NFTs: How Cryptocurrency and Modern Art Push the Definition of Value
On March 11, 2021, British auction house Christie’s minted the third most expensive living artist in the world, Mike Winkelmann. The 41-year-old South Carolinian, who began creating artwork in 2007 under the alias “Beeple,” created one piece a day and combined works from five thousand days into a single block for the sale. In addition to the sheer number of works sold at once, and an astronomical $69 million price tag, the auction was exceptional for another reason: the works were all digital.
To some, selling a JPEG file might seem like the scam of the century. Nothing could seem more valueless than an arrangement of pixels being copied endlessly, millions of times over, until there are more copies than could ever be demanded. But within this particular JPEG hides a unique feature allowing the file to be bought and sold.
These art pieces were each minted into an “NFT,” or “non-fungible token.” Non-fungible refers to each NFTs individuality, as fungibility is a term borrowed mainly from economics, referring to an item that you would not mind having replaced for another of the same value, such as currency, government bonds, or even Dave and Busters tickets. “Token,” in this context, refers to each artwork having a digital certificate of authenticity stored on the blockchain. Art’s ability to maintain value lives and dies by the existence of certificates of authenticity and their ability to generate validity-backed scarcity. This level of verification allows an asset to be considered for purchase and trade.
This certificate, created on the blockchain, uses “proof of work” to identify exclusivity and ownership. Blockchain technology has found recent popularity through the crypto-currency Bitcoin, as well as nascent coins like Ethereum. There is an essential difference between digital coins and tokens: where a coin is a store of value that can be exchanged for other assets of worth, a token is a digital representation of an asset with neither particular market use nor an established relationship with online payments. Because the accessibility of these tokens depends on other digital programs, many NFTs, and other tokens, exist on the extant Ethereum blockchain.
“Proof of Work” is a blockchain concept term referring to the consensus algorithm that verifies transactions on blockchains. It signifies the computational puzzle a computer must solve before adding new information onto the chain constituting the blockchain ledger. This “ledger” records the information critical to maintaining these technologies, like who owns a bitcoin at any particular time, and whether or not this JPEG is the original NFT, rather than one of the imposters. Internet users can employ this technology to mint an image or sound into a token, and generate their own creative take on the nascent cyberart market.
In recent months, NFTs have exploded onto the scene in every shape and form. Whether it’s Twitter CEO Jack Dorsey minting the social media platform’s first tweet, a Croatian Tennis player selling the rights to temporarily tattoo her right arm, or the humanoid robot Sophia selling its AI produced art, the technology has branched off into a futuristic realm where flying cars and virtual reality schools would be commonplace.
In a desultory fashion, I attempted to buy an NFT artwork for the purpose of putting an image to this illusionary concept. Knowing that even free NFTs found on OpenSea and similar markets will have high costs associated with processing the transfer and maintenance of these technologies, it prompts the question of why someone would buy an NFT at all.
More than 8 million people visit the Mona Lisa in Paris each year, often waiting in long lines looping around the Louvre Museum, for what is currently a thirty-second viewing experience. However, viewing a painting online rather than at a museum is not considered an authentic experience. The disparity between in-person and virtual observation is what generates museum viewership of art, concert ticket sales and even basketball game attendance. The baffling aspect of NFTs popularity is that the viewing experience is the same for both owners and online viewers. Because there is no difference between my computer screen displaying Beeple’s artwork, and the owner’s viewing experience, how does artwork ownership distinguish itself from non-ownership? Furthermore, is there value to being the owner?
Shortly after his purchase of Beeple’s aforementioned artwork, Crypto-investor “Metakoven'' explained his reasoning for purchasing to CNBC: “I think this is a significant piece of art history… this is a change in medium and there will be an economy around it. The first piece in that movement will be incredibly valuable going forward.” While Metakoven, whose real name is Vignesh Sundaresan, seems to believe there is room for growth in the world of NFTs, the very artist who sold him his works seems to disagree. Beeple, or Mike Winkelmann, immediately liquidated his Ethereum into cash and announced that “NFTs are absolutely a bubble.”
The Winklevoss twins were early investors in cryptocurrency and built platforms to further their ease of exchange. Their most recent purchase was Nifty Gateway, a platform designed to streamline the NFT trading process. They espouse the oncoming “Metaverse,” a virtual reality enhancement of the physical world, which induces thoughts of The Matrix, and Ray Bradbury’s “The Veldt.” Early proofs come from the video game Fortnite, where people have bought concert tickets and clothes to dress their characters, despite these purchases existing solely in the digital ethersphere. Although it remains uncertain whether or not the true forward motion of the human race will be virtual, early investors will continue to try their luck at NFTs, and uncovering the next crypto-asset to fuel the revolution.
Photo Caption: In recent months, NFTs have exploded onto the scene in every shape and form.
Photo Credit: Pixabay