How I learned to stop worrying and love the non-fungible token
9 min read

How I learned to stop worrying and love the non-fungible token

Why NFTs have become the belle of the cryptomedia ball.
How I learned to stop worrying and love the non-fungible token

A song to read by: “Forever Turned Around,” by Whitney

What I’m reading: “The Sympathizer,” by Viet Thanh Nguyen

Personal note: I started a new job at Adweek on Monday, where I will be covering the media industry! As always, follow me on Twitter for my latest professional writing and contact me at mark.stenberg@adweek.com with pitches, tips, and scoops.


Vinyl economics

About a year and a half ago, as a gesture of thanks for letting me crash in his spare room over Labor Day weekend, I gave a friend of mine what I consider to be one of the better gifts I have ever given: a limited-run vinyl of Whitney’s 2019 album “Forever Turned Around.”

The band only released 100 of the collector’s items, and they sold them only on Aug. 30, 2019, a day the city of Chicago designated as Whitney Day in honor of the hometown duo. I waited in line for two hours, alone, to hear the band perform a free show in the back of Shuga Records, after which I forked out $40 for the vinyl, despite not having a record player myself.

Why? I knew that even though I would be unable to listen to the record, its scarcity, my friend and I’s shared affection for the band, and the backstory of the gift made it far more valuable than its price tag. Despite the fact that anyone could easily and freely listen to “Forever Turned Around” on any music-streaming service, the vinyl had an emotional value that existed independent of its utilitarian function.

While this concept goes by a number of different terms — a keepsake, a memento, a souvenir — the idea is universal: that an item can be valuable for reasons outside of traditional market dynamics.

Non-fungible tokens, or NFTs, take this practice and apply it to digital media. In the same way the Whitney vinyl draws its value from its collectors’ emotional attachment to it, in tandem with the laws of scarcity and authenticity, an NFT derives its value from its emotional caché and the laws of supply and demand.

While NFTs have been around since at least 2017, the buzz surrounding them has escalated in recent weeks, for a number of reasons.

The technology presents a new, and potentially very lucrative, revenue stream for anyone in the business of creating digital media, a classification that includes everything from songs to tweets to essays to memes. To borrow some examples from technologist and writer Peter Yang, recent months have seen a digital flower sold for $20,000, a looping video clip sold for $26,128, a sock sold for $60,000, and a LeBron James clip sold for $99,999.

NFTs also represent the beginning of a new way of thinking about how ownership works on the open internet, a line of thinking that Packy McCormack captures well here. They also, in line with other trends concerning the creator economy, double down on the idea of fan economics, giving people a new way to support the work of artists and creators they admire.

Finally, they are the beneficiary of good timing. Following the capitalist phantasmagoria that was the r/WallStreetBets drama, millions of Americans have woken up to the very real money to be made by trading digital assets, whether those assets are stocks, cryptocurrency, or NFTs. Now more than ever, people don’t want to miss out on the next weird way to make money online.

And while much ink has been spilled over the subject in recent weeks, a critical consideration has been overlooked: How can the media industry, which has never found a revenue stream it won’t try once, put this new trend to use?

The ABCs of NFTs

In its most simple form, to borrow the language of Peter Yang, an NFT is a record that shows who owns a unique piece of digital content. Think of it like a vehicle title for digital media.

When someone “mints” an NFT, they create a file that lives on the blockchain, which means that it can't be copy-pasted, edited, deleted, or otherwise manipulated.

This file, which some call a “smart contract,” contains basic metadata — such as price, the date purchased, a description of the object — on the media in question. Writer Jesse Walden compares NFTs to a “digital passport,” in that they follow the media across the internet, bearing information that can be updated but never destroyed.

An NFT is “non-fungible” because it is not interchangeable; each NFT is distinct and has a unique ID. You can buy and sell NFTs, and I imagine you can trade one for another, but they are not homogenous. Currency, on the other hand, is fungible, because one dollar bill is worth as much as any other dollar bill.

While you might associate blockchain with Bitcoin, NFTs actually use a different kind of cryptocurrency: Ethereum. While Bitcoin currently costs about $50,000, one Ether (the individual unit of Ethereum) costs about $1,600. To buy an NFT, you must first buy Ether, and it is generally the coin of NFT buying, selling, and trading. To buy Ether, you can use a crypto wallet like MetaMask.

Once you have converted your money into Ether, you can shop for NFTs on a handful of platforms, depending on what you’re looking for. SuperRare is becoming the go-to destination for digital art, NBA Top Shot allows you to buy NFTs of NBA clips, and Zora, which looks a bit like a crypto Tumblr, lets users browse through a variety of cryptomedia.

Once you find an NFT that resonates with you, you simply purchase it and become its owner. Congrats!

*Gordon Gecko voice* “NFTs … are good”

When you buy an NFT, you own the content in question, but it can still travel freely across the internet, be viewed, listened to, or saved by anyone who wants to do so. At first, this might sound like it reduces the value of an NFT: What good is “ownership” of a work of digital art if everyone has equal access to it?

In reality, the more a file is shared and seen online, the more cultural value it accrues. Walden uses the work of Andy Warhol as an example:

“Consider the mass production of posters and t-shirts of Warhol imagery,” he writes. “With increase in notoriety, the concept of owning the canonical work becomes more thrilling, and more a marker of social status. It can also drive up the value that can be derived from reselling the work should its notoriety increase after purchase.”

Imagine, for example, your favorite musician is releasing a new song. In the process, they mint an NFT of the track and sell it for $20. You buy the NFT because you love that artist, and then the song, which turns out to be “drivers license” (!), becomes a global phenomenon overnight. The next day, you sell that NFT for $100,000.

Here’s the cool part, though: When you buy an NFT through an online platform, the platform takes a percentage cut — between 3% - 15% — and the creator takes the rest of the revenue. Then, if you decide to sell that NFT to a new buyer, you get the majority of that revenue, but the original creator also gets a cut, generally between 3% - 15%.

This continues … forever.

Every time that NFT trades hands, the seller makes money and the original creator makes money. These “royalty economics” allow the original artist to generate revenue for as long as their NFT is bought and sold, thanks to the blockchain technology that shows the transaction history of every NFT going back all the way to its original minting.

Faconomics (fan economics)

As a result of their digitally enhanced royalty system, NFTs are a natural extension of the creator economy and the emerging world of fan economics that power platforms like Patreon. On Patreon or Substack, when you want access to the work of a creator whom you admire, you pay them a monthly subscription fee. You might also buy one-off merch drops, book pre-orders, or album releases.

When an artist mints an NFT, they give their super fans yet another way to express their affinity for their work. Like tour merch from a legendary Grateful Dead concert , an NFT is valuable because it is a one-of-a-kind artifact from a creator.

Unlike a traditional memento though, when you buy an NFT, you not only put money in the pocket of that artist immediately; you also give them an untold number of opportunities to make money down the road, all off of their one work of digital art.

Like Substack or Patreon, NFTs can fuel the patronage economy, but they also give fans a way to show support, make money for themselves, and generate ongoing revenue for the creators they love.

Cherie Hu, whom I interviewed two weeks ago, has been chronicling the rise of the NFT ecosystem in the music world. Given that music-streaming makes musicians very little money and the pandemic has put live shows on indefinite hiatus, non-fungible tokens have become especially popular in the music world.

According to Hu (emphasis hers):

“According to my own research, monthly music NFT sales have skyrocketed 150x in the past six months, from only around $2,000 in sales in June 2020 to over $300,000 in December 2020. In this time period, over 20 musicians have sold NFTs to fans and digital art collectors, driving over $800,000 in total sales on the primary market — the equivalent of around 230 million streams. With anticipated NFT drops this month from major artists like deadmau5, this sales figure will easily surpass $1 million by the end of January.”

Why are they so popular amongst musicians? In addition to existing outside the broken ecosystem of music-streaming, NFTs share a function similar to tipping and other forms of patronage: They help close, writes Hu, the “stubborn gap between the emotional value and market value of [art] in a digital world.”

How publishers can use NFTs

Right now, NFTs are flourishing in the industries where they have an easy-to-grasp physical analog: digital art behaves like physical art, NBA Top Shot behaves like trading cards, and music NFTs behave like rare tour merch.

But as the market matures, it could become more commonplace to mint any work of cultural value. Publishing an essay? Mint an NFT. Making a meme? Mint an NFT. Sharing a photo? Mint an NFT.

Celebrities and creators with rabid fan bases will no doubt find a willing clientele for their new creations. I regret to inform you that the sentient homunculus Logan Paul recently made a cool $5 million by selling 2,586 NFTs worth $2,000 each, and the Bud Light Rose of Texas himself, Post Malone, is selling NFTs that allow their owners to play beer pong with the rapper.

Of course, it is a truth universally acknowledged that a celebrity in possession of just about anything can sell it for money. Remember when someone sold Justin Timberlake’s half-eaten French toast for $3,000? Ah the 2000s … simpler times.

But what about publishers? There are a few options.

Integrating NFTs with events. I’m borrowing this idea from Hu because it fits into the world of publishing, which had just begun to collectively lean into the events space in a big way before the pandemic hit. An event like The Texas Tribune Fest or New Yorker Fest, which are filled with celebrities and fans of the publications, could sell NFTs exclusive to the event or treat NFTs like the price of admission. Unlike standard tickets, these NFT tickets would continue to appreciate in value over time, potentially generating future returns for the publishers.

Minting NFTs for high-profile stories. Imagine a cover story, especially one with a strong emotional resonance or significance, being sold as an NFT. A publication like Pitchfork, for instance, which sells posters of its magazine covers, could also sell NFTs of its covers. This could also apply to works of fiction — imagine The New Yorker’s “Cat Person” as an NFT — or even just canonical works of nonfiction, like “Frank Sinatra Has a Cold” or Ta-Nehisi Coates “The Case for Reparations.”

NFT subscriptions. Imagine you buy a subscription to a publication you love at a fixed price — say, $100 — and you can sell it in the future, when prices have risen. I think people do this with season tickets (I credit/blame “Fever Pitch” for this idea), and I believe this is somewhat similar to rent-controlled apartments. The publisher sells a subscription for a high price, but the customer never has to pay again, and they can sell that discounted subscription to someone else in the future.

Photography, video, and infographic NFTs. A self-explanatory concept, but when a staff photographer takes a really great photo — like this one that will haunt my nightmares — they can mint an NFT of it. This introduces a thorny dilemma: Who owns the picture, the publication or photographer, but either way, there could be money to made for both parties.

Regardless of whether publishers put NFTs to use, the opportunity is ripe for individual creators, including journalists, photographers, videographers, podcasters, and every other kind of creator involved in the production process in a news organization.

This new technology and its hybridized ownership model — ownership without restriction — offer an astounding number of potential sources of revenue for creators, one that puts money in the pockets of talented artists without walling their creations off from the public. It might all sound far-fetched, but crazier things have happened, right?


Some good readin’

— This profile of director Chloé Zhao, whose “Nomadland” I will have hopefully watched by the time you read this. (Vulture)

— This piece about the perils of content moderation. Yes, the perils I said! (Pirate Wires)

— This Platformer about the suddenly saturated landscape of social platforms. (Platformer)

— So many pieces about the Facebook/Google + Australia fiasco. This one is the best. (Stratecherry)

— This essay from writer Mary Retta, which touches on a lament I’ve heard from a lot of young people: The pandemic is stealing their best years. (close but not quite)

— The article to read if you want an optimistic take on when the pandemic will end. (The Atlantic)


Cover image: “Pool with Two Figures,” by David Hockney