When trying to explain the otherworldly concept of NFTs, a handy comparison people sometimes reach for is the famous one-of-a-kind Wu-Tang Clan album, which was purchased for $2 million by a very close incarcerated friend of mine.
Once Upon a Time in Shaolin was produced as both a singular piece of musical art and a brilliant publicity stunt. There is just one copy of the album. Just one (!). Until its 2015 sale through auction house Paddle8, it was kept in a vault beneath a luxury hotel in Morocco, lending it a mythological aura the New York hip hop group has long been known for.
Today, it’s back in a vault. Or more accurately (to the best of my knowledge), in a much less glamorous storage locker somewhere in the Tri-state area, collecting dust until the U.S. government sells it as a forfeited asset. But for a brief and explosively controversial period, it was in the possession of the pharmaceutical executive who became my prison boyfriend, Martin Shkreli.
Back when I was just a reporter writing about his legal case, and I was interviewing him about his trial, I asked to examine the album briefly. I held the hefty, jewel-encrusted case, flipped through the leather-bound notes, and listened to two of its tracks. Sadly, not enough to write any sort of cogent review, although they sounded reasonably good.
Like the album, NFTs or non-fungible tokens, are one-of-a-kind, and the lure of this specialness has also sent prices soaring. Artist Beeple recently sold an NFT piece through Christie’s for $69 million. Twitter CEO Jack Dorsey sold the first even tweet as an NFT for a cool $2.5 million. Kings of Leon is also planning to release an album as an NFT.
But calling a one-of-a-kind physical album like Once Upon a Time in Shaolin an NFT is an awkward metaphor at best. There are some pretty important differences between a tangible artwork or traditional musical work and the purely digital assets — and they might make you think carefully before jumping into this frothy market.
1. Owning an NFT does not necessarily give you exclusive access to a work.
Exclusivity was billed as a main selling point for the one-of-a-kind Wu-Tang album, and one that definitely attracted a brash drug company founder who enjoyed tempting and teasing music fans by referencing the work, and on a few rare occasions, playing snippets of it during his live streams.
“The irony of it is that we did it for the fans,” the album’s producer, Tarik “Cilvaringz” Azzougarh, told a group of journalists when the work was exhibited in March 2015 at MoMA PS1, a nonprofit arts center in Queens, New York, about the reason for selling only one copy. The group initially priced the album at a floor of $5 million. Shkreli later bought it for $2 million.
“We felt that felt that retail commercialization and mass replication would dilute the status of the album as a one-off work of art and compromise the integrity of our statement,” Cilvaringz later explained in an online Q&A.
RZA, or Robert Fitzgerald Diggs, the rapper who serves as the de factor leader of the Clan, likened the work to a Picasso during the Q&A.
“Owning a Picasso doesn’t mean you can sell prints or reproductions, but that you’re the sole owner of a unique original,” he said.
The same cannot be said of an NFT.
Like anything else existing in the digital world, NFTs can easily be copied and exhibited by anyone with the technological means. That’s why someone could pay $69 million for a Beeple, but you can still download the same image for free on your computer or your cell phone.
Similarly, nothing would necessarily stop an NFT of an album from being reproduced and distributed to the masses. A person could even make and sell an NFT of someone else’s work.
All you’re getting exclusively, generally speaking, when you buy an NFT is ownership over that particular NFT. Sort of like a baseball card.
2. The only way to have an "exclusive" NFT is to buy the copyright, too.
Because digital files are so easy to share, you would only be able to keep an NFT all to yourself if you also obtained legal rights for the underlying intellectual property. This is not true with with a single-copy traditional work, like Once Upon a Time in Shaolin. Under that deal, ownership of the copyright stays with the Clan for 88 years before transferring to the owner, whoever that eventually is. That means the album can’t be released commercially until 2103 — unless somehow the Clan gets it back.
“NFT ownership and IP rights are almost entirely separate domains,” Chris Sabbagh, an intellectual property rights lawyer with Baker Botts LLP told me. (Sabbagh was generously explaining aspects of NFTs to me, and has no professional connection to the Wu-Tang album or anyone mentioned here.) “In this respect, selling an NFT is similar to selling an mp3 file. If an artist sells an mp3 of her song, the purchaser does not then own the copyright of the song.”
“But this isn’t a hard and fast rule,” he added. “An artist could sell both an NFT of a work and the copyright of the work to a purchaser.”
3. For the time being, you need cryptocurrency to buy NFTs.
This situation could certainly change as technology and marketplaces develop, but currently most NFTs “live” on the Ethereum blockchain. That means you need Ether to buy NFTs, and converting U.S. dollars into the cryptocurrency generally incurs fees. Sometimes substantial ones. (Other fees may exist for buying and selling art pieces in the non-digital world, but it’s unlikely you will need to exchange your dollars for cryptocurrency.)
Twitter is littered with complaints from users who have recently tried to buy NFTs and found the process both complicated and expensive.
“Ethereum Gas fees [that is, the transaction fees on the Ethereum network] are insanely high now,” an artist tweeted in February. “New #NFT artists are unable to sell their artworks. We should soon have better alternatives!”
Another user tweeted last week:
“trying to buy an NFT with this digital ‘money’…the process is comical..$50 conversion from ETH to WETH, whatever that is…$3 fee of some sort…$7 miner fee…waiting 10 minutes for the transaction…waiting..”
4. You might have to share proceeds of reselling an NFT with a content creator.
This is maybe not a bad thing at all. NFTs can be designed so that content creators always share in the upside, no matter how many times a work is sold, or how much it goes for. That feature could be a huge plus for new and emerging artists, who don’t often benefit when works in the physical world suddenly become sought-after and prices go up. Beeple, for instance, has done this.
“Yes, this is definitely possible, at least through Ethereum,” Sabbagh, the IP lawyer from Baker Botts told me.
“This is my understanding: Ethereum uses a ‘smart contract’ that is basically code that runs automatically when a certain event happens. The seller could put in a ‘clause’ into this smart contract that says, ‘when this NFT sells, send 10% of those proceeds to me.’”
Unfortunately, Once Upon a Time in Shaolin does not appear to have been sold with similar provisions. If it had, the effort could have prevented some later legal squabbling. A then-34-year-old artist Jason Koza in sued RZA and Shkreli in 2016, claiming that he was not compensated for his works being used in packaging for the album. Shkreli was later dropped from the suit, while RZA settled.
