of online platforms, has flaws in my view. Here’s why:
First, NFTs are not plagiarism-proof, they simply provide an immutable provenance for a work of digital art. You can copy or save an NFT work of art with something as simple as a ‘right click’ of your mouse and choose to save a copy of the file. You can even use the jugaad (workaround) of taking a screenshot.
NFTs are built on irrevocable append-only blockchain technology, which is unfortunately and absolutely useless in providing any protection to artists from plagiarism. Let’s say a web pirate downloads a Bhuvan Bam video from YouTube and circulates it on WhatsApp. Now Bam stands to lose some ad revenue. This problem will persist even if Bam uploads all his videos as NFTs. While Bam may be the undisputed owner of the said video, nothing stops nefarious counterfeits or piracy. This holds true regardless of whether one employs an NFT or uploads a clip on a regular video platform online.
The Big Tech companies that we all like to despise have set up a mechanism that works at scale to handle notices under the US Digital Millennium Copyright Act and other copyright issues. As for NFTs, the process pretty much remains the same. Owners of original works must take their dispute to platforms like Foundation or OpenSea where they have hosted their NFT works.
Second, the argument touting NFTs as a solution for a real crisis of the internet economy, where Big Tech firms are growing at the cost of everyone else, is extremely weak. NFTs make little difference. Today, people are building entire careers as content streamers on Twitch, YouTube and the like.
Hikaru Nakamura, a top-seeded chess grandmaster, has pivoted to become a full-time streamer on Twitch and was publicly quoted as saying that he now has a better source of income. Nakamura earns through contributions made by his subscribers, in addition to any sponsors for his streaming sessions. Ryan Kaji, a 9-year-old who runs ‘Ryan’s Toy Review’ YouTube channel, reportedly earned as much as $29 million in 2020. By one count, he’s the highest earning YouTuber for three years in a row.
Do platforms like YouTube and Twitch take a cut from creators? Yes, they do. Which is fair, as they provide a basket of services from streaming servers, seamless payment devices and chat functions to cyber-threat protection, subscriber management and more. A flywheel has set in: More creators flock to these platforms since they already have audience congregations that can be addressed. This is a simple function of demand and supply. There is nothing sinister here that could reveal some mysterious greed of Big Tech. Note that platforms only take a cut of the revenue generated and not an upfront fee.
NFTs are not a panacea for independent creators seeking freedom from Big Tech. If anything, the perceived problem of ‘Big Tech robbing us’ has moved from current operators to new incumbents like Ethereum. Building your business on top of Ethereum results in an awful form of vendor lock-in, as crypto formats are not interoperable. Besides, a blockchain runs on energy-guzzling machines that are in search of problems to be solved.
Third, the author argues NFTs have shown what could happen if creators are “directly connected” with their audience. These gains are dubious. Artists must still depend on their fame or social media clout, or spend time and effort to market their art to prospective buyers. And if you are an independent artist who’s just getting started, the NFT world’s cost of entry is not just riddled with a tech labyrinth, it also needs heavy upfront investments to just get going. In comparison, it takes a single free Gmail ID and about 30 seconds to set up a YouTube channel.
To upload a piece of digital art as an NFT via a well-known medium, one must typically pay a minting fee that could be as a high as 0.05421 ETH ($236 at today’s rate). Listing fees can range from $60 to $100, a 15% commission is paid on sale proceeds, and then there’s a transaction fee to move that money from an escrow to one’s digital wallet, after which one incurs bank charges to move it into a bank account. Given these costs, should the cryptocurrency in which one got paid take a plunge, one could end up with losses.
Does listing NFTs on these marketplaces guarantee sales? Not really. Marketplaces provide access and create information symmetry between buyers and sellers. The chance of an artist successfully selling NFTs at high prices still depends on the individual’s reputation and track record. In other words, the adoption of a new technology has no bearing on sale prospects or prices.
Just because Jack Dorsey sold his first tweet as an NFT for $2.9 million doesn’t mean that Jack next door can do it.
I agree that independent creators have complex dependencies on Big Tech firms. But to tout ‘web3’ technologies like blockchain and NFTs as saviours who can take them to some promised land is absurd, as I see it. It’s like trying to make a toll road ‘free’ by changing its operator.
Sreeraman Thiagarajan is co-founder and chief executive officer of Agrahyah Technologies