If you read my post about cryptocurrencies, you knew this was coming, I am finally writing about NFTs. I wasn’t going to get into the topic but my friends wouldn’t stop sending me articles and insinuating that I should do a post on NFTs. For the past month(s), I have been feeling like this:
As I said, I wasn’t too convinced when I started investigating. But holy shit. This was fun to write, stimulating to reflect on and overall exciting to share with you guys, so thank you.
What is an NFT?
NFT means Non-Fungible-Token. In economic jargon, a fungible asset is a value in which units can be interchanged. For example, cash is a fungible asset, because one can swap a tenner for two fivers and the value remains unchanged. Cryptocurrencies are also fungible, as a bitcoin is worth the same as any other bitcoin in your digital wallet.
Some assets are non-fungible, like a house. Houses have unique qualities, but they can’t be treated in the same way as cash. Non-fungible assets can be traded but they are not interchangeable.
NFTs are used as an identifier that points to a digital object. For example, the first popular NFT was CryptoKitties, in 2017, a blockchain game on Ethereum in which you can purchase, collect and breed virtual cats. When buying a virtual cat, the buyer is purchasing an NFT. The felines are all different and are seen as collectables, so they are not interchangeable like ethers (Ethereum’s cryptocurrency), bitcoins, or cash. And buying an NFT means buying a stream of letters and numbers in the blockchain.
At the beginning of March, Christie’s auction house had one of those blockbuster moments when the eyes of the world are pointed to the art world. This time the topic was the sale of an ‘NFT-based piece’, a digital work by the artist Beeple that came to a whopping £50 million. It was the first NFT sold by a major auction house, and the more expensive digital art sale to date.
The media went crazy. News about NFTs would pop everywhere on our feeds, articles on how NFTs are revolutionising art and how everyone who matters is investing in NFT and cryptocurrencies. Just have to take a look at Google Trend to see:
What people get wrong about NFTs
This is when our blockchain training is going to come in handy. Remember when I told you what blockchain was? I explained it here in detail, but as a refresher: blockchain is a decentralised virtual ledger that contains digital transactions verified by the network.
NFTs are hosted in the Ethereum blockchain. How it works is: an artist creates the NFT, which works as a sort of digital provenance. Then the NFT is verified in the same manner as a cryptocurrency: through the network of blockchain users. This verification tells us who owns the NFT.
But an NFT is not the actual piece of digital art, it is a pointer to the piece. An identifier. It is, at best, a certificate of authenticity. Using the CryptoKitties example, if the company decides to take the artwork offline and use it only to promote a new movie series, the person who bought the virtual cat is left with the data in the blockchain but without any art attached to it. Because that is what NFTs are: numbers and letters on the blockchain.
In the case of visual art, crypto fans say that NFTs provide digital ownership. This begs the question of what it means to own digital art. Since digital art is not physical, unlimited copies of the piece can be made and scattered over the internet, making it impossible to distinguish between the original and the replica. If an artist sells a digital work, don’t they copy and paste, retaining the first version? Can we then say that there is a distinction between original and replica in digital art?
To make things worst, when a buyer purchases an NFT, they have no major rights like copyright or reproduction. After all the publicity about NFTs, creators saw the potential to monetise the greatest hits of the internet: Nyan cat was sold. The first-ever tweet was sold. But that doesn’t mean that we can no longer use it, it only means that it belongs to someone. On paper. Maybe.
Even Christie’s in the contract is not too sure, stating that “You acknowledge and represent that there is substantial uncertainty as to the characterisation of NFTs and other digital assets under applicable law.”
To summarise, NFTs barely have any ties to the actual artwork. Buyers don’t acquire the artwork, they only purchase a piece of paper that claims the piece is theirs, without enjoying the traditional benefits of owning an artwork.
The artistic irony
Here is the crazy thing. For all the publicity that NFTs had as a revolutionary force in the art world, they are not about art. At all. It’s all about money.
As some curators say, it would be interesting for artists who create NFTs to do work that explores topics such as the blockchain and use that NFT as a way of exploring the concept in their work. That would have artistic value and interest. Otherwise, the NFT issue is just an excuse to talk about the astronomical quantities collectors are willing to pay at auctions. It’s not like that didn’t happen before, but it annoys me that money is the only reason why art makes it to the papers these days.
So, here are my thoughts: NFTs play into the concept of authenticity, as they are a certificate expedited by the artist to say that the work they created is ‘owned’ by the buyer. And it seems strange to me because I always took digital art as a celebration of the Warhol spirit that rejoices in the reproducibility of the work of art.
Philosopher Walter Benjamin believed that while original artworks have an aura, a unique existence, reproductions lack that. Warhol challenged that belief by creating silkscreens that allowed unlimited reproductions. Digital art is reproducible from the moment of its birth, reproducibility is carved into its DNA. I find it conceptually ironic that the NFTs pursue authenticity in digital art, being ‘authenticity’ an extremely foreign concept to the medium. But again, as I said, this is not about art.
Marketability
On February 22nd, Jesse Schwarz (random guy with dollars, I think) spent $208,000 on an NFT for a GIF of LeBron James dunking during a game. Because there is no copyright ownership, everyone can still go online and watch it.
When asked in an interview if he didn’t think the GIF would lose its value because is not restricted, Schwarz answered that in his opinion, it was quite the opposite. He then compared the GIF with the Mona Lisa. He said that indeed, there are many reproductions of the Mona Lisa, but there is only one original Mona Lisa. The attention, the postcards and even the memes of the painting just increase the value of the painting, because it popularises that image.
Hold on, wait a minute. Comparing the GIF with Mona Lisa is not feasible because there is indeed an original of the Mona Lisa. However, the original of the GIF doesn’t exist, unless by original we mean the treasured memory of being there to witness that dunk. Any other thing is a reproduction. Also, I doubt that you can popularise the image more than it already is.
The Mona Lisa and the LeBron James GIF do have something in common though: they are not very liquid assets. Schwarz claims that his LeBron James GIF is an investment. Is it? And who collects NFTs anyways?
Most people who ‘buy art’ through NFTs are not art collectors, are crypto investors. These people are crypto entrepreneurs or have invested in cryptocurrencies in the past, having tons of ethers and not much to spend them on.
The high fliers, like Beeple’s piece buyer Metakovan, invest millions of dollars into NFTs to generate interest and publicity and have people thinking that is the next big thing. Middle range investors like Schwarz follow suit and NFTs -and cryptocurrencies- become more valuable.
What the future holds
Okay, we get it. NFTs are like selling air and have no intrinsic value. But what is intrinsic value anyway? Does money have intrinsic value?: No, it works because we believe in its value. Many elements in our society are constructs, and they work. Whether NFTs will become part of that construct it’s a question of how optimistic you are about people, and how gullible you think they are.
As I am writing this, NFT prices are plummeting by 70 per cent. CEOs of NFT art companies ensure that this is just a natural whiplash and that NFTs still have a bright future.
However, if the interest generated by NFTs was exclusively created by crypto millionaires and crypto investors, we have a problem. If this sale craze is not driven by loyal art collectors, sales are bound to die down. Unless they can get serious collectors on board, we are witnessing a bubble about to burst.
NFT and the emperor’s new clothes
The NFT issue can be explained with an analogy, comparing it to Hans Christian Andersen’s story The emperor’s new clothes. In the story, two swindlers convince the emperor to supply them with exquisite fabrics so they can make him new magnificent clothes that are invisible to those who are stupid or incompetent.
The swindlers kept the expensive fabrics and showed the emperor’s officials the empty looms. The officials, afraid of admitting they couldn’t see anything, endlessly complimented the clothes. When the emperor put the ‘clothes’ on, he also pretended he could see them. He sets off in a procession before the whole town, where folks uncomfortably go along with the pretence until a child shouts: But he has nothing on at all!
In a way, those investors are to NFTs what the swindlers are to the emperor, and art is the suit. NFTs are naked of art, and still, there are lots of people who pretend that NFTs are vehicles to hold real value. Until someone comes up with a better way to ensure digital ownership, NFTs are just waiting for the little child to exclaim that the emperor is, indeed, wearing nothing at all.
REFERENCES
Artforum News ‘After strong start, NFT prices sink by 70 percent’ in Artforum, April 14 2021. https://www.artforum.com/news/after-strong-start-nft-prices-sink-by-70-percent-85463
BBC. ‘What are NFTs and why are some worth millions?’, in BBC News, March 12, 2021. https://www.bbc.co.uk/news/technology-56371912
Benjamin, Walter. The work of art in the age of mechanical reproduction. Prism Key Press, 2010
Castor, Amy. ‘Metakovan, the mystery Beeple art buyer, and his NFT/DeFi scheme’ in Amy Castor, March 14, 2021. https://amycastor.com/2021/03/14/metakovan-the-mystery-beeple-art-buyer-and-his-nft-defi-scheme/
Gerard, David. ‘NFTs: crypto grifters try to scam artists, again’, in Attack of the 50 Foot Blockchain. March 11, 2021 https://davidgerard.co.uk/blockchain/2021/03/11/nfts-crypto-grifters-try-to-scam-artists-again/
The Hustle. ‘Why one guy paid $208k for a video clip of LeBron James dunking’ in The Hustle, March 7, 2021. https://thehustle.co/why-one-guy-paid-208k-for-a-video-clip-of-lebron-james-dunking/
Sriram, Samyuktha. ‘Analysts suggest “silent crash” may be underway as NFT prices floors plummet’ in Bezinga, Yahoo Finance, April 5, 2021. https://finance.yahoo.com/news/analysts-suggest-silent-crash-may-111059901.html
Upshaw, Reagan. ‘Selling the Mona Lisa’, in Reagan Upshaw Fine Art, January 6, 2017 https://www.reaganupshawfineart.com/selling-mona-lisa/