What do Logan Paul, Jack Dorsey, and the January 6th Capitol attack all have in common?
Non-fungible tokens.
What are those, you may ask, and reasonably so? Non-fungible tokens are the newest popular player in the world of cryptocurrency. Currently built on the Ethereum blockchain, a cryptocurrency like Bitcoin or Dogecoin, NFTs are unique digital assets stored on a system of algorithms. This creates an immutable, decentralized way of tracking information — here, financial transactions — so that no one person or group controls the system. The “non-fungible” is key to what makes NFTs so interesting. It means that an NFT cannot be interchanged or subdivided. This is unlike dollar bills, for example, where any individual bill is exchangeable for combinations of others.
This token can take the form of anything, but the most popular so far have been forms of digital art. Over the past week, NFTs have been trading at a volume of about $40 million, with an average price of about $1000. After buying a cryptocurrency (Ethereum, for now), one can go to an NFT marketplace, bid on an NFT, and secure the token as the highest bidder. Recent notable NFT transactions include $5 million in NFTs from YouTuber Logan Paul (trading cards), $6 million from Canadian musician Grimes (artwork and short videos set to original music), the first-ever Tweet by CEO of Twitter and Square Jack Dorsey (current highest bid of $2.5 million) and $69 million for a compilation of 5000 days of digital art by Beeple. If this sounds absurd, you’re not alone.
In a sense, NFTs are a new form of exercising property rights: they are a digital certificate of authenticity and a form of ownership on the Internet of a “special” original, much like famous pieces of art or high-value baseball cards. In an interview with NPR, venture capital firm Andreesen Horowitz’s general partner Katie Haun explained NFTs as the digital equivalent to people lining up for the newest Nike Air Jordans. “It’s everything that brings together culture, and it’s also a bet on the future of e-commerce,” she said.
The buzz around NFTs and crypto at large is certainly growing. Recently, Tesla announced in an SEC filing that it purchased $1.5 billion of Bitcoin and would start accepting Bitcoin as a form of payment. The Bank of New York Mellon, the nation’s oldest bank, reported that it will begin financing such currencies through the same network of U.S. Treasury bonds and equities.
On the other hand, cryptocurrency has generally not been a favorite in the world of politics. In recent weeks, New York Attorney General Letitia James reprimanded the industry for missing registration with the Office of the Attorney General’s Investor Protection Bureau and has sued the crypto trading app Coinseed for allegedly defrauding users of $1 million in assets. Meanwhile, Treasury Secretary Janet Yellen warned of the dangers Bitcoin poses to investors and the public due to its extreme volatility, even as she acknowledged its potential merits in facilitating “faster, safer and cheaper payments.”
Arguably, this regulatory attention is a welcome change and marked contrast to the previous paradigm of politics relationship with “Big Tech,” effectively summarized when Sen. Orin Hatch’s asked Facebook CEO Mark Zuckerberg in 2018 how the company remains free to users. Zuckerberg infamously replied, “Senator, we run ads.”
However, the landscape of Big Tech itself seems to be changing. In early March, amidst growing privacy concerns and general scrutiny on the industry, Google announced that it will phase out its tracking of users across websites while not replacing third-party cookie tracking. This is potentially groundbreaking as it forces marketing and digital advertising agencies — or any third party — to fundamentally grapple with how they track and target users through ads, even though Google itself can still track consumers through Google Analytics and fuel internal and YouTube and Search algorithms. (In a way, this decision and its far-reaching, high-stakes repercussions only contribute to an increasingly strong antitrust case against Google.)
Meanwhile, entirely alternative search engines are being built by ex-Googlers to fit a similar demand. Neeva, currently boasting a 45-person staff with about a dozen former Google employees, is developing a novel search engine from scratch without data tracking and ads, instead making money through a subscription-based model. Ironically, this shift harkens back to Google’s roots: co-founders Larry Page and Sergey Brin wrote in the very early days of the company, “[W]e expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.”
Fundamentally, because of the confluence of factors ranging from consumer privacy to digitally fomenting events such as the January 6th attacks on the Capitol or the Cambridge Analytica election scandal of 2016, the technology sector is seeing a slow shift from an attention-based economy built on advertisements, clicks and algorithms that seem to read your mind, to one that revolves around subscriptions and has a differently focal point: individual creation.
In a narrow sense, this “creator economy” was cited as the reason why Square recently acquired a major stake in Jay-Z’s streaming service Tidal. Dorsey tweeted, “It comes down to a simple idea: finding new ways for artists to support their work. New ideas are found at the intersections, and we believe there’s a compelling one between music and the economy. Making the economy work for artists is similar to what Square has done for sellers.”
“Making the economy work for artists”: this is a window into how we are slowly beginning to rethink how the intersection of money and power manifests in the digital world. And it brings us back to NFTs. The digital ownership stake facilitated by NFTs offers a viable means to rethink what communities in general look like online.
Today, that community more resembles a digital mob, as a recent article in The Atlantic explains: “Instead of the procedural regulations that guide a real-life town meeting, conversation is ruled by algorithms that are designed to capture attention, harvest data and sell advertising. The voices of the angriest, most emotional, most divisive — and often the most duplicitous — participants are amplified. Reasonable, rational and nuanced voices are much harder to hear; radicalization spreads quickly. Americans feel powerless because they are.”
This shift in tech is an opportunity to reclaim that power. NFTs, despite being a distant reality, are a valuable thought experiment beyond just an absurd amount of money changing hands for digital art: What does the world look like when individuals can purchase a stake in that which others create? How does the Internet serve to facilitate more thoughtful creation? And how does this relationship harken back to “associations” and “civil society” once heralded by Alexis de Tocqueville, where the fabric of our democracy rests in that which we create?
If not already apparent, the need for non-toxic digital social platforms has been underscored by the events of January 6th. We are in pursuit of a civically healthy internet, one facilitated by networks built upon heightened individual engagement, whether through subscription or, more concretely, ownership as facilitated through NFTs.
It is crucial to attempt to foresee and guard against the potential downsides of such a model in a way that we did not in the early days of the attention economy of today’s Internet. For example, a singular crypto transaction may use more power than average U.S. households utilize in a single day, and that has significant implications for any fight against climate change. However, it is also useful to ponder the upsides, specifically how this model applies beyond the digital world. Whether to rethink how campaigns are financed or how policy is crafted, ownership that better aligns “shareholders” and “stakeholders” may be a way to usher in a 21st-century version of “practicing democracy” again.
Image by Xresch is licensed under the Pixabay License.
