Law and Technology

Worth a read, NFT and more.

These Are Not the Apes You Are Looking For

By Andres Guadamuz

Communications of the ACM, September 2022, Vol. 65 No. 9, Pages 20-22    10.1145/3548761

Imagine you want to stream some music. On today's Web, you would sign up for a service such as Spotify or Apple Music. These platforms have obtained copyright licenses from record companies and artists, and they offer you that music for a monthly subscription. The music streaming services are centralized intermediaries. They exist to connect musicians and fans, and in exchange they take a substantial cut of the money.

But a growing number of technology enthusiasts have a different vision, which they call Web3. To them, it "represents the next phase of the Internet and, perhaps, of organizing society.'a One of the pillars of the Web3 vision is tokenization: using representing ownership of different assets using cryptographic tokens that can be exchanged on a blockchain or other decentralized system. Only the person who knows the private key associated with a token can use or transfer it. A token can be used to represent anything, from frequent-flyer miles to hotel reservations. By transferring a token from user to user, it can record who owns an associated asset.

In a Web3 world, your music experience would be mediated not by Spotify but by tokens. Instead of signing up for a music service, you would buy a token directly from the artist. The token would represent your right to listen to the music. The token's cryptography would be tied directly into the digital rights management protecting the music, so that only token owners would be able to listen. In other words, the token living on a decentralized blockchain would let you and the artist automatically cut out the middlemen like Spotify, and maybe even record companies.

One of the sectors receiving particularly intense Web3 interest and investment is the creative industries. In this area, the tokenization push is being driven by non-fungible tokens (NFTs), cryptographic tokens that represent a unique asset. One banana is pretty much like any other banana, but a Picasso portrait and an Ai Weiwei sculpture are radically different. The tokens representing them are not interchangeable, or fungible, hence the name.

The most famous NFT project is the Bored Ape Yacht Club, whose collection of "Bored Ape" NFTs have been selling for hundreds of thousands of dollars. Each of the 9,999 Bored Ape NFTs consists of a token on the Ethereum blockchain linked to a JPEG cartoon drawing of an ape. The JPEGs were procedurally generated with different combinations of traits, including jackets, hats, and facial expressions. While they all resemble each other, each individual Bored Ape is unique, a bit like the different cards in a trading-card set

There is currently a push to move the economy in the direction of a wider use of tokens, and this is being driven mostly by a combination of Silicon Valley venture capitalists and crypto-currency holders and investors. If the funders, developers, and artists pushing NFTs and Web3 get their way, the media landscape will look very different from what it looks like now.

This might sound like a great idea, but only until you start looking in detail at how it would actually work. As soon as you do, there are serious problems at every practical level.  .... '