Are NFT Purchases Real? The Dollars Are.

Dive down a rabbit hole and explore nonfungible tokens, multimillion-dollar digital art and the nature of reality.

When an artist sold something called a nonfungible token for nearly $70 million at auction a few weeks ago, people were astonished — and confused. These tokens, or NFTs, are a complicated way to ensure ownership of something that exists in the digital world. In this case, it certified a yearslong project of daily images by an artist known as Beeple.

NFTs went from that thing you never heard of to the thing you’re tired of hearing about — and, most likely, without your ever having figured out what they actually are in the brief time in between. Of course, blockchain is involved, because everything unknowable and wacky these days has a blockchain connection. And cryptocurrency, because obviously.

Coverage has exploded — articles explaining what the tokens are and about the eye-popping prices tokens and other such “investments” are getting in online marketplaces, as well as the unsettling fact that some NFTs mysteriously go missing or disappear. My colleague Kevin Roose joined in the fun, auctioning an NFT of his article about NFTs (cue the music from the movie “Inception”) — and the thing sold for more than $500,000! The money did not go to buying Kevin a beach house: It will do good through the Neediest Cases Fund.

The whole thing can leave you wondering what art is, or even what reality is. It certainly made me wonder whether, with windfalls like these, I should stick with those boring, no-load, low-fee index funds that everyone tells me are the foundation of a smart investment plan.

Bruce Sterling, a science fiction author and art festival curator, told me the universe has changed. He said the shock the Beeple sale — Beeple is the alias of the digital artist Mike Winkelmann — sent through the art world “reminds me of the early days of rock ‘n’ roll,” where people were confronted with something raw and new.

I’m an old guy so I liked this analogy. He said, approvingly, that the NFT sale was the auction-house equivalent of Elvis gyrating on the Ed Sullivan show. “This would probably not have happened if we hadn’t been locked indoors for a year with our computers in a world with hundreds of millions of computers and oceans of funny money,” he said.

Matt Blaze, a professor of computer science and law at Georgetown University, pointed out the enormous energy required to run the computers that keep this virtual world afloat.

“I’m not an expert on the art market, and far be it from me to denigrate a new way for artists to extract money from people who want to give it to them,” he said. “But it would be nice if they could find a way to support artists that doesn’t involve wasting enough energy to light up a small city with each transaction.” Besides, he added, “the blockchain is contributing nothing here that an ordinary digital signature doesn’t already accomplish.”

I called Beeple, otherwise known as Mr. Winkelmann, on Zoom. He was happy, as anyone would be with the payday he just had.

Is his art real, I asked? He said he provides his buyers with physical screens with his works on them, so that’s kind of real, maybe.

Then he held up his phone and showed me an app that summarized his personal financial assets: At that moment, they included $56,635,781.41 in cash. He had received his payment in cryptocurrency, and immediately converted it into what I still think of as real money. The digital artist had transformed most of his new wealth into something I could understand: U.S. dollars.

But those dollars on his screen are a digital representation, too! “It’s not like I have 56 million dollar bills in my house,” he said, waving his hands to show the lack of stacks of bills. “I just have a number; you and I know this number is as real as anything else.”

In the world of modern art, it’s common for people to look at an abstract piece and say, “My kid could do that!” But, he said, “I’m pretty sure a kid couldn’t do what I do,” and showed me one of his pieces. It depicted a big sphere, and the image also contained a mountain and, by the way, a goat, among other elements, that he used digital trickery to manipulate, resize and juggle. The process was playful, but it also had something more, a guiding sensibility. Something that felt like — I might as well say it — art.

Besides, he asked me, what’s the inherent value of a baseball card? “You paid this much money for a little piece of cardboard?” he asked. “Even a painting. It’s just a piece of stretched fabric with some splotches of paint on it. Why would you pay for that?”

Did I mention that an NFT of a cat with a Pop-Tart body that leaves a trail of rainbows recently sold for nearly $600,000?

He had me wondering whether anything is real, and whether we’re not all just living in a consensual illusion.

All of this pondering about the nature of reality put me in a brain fog that carried me through a recent trip to Texas. As I was in line at the airport in Houston, a Transportation Security Agency officer stopped a family of three in front of me. He got the attention of the daughter, who looked to be of high school age, and said, “Buy cryptocurrency! You know Bitcoin? Do it! You’re young!” And he smiled and walked on.

“Don’t,” I said, and the four of us laughed. I asked her about the encounter, and she shook her head. “I think there could be a crash,” she said.

Make up your own mind.

But even the great Beeple has stashed most of his money in dollars, not Bitcoin.



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