I have to say that it’s ironic that my most recent column for the Financial Times comes hard on the heels of an aggressive bitcoin sell-off, with $40,000 the new threshold for pricing. My technical friends have already penciled in another lower threshold at $30,000 and then into proper freefall territory. You can read the column now, here.
Just prior to the column back in April 2018, I had purchased some bitcoin trackers at around $6000 per bitcoin, with prices coming off a recent high of around $16,000 which then proceeded to bottom out at around $3000. So a 50% fall from peaks looks eminently reasonable which would imply that that the $30,000 barrier for Bitcoin is looking very vulnerable over the next few days.
That said I think the case for using digital currencies isn’t going away and I can sense that a large number of retail investors will be thinking that any sell-off over 50% might be another entry price.
I also think as I say in my column, that the associated technologies – blockchain and of course NFTs – are also not going to go away. In fact, I would add that because China has in effect put all crypto’s off any legitimate list, demand for these monetary alternatives might actually increase – plenty of people around the world will positively want to invest in something the Chinese Communist Party clearly hates!
Anyway, back to NFTs. Because of space constraints, I didn’t include a slightly more cautious section looking at ownership rights associated with this new technology. In particular, I asked whether I actually own an NFT?
“So, you’ve bought your NFT – be it a digital horse or piece of ‘art’ – and so it’s yours right? Well, yes but…As Lance Koonce and Sean M. Sullivan at law firm Davis Wright Tremaine rightly point out, it’s actually a bit more complicated. They observe that “digital media theoretically can be reproduced infinitely and not vary in any meaningful way” and that under “copyright law, there is no such thing as a unique digital media asset that can be bought and sold on a secondary market, because media files are essentially treated as fungible. Thus, when a user buys the NFT, they are purchasing the token itself, not the digital asset that is linked to the token. The cryptographic link between the token and the asset does not automatically result in the transfer of any rights or obligations as to the asset—that occurs as a matter of contract between the buyer and seller.”
Medium blogger and engineer Daniel Brain at Bluepnume (https://bluepnume.medium.com/) has also posed some awkward questions about ‘ownership’ and replicability’. He asks “if the NFT doesn’t grant you the legal rights over the original, what prevents the artist from tokenizing their artwork on multiple blockchains, hoping to hedge against one chain falling from grace in future?
…in reality, changing a single pixel to a slightly different shade of color, or a single dimension, or even a single piece of metadata in the image file, will change the resulting hash.”
He suggests that many of these challenges remain unanswered and that there is need for a “centralized registry of which NFTs have been minted, to solve the problem of artists ‘double-tokenizing’ the same artwork multiple times.” But how does that fit into a world of decentralised finance where there is no central authority over anything?”.