Bloomberg’s Massive Crypto Article Derides NFTs as a Ponzi Scheme – ARTnews.com

Bloomberg published a massive 40,000-word story on crypto Tuesday by veteran financial journalist Matt Levine. In the piece, Levine writes mockingly about NFTs, comparing them and the majority of the crypto space to a Ponzi scheme.

“The bad way to say this is that every web3 project is simultaneously a Ponzi [scheme]” Levine wrote, arguing that most tokens are bought with the express purpose of transferring them to others for more money. “Why do you think anyone else would buy tokens? Is it because you think they like the product? Or is it because you think the Planning to get rich by selling to a bigger sucker? Where does it end?”

Writing specifically about the presence of NFTs in the larger Web3 context, Levine raised a few points that substantiated his belief in the essential worthlessness of NFTs: that NFTs are technologically weak, that the legal basis for NFT ownership, as far as IP is worried, is thin, and that the general feeling that art NFTs represent was for the most righteous “zombies and kittens”.

There are certain obvious technological and legal issues with NFTs. The fundamental that Levine addressed was that, in his words, “art does not live on the blockchain.”

“If you buy an NFT, what you own is a notation on the blockchain that says you own a pointer to a web server. On that web server, there probably a picture of a monkey, but that’s none of the blockchain’s business.”

Although there are many NFTs where the art is held on the blockchain, for example, the NFTs minted on the generative art platform Art Blocks, most NFTs are not.

Kelani Nichole, who has run the digital art gallery Transfer since 2013, said ART news last year that she was frustrated that most people did not know this. “The NFT is just a display resource that’s made available online, it’s for the public, it’s a receipt,” Nichole said. “But to really own the work, you have to pick up the entire archive package.”

Her point? Owning and caring for a digital artwork requires more than buying a token.

What Levine did not mention is that even the royalties supposedly guaranteed to artists of NFTs are not always delivered because different NFT marketplaces write different smart contracts that cannot be processed when an NFT is sold cross-platform.

When it comes to legal matters, the situation is even worse.

The technological and legal connections between blockchain and JPEG and ownership are somewhat tenuous,” Levine writes, going on to say that these connections are only culturally enforced.”

Last year, intellectual property lawyer Jeff Gluck told ART news“You can’t go into a courtroom and say, ‘I’m putting this on the blockchain, I can enforce my rights, because it’s not recognized [as proof of ownership].'”

What is acknowledged is copyright. But what happens when an NFT cannot be copyrighted?

Dr. Andres Guadamuz, a leading expert on the intersections of intellectual property rights and the evolving field of crypto-law, believes that most NFT collections of profile pictures (those collections, such as Bored Ape Yacht Club, which come in runs of 10,000 or so generated images) probably do not qualify for copyright protection under current standards of originality and creativity.

What Levine didn’t quite get was his insistence on collecting NFTs into nothing more than large PFP collections of zombies and kittens used to scam people out of money. NFTs have their roots in the early digital art scene and artists’ efforts to get paid for that work, which was often difficult to sell.

“We’ve seen the transformation of our world into a kind of digital networked reality where creative media is so fundamental, but until this technology was established, there was no way to really value it directly,” Kevin McCoy, an early inventor of NFTs, told ART news.

“The way I see it, this gold rush or what we would call it an equalization or re-equilibration that moves some of the value that was there all along much closer to the creative communities that have provided it.”

But McCoy was also aware of the abuses and tone of the community, commenting that using NFTs sustainably would be the result of people willing to shape the space for the better, a topic many fine and digital art collectors are passionate about.