Making sense of the NFT gold rush

Illustration by Harry Haysom

Like a lot of people, I’ve been struggling to get my head around NFTs. As the cryptosphere continues to move from the fringes to the mainstream, these Non Fungible Tokens have been making the headlines, with online searches now exceeding those for ‘blockchain’, according to Google trends. What’s followed has inevitably felt a bit like a crowd of thousands rushing to get through a single doorway, as everyone from big name artists to internet celebrities clamber to get their work minted and up for sale to the highest bidder before anyone realises what’s actually going on.

But to dismiss all this as a get-rich-quick scheme, or as hysteria that will pass along with countless other technology fads, risks overlooking the core idea that has made NFTs such a fascinating proposition in the first place. The idea, and the underlying technology associated, will endure and outlast the current hype, and so raises a discussion about the wider issues at play.

Firstly, NFTs help to frame the issue of authenticity of digital materials at a time when more and more of our daily lives are played out online. What’s being traded in these high profile examples is not the work itself, but a digital certificate of provenance that is deemed valuable in its own right. Art buyers have always prized provenance; proof of the source of a purchase, or prior ownership, as evidence to reassure that an artwork or object is authentic.

However, it’s a paradox that the internet seems both enduring and ephemeral. For every digital asset that’s created, there will be a link that rots, so establishing the true original source of content has always been problematic. When an artwork is minted or ‘tokenized’ an entry is recorded on a Blockchain as a permanent record, which helps solve this problem . An NFT provides a way to validate provenance more efficiently than any offline process has before (although not always without wrinkles in the process).

NFTs also have the potential to help define the difference online between ownership and access. Currently, the most common way to exert ownership of materials on the internet is to restrict access. This has historically been the way value has been created online (paywalls and subscription), but this has ultimately been at odds with the ethos of the open internet, where the more something is shared, the more valuable it becomes. This will become increasingly important in a world where more of our experiences take place virtually. In recent weeks brands have even started to sell products that only exist in augmented digital environments. The same motivators driving the sale of limited edition products or small batch goods are at play here. Scarcity drives desire and demand, and the social currency created by owning the rarest digital items is no different in a world where most people spend as much recreational time online as they do in the real world. It’s easy to imagine these same products will soon come with their own NFT to guarantee authenticity.

The second area is a shift in perception about the value of digital materials. In the art world, attempts have been made to reimagine and create a digital equivalent for the real world gallerist, with platforms like Sedition. But here the value of artwork appears painfully undervalued when compared with the traditional market. It’s not that the work isn’t as good; it’s that there’s an implied assumption that the work is of lesser value as it only exists on screen. Henrik Mauler is the founder of ZEITGUISED, and a pioneer in digital art. “While the idea has been around for a while, I share the sentiment of everyone in the digital Art community that NFT is a technology that we’ve been waiting for — being able to monetize our art by selling our work to collectors and fans in order to reach those who care most about the work. If that was practiced in its purest form, it would lead to a normalization of art prices, many more could afford art and more artists could live off making art.” But if that sounds utopian; like it’s too good to be true, it probably is. “No clever self-organising system will be free from the sort of speculative behaviour we’ve seen recently” Henrik continues, “It’s an oligarchy of ‘cryptowealth’ defining what is valuable art and what isn’t. This is the same form of power mongering, the same structures forming themselves as in the physical or traditional art market. As long as you have people trading values, these steep hierarchical structures will always form in one way or another.”

Finally, and most significantly, the surge in interest in NFTs has helped draw even more attention to the energy intensiveness of the underlying technology, and the inevitable ecological impact. Unfortunately many of the websites and platforms that have caught the wave of popularity are also based on the Ethereum blockchain, which is particularly costly in terms of carbon footprint. Earlier this year we hastily auctioned our self-initiated work Hands.wtf on the OpenSea marketplace, only to discover that the ETH transactions consumed 132 Kg of CO₂, roughly equivalent to driving a car from London to Paris. (We subsequently offset this with a donation to the Agrocortex REDD Project, but we fully appreciate offsetting isn’t the long term solution.)

There are more sustainable routes emerging, like Hic Et Nunc that runs on Tezos, one of many cryptocurrencies that take a more eco friendly approach to mining, and a new release of Ethereum that may have a lower carbon impact. It’s a very important question for an eco-aware generation of artists and companies, and one that’s yet to be answered fully.

From preserving authenticity online and bringing well earned value to digital artists, through to navigating the thorny issue of ownership on the open web and impact on the climate, there will be innovation and unintended consequences in equal measure. “I think the exciting part of NFTs at the moment lies outside of the gold-rush for digitally made pictures” Henrik concludes. “The conceptual side of what is art, what is a transaction, the myriad creative ways of how to share, own, co-own, resell, remake, publish creative work is what’s truly exhilarating. A lot of this good stuff we’ll see emerge over the coming months and years, while the focus of the mainstream is on the crazy values being put on work that would have gone unnoticed before.”

James Britton is Group Managing Director at Stink Studios.

Illustration by Harry Haysom (available to collect on hicetnunc.xyz for 25 tez)

Originally published at https://www.creativereview.co.uk on April 1, 2021.

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