NFTs are overhyped but useful for our creative economy

For NFT believers, though, the promotional blitz in Indian media is just one more sign of the coming revolution. A big part of the pitch is that artists will own the rights to their works and be able to restrict the number of people who can own these. Underlying it all is blockchain technology that registers ownership of digital information in a way that is (at least theoretically) tamper-proof. The rationale is that once ‘digital goods’—say, a photo, an e-book, an audio or video clip or any digital file for that matter—are locked with software-defined usage rules, then an entirely new creative economy could stand on this foundation. After all, the main reason we have come to expect everything to be free online is that unlike physical works, it costs nothing to copy digital files. That changes with NFT technology.

While NFTs have been around for years, it was a Christie’s auction earlier this year that made them headline news around the world. Mike Winkelmann, the digital artist known as Beeple, sold an NFT for $69 million, which made him one of the three most valuable artists alive. Since then, $2.5 billion worth of NFTs—mostly photos and animated gifs—have been bought and sold.

Sceptics spot a bubble in the rapid increase in the value of NFTs. The fact that they are joined at the hip to another even more hyped technology, cryptocurrencies, makes matters worse. It does not take a degree in economics or history to suspect that when virtual goods are sold in exchange for virtual currency, the dangers of a speculative bubble are real. There is also a new uncertainty in the mix, because right now, private cryptocurrencies face a regulatory sword of Damocles in India. Add to it aggressive advertisements, and there hangs more than a whiff of get-rich-quick schemes.

However, it would be wrong to dismiss all of this merely as a new mania. That judgement doesn’t do justice to the motivations of a lot of serious folks building blockchain, NFT and related technologies to solve a very real crisis of the internet economy—the relentless centralization and growth in power of Big Tech at the cost of everyone else. The worst hit are media companies, as advertising revenue, which largely supported traditional creative professionals—writers, journalists, radio stars, filmmakers—continues a decade-long decline. Things are not much better for emerging independent stars on platforms like Instagram, TikTok or Spotify. While many of them have attracted gigantic audiences, platforms control everything, including their reach via blackbox algorithms and the amount of advertising money they share. In the shadow of Big Tech, everyone in the creative economy is reduced to a sideshow, trapped on a treadmill chasing eyeballs.

The arrival of NFTs was fortuitously timed—in the midst of a pandemic that had made the long-running woes of the creative economy even worse. It gave artists a taste of what could happen if they connected directly with fans willing to pay for their creations. The range of those who have attempted to get NFTs to their fans, from popular film stars like Amitabh Bachchan and earlier-era cricketers like Sunil Gavaskar in India to Damien Hirst and Banksy who’re globally famous for high-brow art works, is revealing. It shows that something is absurd about the current internet. Many creators have millions of fans willing to pay them, but that relationship is owned by Big Tech platforms. So it is no wonder that the moment a direct option emerged, it got everyone excited.

The hype around NFTs may be a gold rush, but it has made an important idea mainstream: Creators need to take back control from Big Tech. The good news is that for most of them, the complex new fangled NFT/crypto world is technological overkill. For example, when it comes to payments, India’s Unified Payments Interface (UPI) system beats any crypto alternative hands down. All that’s needed to break out of the platform stranglehold already exists, whether it involves owning your online identity and your followers’ contacts to reach them directly, or the ability to collect money without any need of technical skills or incurring costs. Even before Collins Dictionary declared ‘NFT’ the word of 2021, the underlying idea of direct creator-to-audience platforms was gaining steam in the form of paid newsletters from journalists, direct support of creative projects on platforms like Patreon, or online tips on BuyMeCoffee.

The creative world is famously ‘winner takes all’. Big stars make many multiples more than everyone else in an industry. Yet, even old-world media sustained a huge population and variety of artists, writers and performers. The internet not only didn’t create a comparable class of creative workers, but also destabilized the old model. The greatest promise of the emerging ‘paid’ internet is that once creators are freed from the tyranny of chasing scale, a far wider array of creators could earn a good wage. Such an internet of small projects and individual creators, supported by a “thousand true fans”, will also be a more hospitable home for ideas that are truly revolutionary (and niche). In return, if we have to live through a million pitches for ersatz ‘collectibles’ from Bollywood stars, perhaps it’s a price worth paying.

Samir Patil is co-founder and chief executive officer at ScrollStack