What do Logan Paul, Jack Dorsey, and the January 6th Capitol attack all have in common?
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…