I don’t particularly care for non-fungible tokens (NFTs). I know that isn’t a novel opinion to express in the final months of 2022, after well over a year of media hype, Super Bowl advertisements and a volatile boom-and-bust cycle in the NFT market. While there is certainly a persistent contingent of NFT traders still chugging along, non-owners have increasingly come to understand that they are less of a transformational artistic concept and more of a risky investment option. But they’re not just an unwise place to place your money; the great number of us at Georgetown University who are destined to work in finance and public policy should be skeptical about the societal value of the NFT industry as a whole, and perhaps even look upon it as a manifestation of capitalism in its worst form.
“Non-fungible token” is a technical term that refers to a digital identifier — essentially an ID tag — that can serve as a cryptographically backed certificate of authenticity for “artifacts” like digital art, tweets and memes. The particular power of an NFT is its ability to turn intangible objects into commodities that can be bought and sold; in a transaction, the seller passes the buyer nothing more than the certificate of authenticity attesting to their ownership. NFTs saw a surge of popularity throughout 2021, with their trade volume peaking in the beginning of this year before the aforementioned sharp decline.
There’s a reason why so many people, including myself, have an instinctive revulsion to celebrities and athletes shelling out thousands of dollars for grotesque digital images: it’s our recognition that transactions should create something of value. The NFT industry creates nothing of value. Specifically, it’s one of a number of industries that operate without providing a significant social value, or what I’d call a value-extractive industry.
While simply an “extractive industry” would mean firms that work to obtain natural resources, I’m referring to value-extracting industries: those that contribute very few identifiable benefits to consumers, and obtain their profits largely by finding increasingly intricate and incomprehensible ways to transmit money from one holder to another. Aside from the NFT market, I would argue that the cryptocurrency market, certain asset markets and forms of rapid-fire trading are fundamentally extractive in nature.
The NFT industry is intimately linked to the Bitcoin and broader cryptocurrency markets, which similarly create very little legitimate value. The crypto advocates who are more sensitive to this perception counter with arguments such as the revolutionary potential of the ability of anonymous digital currencies to circumvent authoritarian government restrictions, but these defenses don’t change the fact that the basis of crypto value’s growth is little more than hoping that the market will continue to grow.
Value-extractive industries display the worst attributes of capitalism without any of the corresponding benefits. While critics of capitalism argue that the economic system encourages greed, fraud and materialism, one may counter that for all of its faults, capitalism has demonstrated a capacity to bring substantial wealth and material benefits to the average person like no other economic system in history, however much income inequality, low social mobility, exploitation and other significant issues with the system persist. However, value-extractive industries create nothing. Sure, they can provide great wealth to the lucky few who work on a trading floor or make a fortuitous investment decision at the right time. But for the vast majority of both investors and bystanders, their effects are neutral, if not downright harmful. Like in day trading, it’s all but certain that the overwhelming share of investors will lose money, and resources will be diverted from more productive industries.
The issue of how to deal with value-extractive industries isn’t just a point of philosophical contention or public policy issue. For students attending Georgetown, it’s actually intensely personal. The connections between the Georgetown student body and the financial industry aren’t just buttressed by an innumerable amount of selective consulting clubs, but by a broad pipeline stretching from Washington to Wall Street. A recent study using data from LinkedIn found Georgetown to be the 15th university with the most undergraduate alumni in the country working in finance and investment banking. Even the McDonough School of Business itself has gotten in on the craze in recent months, “minting” an NFT for its undergraduate Class of 2020.
The choice to participate in a value-extractive industry is one that may lie in the near future for a good fraction of those reading this column.
I want my work to provide something of enduring value to society, which could come in the form of knowledge, happiness, health or anything else. I’m not a moralist about work, but neither do I believe the way you choose to contribute your skills is meaningless. There is undoubtedly a compelling personal monetary interest in joining a value-extractive industry. But those extra dollars come as the price of work that has all of the enduring value of a chimp JPEG.
Dylan Partner is a sophomore in the College. His column Scrutinizing Structures appears in print and online every third week.