Buying a meme

Why would anyone spend $69 million on a digital picture they could download for free from the internet? That’s what happened back in March when digital artist Beeple sold “Everydays—the First 5000 Days,” a collage of digital images he created over the course of 5,000 consecutive days.

Vignesh Sundaresan, an Indian technology tycoon, now owns what Beeple considers the original file of his digital artwork, along with something called a nonfungible token (NFT) that serves as a certificate of authenticity. In the past few months, millions of dollars have traded hands as people buy digital artwork such as Beeple’s, backed by NFTs.

An NFT is a unique digital item that lives in a blockchain, the same kind of secure, decentralized database used to track cryptocurrencies such as bitcoin. Collectors compare NFTs to one-of-a-kind coins or trading cards. In the case of digital art, an NFT doesn’t necessarily contain the item’s digital file. It usually just confirms the file’s creation and ownership history, like a certificate of authenticity would for a painting or sculpture.

NFTs have caused a stir in the art world, but anything digital can be turned into one. Dapper Labs showed people the possibilities of NFTs when it launched the game CryptoKitties in 2017. In the game, users own and breed digital cats with unique characteristics and their own NFTs. Users could trade, buy, or sell them, and cats with more desirable characteristics started commanding a premium. By the middle of 2018, some kitties were selling for more than $100,000. Today the kitty named Dragon has an asking price of more than $1 million.

Once people saw the profitability of digital cats, any bit of Internet ephemera could suddenly become a collectible digital item. In February of this year, the creator of Nyan Cat, a flying, Pop Tart–shaped feline streaming a rainbow behind it, sold it as an NFT for the equivalent of $500,000. In March, Jack Dorsey, the creator of Twitter, sold his first tweet for $2.9 million. This month, an NFT of a photo of Harambe, the gorilla whose death went viral in 2016, goes up for auction.

Unlike owning a painting or other physical artwork, an NFT conveys no advantage other than bragging rights. An oil painting by Van Gogh is substantially different and therefore substantially more valuable than even the best copy. But the only difference between a piece of digital artwork and a copy is the creator’s acknowledgement of one as the “original.”

This year’s rise in NFTs coincides with the growing interest seen in various other collectibles. For the most part, speculators have driven the dizzyingly high prices of NFTs. But just as the trend has started to go mainstream, some evidence suggests the NFT bubble might have burst. Protos, a site offering news and analysis on cryptocurrencies, reports that sales, both primary and secondary, of NFTs are down 90 percent from their frenzied high last month, and the number of active digital wallets has dropped by 70 percent.