As someone who teaches art history, specifically modern and contemporary art, it’s not uncommon for me to get a lot of questions about art’s value and the art market. For a wide variety of reasons, people seem much more intensely interested in why post-war abstraction and contemporary installation works sell for millions of dollars than with the monetary value of a Monet or Rembrandt (in my experience, anyway). So when a Beeple NFT work sold at Christies for 69 million dollars, I got a lot of questions, from students, colleagues, and friends. I attempted to sort my thoughts in my previous post on NFTs, In that post I also summarize what an NFT is, so if you’re looking for that explanation, please check that post out first.
I had a pretty critical response to NFTs in that article, and while I’m attempting to be more open to the positive potential of this new technology, I’m still quite wary. Previously, I argued that the frenzied speculation in the market was an indication of the acceleration of art’s commodification. I suggested that while the intention of NFTs developers was to empower artists to maintain ownership and receive proper compensation for their labor, what seemed to really be happening was a hyper-commodification that only in rare cases directly benefits the artist. I asked in that post if the transmutation of the art-object into a purely financial asset does or doesn’t empower the artist.
A few months, several huge auctions, and lots of spilled digital ink on the topic later, and many of my concerns about authenticity and commodification remain.
Anil Dash, the CEO of Glitch, who co-pioneered NFT technology in 2014, wrote for The Atlantic in April this year about his initial expectations for this new way of trading art. The intention, as he describes it, was to create a system of provenance and protection for artists. NFTs were meant to allow artists to retain ownership of their works and thus resist appropriation and exploitation. The technology was intended to be a brave new way forward to ensuring the direct compensation of creative labor. It didn’t quite work out that way.
Dash explained that the initial 2014 program was quite rudimentary, built during a type of hackathon. The program didn’t have the capacity to contain actual images, the shortcut they used in the code was to simply link to an external site containing the image. The issue, however, is that now, this market which is worth billions of dollars uses the same shortcut. Most people buying NFTs now are not getting access to a complete file but only a link to it, which may be housed on a website maintained by a startup company which may or may not be around two years from now. If that company goes belly-up, who authenticates your NFT?
In short: Right now NFT’s are built on an absolute house of cards constructed by the people selling them. It is likely that _every_ NFT sold so far will be broken within a decade. Will that make them worthless? Hard to sayJonty Wareing, Tweet.
Will that make them worthless? The software engineer, Jonty Wareing, quoted above, certainly understands the technology better than I ever will. But I do think discussions on the value of NFTs would benefit on a reminder on how art is valued, no matter the media or method of trading.
A work of art’s value is determined by three things: Perceived Rarity + Perceived Demand + Perceived Authenticity
Rarity. Or if you prefer, scarcity. This is probably the most fraught concept when it comes to NFTs. IRL art is physically tangible, with dimensions that can be measured and cataloged. It’s an object that can be found, lost, rediscovered, etc. Due to the manner in which non-digital art is made we tend to think of the work as unique, original, and one of a kind. This gives obvious rarity. Even in the case of replicable media, like prints, the individual items are usually numbered and in limited editions. Lower numbered prints are typically valued more than higher numbered ones, prints from smaller editions are worth more than ones from larger editions. And then there’s the consideration of authenticity, prints made by the artist tend to be worth more than a posthumously made edition (in general, there are always exceptions). NFTs have a real problem in terms of originality. A jpeg or other image file can be copied easily, and absent metadata, the copy is indistinguishable from the original. As summarized in my previous post on NFTs what the non-fungible token actually does is provide a certificate of authenticity. It “mints” this particular jpeg (or whatever) as the designated original. The coding in the token is what is actually rare, not the item signified by it.
Demand. This element of value is fickle. Artists can fall in and out of demand over time, sometimes suddenly. NFTs are currently a hot commodity, there’s definitely demand, although the audience is quite limited.
Authenticity. An original is worth more than a copy. An original with well documented provenance is worth more than an accepted attribution with no solid substantiation of its origins. As mentioned before, an NFT is generally a certificate of authenticity, a tracker of provenance.
Perception. All of these elements of value rely on perception. All of these factors are largely subjective. A work thought to be an original may be discovered to be a forgery. A work thought to be a one-off may actually be one in a series. A work thought to be by one artist may turn out to be from someone else. A change in the academically accepted status of a work can suddenly and dramatically change its market value.
In the tweet above, the software engineer asks an open question regarding the nature of NFT art should the links encoded in the tokens be “broken.” In such a circumstance, the designated original would be lost, or at least compromised, but the token of authenticity would be intact (as far as I understand this hypothetical). Would such a work lose value?
In this hypothetical, but seemingly quite possible, scenario, what happens to the three factors of value? Immediately the authenticity and the rarity of the file would come into question. The designated original file would be compromised or deleted, but likely copies would exist. Since those copies would be indistinguishable from the designated original, and let’s say the artist consents to the substitution, the NFT could then be made “whole” again with no alteration to the original form of the NFT. What about demand? If I’m the owner of the “restored” NFT and put it up on the secondary market, does the process of restoration effect its value? In theory, it shouldn’t, since it is literally indistinguishable from the original, but in my opinion, I predict it would negatively impact the value. Collectors are often opportunistic, but not always rational, I think they would view the restored NFT as lacking authenticity, or as being damaged in some way. Not because it literally is, but because of subjective perception.
This is all wild speculation, of course.
Remember the collective that bought a Banksy, made it an NFT then burned it?
Artist Damien Hirst recently launched an initiative called “The Currency” which offers 10,000 hand-created dot paintings, each one with a corresponding NFT. For 2,000 dollars a buyer gets the NFT, but after one year the owner must decide if they want the physical version of the object, for which they must relinquish the NFT, or if they want to keep the digital token. If they choose the token, the physical painting is burned. Paintings were ranked by a third party analytics company in terms of “rarity” based on factors like how many colors were used, number of words in the title, etc. Since the project started, the secondary market has earned over 26 million dollars to date. Some of the tokens sell for only a few thousand dollars, others of 100s of thousands.
As a side note, I was not able to find out if the NFTs include a resale clause that gives Hirst a royalty on secondary sales. Some such contracts are included in NFTs but many tokens do not have this clause. Further, I was not able to determine where the designated original was stored, or how it was coded into the NFT.
It stands to reason that in a years’ time most of the owners of the NFTs will opt to keep their digital tokens, and there will be quite a bonfire at Hirst’s studio.
As in the Banksy event I discussed in my previous post, there’s a transmission of authenticity being performed here. For those who decide that the Hirst artwork is more valuable to them digitally, the destruction of the physical object will likely increase the NFTs value. Again, this is speculation on my part, but it will be interesting to see how the secondary market responds once the paintings are destroyed.
Many voices in the art and design community are also angry that NFTs are changing hands for such astronomical sums of money, and it’s often not going to the artist. Given that NFTs were originally created as a way of giving control by asserting digital ownership, the idea that they are becoming increasingly elitist is causing tension. The buy-in fees are prohibitive for many, and the cost to actually buy one means the marketplace is becoming something of a playground for the super-rich.Georgia Coggin, CreativeBloq.com
Anil Dash, comments on the trading of NFTs currently: “What results is an almost hermetically sealed economy, whose currencies exist only to be traded and become derivatives of themselves. If you squint, it looks like an absurd art project.”
It really does all seem like an excuse for rich people to exchange money with each other. I don’t want to be completely dismissive of NFTs, artists in smaller markets can, and some have, been able to profit from this technology. Certain institutions have been able to leverage NFTs into money making ventures. Recently the British Museum announced it was going to sell at auction NFT versions of several Hokusai prints. Each set of NFTs being ranked by rarity, like the Hirst project, creating a series of copies of Hokusais that are designated “ultra rare,” “unique,” or “common,” with corresponding price ranges. It struck me that this makes the NFTs sound a lot like Magic: The Gathering (MTG) cards, and I can’t help but wonder how an ultra rare Hokusai NFT’s value will look in 10 years, and how it might compare to a MTG Black Lotus card in value? Isn’t that kind of what NFTs are? Digital Art Collectible Trading Cards?
The commercialization of art is nothing new, of course, and even this kind of explosive market is not unprescidented.
Probably the closest art historical analog to the present NFT fervor was the dramatic rise of pop art in the early 1960s. Artists such as Jasper Johns and Andy Warhol turned suddenly and in earnest to colorful, recognizable imagery produced in technological, déclassé media in multiple such as screen prints and lithographs.Michael Maizels, TechCrunch, November 2, 2021
The argument has been made that the fervor over Pop art was manipulated and elitist, at least as much as the current NFT rage is. I would argue, that while Warhol and Johns created commodified art about commodity culture, we’re not seeing a similar thematic trend in NFTs. The Beeple, Hirst, Banksy, and NyanCat sales don’t really have that much in common in terms of style, theme, or genre. Their commercial success as NFTs is only what unifies them. What these works have in common is their status as meta-data in a curious and novel form of cryptocurrency.
I find myself again at a quote from W.F. Haug which I quoted from in my previous post (apologies for the repetition):
“Capital, with art at it’s disposal, not only shows off as a connoisseur and admirer of Fine Art but also, in its esoteric interests, adopts the lofty illusion that it is the highest creations of the human spirit, and not profit, which is its determining aim. Thus, everything good, noble, beautiful and great seems to speak for capital. Art is used to dazzle, as a tool to create the illusion that the domination of capital is legitimate, and just as valid as the domination of the good, the true, the beautiful, and so forth. In this way art can become a means, among others, of stupefying the public.”W.F. Haug, p. 129
Art and NFTs go together because art has long been a way for transferring wealth while also signifying interest in high-brow cultural pursuits that give the presentation of being more lofty and sophisticated than mere commodity.
Does this phenomenon have the potential to revolutionize how artists connect with buyers? To ensure creative labor gets the support it deserves? Maybe. It’s certainly not living up to that potential at the moment. I think it’s an error to presume NFTs are a fad or that they’re going away anytime soon. As long as the blockchain technology that underpins it remains viable, so will NFTs, and as long as speculators can make profit on using art as meta-data, then that’s what will continue to happen. Sadly, in most cases, this seems to have little impact on the actual artists except in the highest most echelons of the trade. Will NFTs eventually be relegated to the art elites? The Hirsts and British Museums? Will other artists see their work continue to trade for increasing sums without actually getting compensated? As much money has already been traded in this new facet of the art world, it’s still impossible to say exactly how the market will shake out years from now. I can only hope more attention to equity and accessibility will be paid in the future.
W.F. Haug, Critique of Commodity Aestheticts: Appearances, Sexuality and Adversitsing in Captialist Sockeity, Trans. Robert Block, Intro. by Sturat Hall. University of Minnesoata Press, 1986.