#1101. NFTs: When Blockchain Meets Art

Trust. A global lack of it has fueled a swell of technological ideas aimed at geting rid of the “untrustworthy middle-man”. Blockchain is the most famous and likely to have an impact on our lives and Bitcoin has been the poster child for a financial application of blockchain for the past decade. But what happens when blockchain meets art ?

 

By now, we’ve all heard of Bitcoin. To simplify, it is a digital currency whose explosive financial success rests on two main pillars :

• Distributed transaction validation. Every transaction using bitcoin is validated by multiple computers simultaneously and no central organism such as a bank owns a unique ledger on which those transactions would be stored. The ledger itself is distributed, so the books cannot easily be tampered with and no one has the power to enforce rules on others or cheat. The process of validating a transaction (through complex cryptographic methods) is called mining and, from day one, mining has been rewarded in Bitcoin.
• Scarcity. Only 21 000 000 Bitcoins will ever be mined. We’re recently passed the 19 million mark and complexity of mining increases as we get closer to the “end”. In FOMO terms, this means there won’t be enough for everyone. And the fact that miners are actually paid in Bitcoin (tiny fractions thereof) increases that scarcity.

In a world where central banks can pull billions of new Benjamins seemingly out of thin air with no regard to the actual value reserve backing that green, that scarcity of Bitcoin appears like a lifetime guarantee and a safe investment against inflation. And, in a world where utter scumbags can so easily rise to dominating positions throughout the world, and distrust in institution is at an all time high, the distributed ledger idea and failsafe algorithmic trust of the blockchain underlying Bitcoin can prove irresistible to many.

 

That’s the theory, at least. In practise, fear of missing out is 99% of Bitcoin’s success. And its explosive rise in value is entirely due to speculation. People who buy Bitcoin mainly want easy profit. It’s sadly ironic that a currency based on trust has practicaly no use in actual transactions, except for illegal arms and drugs deals, has served mobs and underground operations, has caused far more identity theft than it has stifled corporate malpractise. And it’s terrifying to read the power usage statistics underlying what has so fad had so little practical use for society. Bitcoin is just one of many environmental disasters engineered to turn innocent wildlife into virtual numbers on a bank account (according to the University of New Mexico in 2018 every $1 of Bitcoin value was responsible for $0.49 in health and climate damages in the US, nuff said?)

By now, you’ll have guessed I’m not a fan. I’d far prefer we focused on actually fostering mutual trust between human beings than relying on machines for that. And Bank of America’s recent slam on Bitcoin (Bitcoin Is Dirty, Slow, Volatile and Impractical – Bank of America Report) aptly sums up its true value creation for the economy and society at large.

But, as much as I’d love to see Bitcoin disappear from this agonising planet, my admiration for Blockchain is very high. The underlying mechanism is fascinating and will undoubtedly serve many worthy lower-scale applications in the future. And, today, we’re talking about NFTs, Non Fungible Tokens, that are taking the Art world by storm, both promising content creators a chance to earn money from their best work – something the evil antisocial platforms had wiped clean off the table for their own profit – and creating more environmental harm through algorithmic power usage. So, where is the jury on NFTs?

 

Bitcoin has many cryptocurrency friends. None share its star status, but Ether comes a “promising” second. Ether is the currency for the Ethereum platform. Ethereum itself isn’t a currency but a platform for hosting and developing blockchain-based applications. Basically, if you have an idea for a project that would require fair but complex attribution measures, there’s a fair chance a developer can create a great framework for it on Ethereum. A few years ago, I was involved in a very interesting freelance platform project for high value work that would have been perfectly suited to Ethereum. And NFTs are also built on Ethereum.

How do they work?

Well, take any photograph on this page, for instance. Or that video you watched on YouTube / podcast you listened to, on your way to work. Copy that to your computer and send it to 2 friends. Ask them to send it to two friends each, and so on. Soon, you have millions of copies circulating on the private devices. Just like Euro bills printed by the truckload with no serious counterpart to guarantee their individual value, and unlike a limited resource such as gold, diamonds or Bitcoin. Well, NFTs are designed to introduce artificial scarcity on those digitial works of art, and their history is fascinating.

 

French street artist Pascal Boyart has experimented with ways to link his murals to the digital world and to generate income for years. By painting functional QR Codes on walls, he was able to obtain significant donations for his work (interestingly, this – now copyrighted – work is still visible in Paris, but no longer on Google Street View. If this generalises, it’s going to make life … interesting … for street photographers and for Google). He also organised artistic treasure hunts that led to digital assets that only the first finders could claim, while everyone else could still admire the physical art on the streets of Paris. But it was by minting his murals as NFTs on Ethereum that he actually made it possible for a limited number of people to own a piece of his art.

The novelty here is that this move enabled the artist’s supporters to help him financially while actually owning a collectable piece of his work. When the mural is inevitably painted over, these patrons will still own a digital counterpart. The NFTs are individually tracked on the Ethereum platform and constitute a true proof of ownership. They can be legally sold to someone else like a certified print, or any other physical object. That perspective of a secondary market makes it possible to “invest” in artists through digital files but my guess is that patronage and support, more than speculation, will be the most frequent (if not most mediatised) use of NFTs.

Anyone can upload a piece of digital art to an official NFT auction market and create instant scarcity around that file. While copies can be in unlimited circulation, the NFT is unique (for example, anyone can copy the images on this page but I could still create – say 10 – NFTs for each of the full-size files and the destroy the originals). So the NFT only guarantees ownership, not exclusivity, which is then left to the author to manage or not. Here again, trust levels are nowhere near what human decency would ensure, because you do not have to prove you are the author of the digital art to mint it. And I’m pretty sure scumbags around the world are hacking the work of others (it’s really not that difficult to find high resolution files of famous photographs on gallery websites, those people don’t seem to have a clue) to mint them in their own scumbag name 😉 So, any reader can download the photographs on this page and create NFTs for their own financial profit in a few minutes (which is why they are low-res, btw). Funny ol’ world.

 

As with Bitcoin, failure to ensure security and actual trust isn’t the only downfall of NFTs. Their environmental cost is also staggering. Everest Pipkin writes :

Numbers vary, but minting artwork on the blockchain uses somewhere between weeks, months, years, (and in rare instances decades) of an average EU or US citizen’s energy consumption.

So, once again, here’s an interesting idea that has been commoditized (sadly a quasi-synonym for innovation, these days) in the worst possible ways:

• The actual content creation is totally secondary and you can mint work you never created.
• Scarcity is introduced purely for speculation.
• The cost to the environment will be huge (cryptocurrencies already use up as much energy as Argentina and NFTs are an important part of this)

And yet, I’m not as bearish about NFTs or cryptoart, as others call the idea, as I am about Bitcoin. Here’s why.

 

First of all, if we’re going to destroy the planet, I’d rather think it was going to be to help artists make a living than for pure speculation and drug sales. So, if you’re diversified and want to invest in crypto-something, might as well be art, rigth? When/If you resell the NFT, 10% goes back to the artist, which ensures another round of financing and patronage.

Secondly, the environmental cost is proportional to the value of the NFT. That is, the amount of computation is proportional to the value of the NFT, not to the size of the file or the number of NFTs minted. Say I sold 10 copies of my best 100 photographs for 100 € each, as NFTs. That would certainly help pay the costs of running DS for many years, pay for gear, trips and help me continue write articles such as this one rather than work. And the 100 000€ generated would come at an environmental cost that still 600 time less than one single sale of Mike Winkelmann’s (aka Beeple) Everydays: The First 5000 Days, a cost I could probably be able to compensate quite easily.

Thirdly: cost is a good countermeasure for mental laziness. Knowing your work is going to cost someting to a community forces you to focus on making the best possible use of it. Well, for the non sociopathic among us, anyway 😉 😉 So you would only try sell your very best work. Which, ultimately, is a win-win-win (you, customer, environment).

Fourthly: there’s a revolution on Ethereum’s horizon. How important and how near, I do not know. But the promise today is to make mining cleaner and find other ways of securing the network than mining (in ways that would increase scarcity, which is much lower than for Bitcoin). As with electric cars, you’re not really being green when you buy one, but if buying one really helps research towards a truly greener future, then it’s not that bad.

Cinqly: the idea is interesting. Bitcoin, for all its ills and dangers has one thing going for it: it’s a change of ideas and worldviews. No longer is centralization necessary to society!!! And NFTs represent a similar shift in thinking. They give digital files the same collectibility status as physical objects and let creators handle their business without having to rely on a system that isn’t always very open to newcomers or fresh ideas. That is worth fighting for.

 

There’s probably a lot more at stake, good and bad, that I don’t know about and that still hasn’t been envisioned. But this is already interesting as it stands. And the reality of the market is that speculators will speculate, NFT’s or not, and polluters will pollute. Just because I mint photographs doesn’t mean anyone will buy them. Just because a famous artist doesn’t mint his doesn’t mean people won’t travel the world to view them and pollute along the way. To me, NFTs do provide a great way for people to support an artist/author/journalist they enjoy and want to keep going. That, in itself, is a worthwhile revolution.

Ultimately, and as ever, it’s down to individuals – not systems – to act responsibly. And we can’t systematically oppose what is new and imperfect. If anything related to Bitcoin is actually going to support budding artists, not just speculators and government-owned mining farms, that’s a win for me. It’s up to us to make it progressively better and better or eventually drop it entirely if it fails to deliver on its promises.

What do you think?