• NFTs have had their moment in the sun.
• Meta and others are walking away from them.
Social media giant Meta (formerly Facebook) announced early in March that it was discontinuing support for NFTs across Facebook and Instagram. Non-fungible tokens (NFTs) are digital tokens verified by blockchain technology, in theory to verify ownership of a particular image, despite that image not being hosted on the blockchain itself. NFTs were the subject of a torrent of hype and some truly incredible investment by individuals and companies, with individual NFTs going for hundreds or millions of dollars or the equivalent cryptocurrency. Like many trends NFTs became fashionable, with celebrities not only buying them but outright endorsing them. As with any trend where the money flows freely, it got so big so quickly that a lot of businesses tried to jump on the bandwagon.
As it turns out, NFTs were a trend that didn’t even last as long as Beanie Babies and companies like Meta who are looking to tighten their belts are killing support for them. NFTs are a classic example of fear of missing out (FOMO) driving decision making and rampant unhinged speculation. These “non-fungible” tokens are and were, well, frankly fungible. Anyone can simply right-click and copy any NFT, making a perfect copy of it, the very definition of fungible. A number on a blockchain doesn’t serve to be anything more than a digital receipt of purchase. From a copyright perspective, NFTs, unless the sale agreement says otherwise, confers no more rights than the right to use the image, not the copyright for the image.
Think of it this way, if Disney sells you a portrait size picture of Darth Vader in sumptuous velvet, you have the right to display that fine piece of art in your home. You even have the right to sell that specific framed piece of taste and style to another person. What it doesn’t give you is the rights to Darth Vader. Or the rights to reproduce your velvet masterpiece. Unless Disney decides to specifically sell you those rights (Disney, call me! Velvet Darth is gonna be big, have your people call my people!) “On the blockchain” isn’t a magical incantation that creates rights under copyright law, unless specifically stated at the time of sale. Just like the people who bought an early, rare, and expensive guidebook to a Dune film that was never produced learned. They intended to create NFTs from it and create more products based on Dune. The expensive lesson there was that they had bought a book, not the rights to the Dune intellectual property (IP). Adding blockchain technology doesn’t change the underlying law.
With crypto winter well and truly set in, it’s unsurprising that companies like Meta are walking away from NFTs. Enterprises who had NFT plans should put them on hold, and in general, avoid blockchain and cryptocurrencies like the plague they are. Right now, they have zero practical use and reputational baggage that an enterprise can ill afford, no matter how much money is sloshing around out there. Right now, these technologies excel only in hype, money laundering, and wasting energy. In the unlikely event that crypto/blockchain/NFT actually finds a real use in the market, enterprises will have a chance then. But for now, the risk is simply unacceptable.