Publishers Note- The art world was shocked in March when Christie’s Auction House sold a non-fungible token (NFT) of a piece, “Everydays: The First 5000 Days”, by Mike Winkelman – the digital artist known as Beeple – for over $69,000,000. We’ve asked Dmitry (Dima) Strakovsky, Professor of Art Intermedia at the University of Kentucky School of Art and Visual Studies to explain it all to us. In this article Dima first does some explaining then engages in a dialogue with Jonathan Hale, an artist who works with many traditional media as well as new medias, such as 3D modeling and 3D printing. Hale also teaches at Northern Kentucky and Eastern Kentucky Universities.
NFTs are in the news. And, like with most things art-related, it’s the news only when something gets sold for a ridiculous amount of money. It’s tough to fight the temptation to comment on the Emperor’s New Clothes but we will endeavor to move beyond the surface and offer some thoughts on what this might mean rather than question if a particular work of art is REALLY worth the dollar$ paid? The answer to the latter is always “no” but… someone is willing to spend the money and it is usually a signal that something interesting and new is happening in the cultural sector.
Before we proceed let’s do a quick technical overview. So, what is an NFT? Non-fungible token. “Non-fungible” simply means unique. The token part is a little harder to explain and has to do with a feature of some cryptocurrencies, most notably Etherium, that allows for contracts to be embedded into the public record of each transaction. This public record, more commonly referred to as “public ledger,” is implemented via blockchain. What is blockchain, you ask? Here is a great, albeit pretty technical, explanation. Each time you buy a work of art, your transaction gets recorded to the blockchain and anyone in the world can confirm your ownership rights. In order to encode the transaction onto the blockchain a complex cryptographic equation has to be solved. “Miners” from all over the world essentially compete to be the first to solve the equation using their own hardware, so each record is backed up by proof that work has been done, the solution was provided and a miner gets paid a small fee for their trouble.
Of course, any conversation about NFTs can’t really be separated from the dramatic crypto crashes of the past months. There are a variety of reasons for these, although there is still quite a bit of optimism in the sector, but one points to perhaps a legitimate critique of the space – the environmental impact of crypto-mining. It is a topic that is (surprise) more complex than “crypto is bad for the environment” and we will try to address it with a bit of nuance below. This tweet from Elon Musk is considered a central trigger (ergo environmental focus) but a bigger issue is a crackdown on cryptocurrencies in China which is both a home of the largest number of crypto-mining operations in the world and a country trying to develop its own digital currency.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
To really start unpacking the conversation around NFTs, at this point we will switch into a dialogue mode. This mirrors some of our own private conversations on the topic conducted via chat apps when both of us were trying to come to grips with the NFT explosion and how we felt about this; and frankly, share knowledge about what we knew about the core tech and art world reactions to it. Jonathan Hale is coming to the conversation with significantly more knowledge than most in the crypto space. He has mined Etherium before and currently has several NFTs on the market. Dima has a lot less of a direct experience and is interested in probing the NFT conversation from a tech-savy art world insider angle. The conversation is edited down for brevity and clarity but definitely hits the highlights from the several hours we spent in our extended dialog.
Dima: What has surprised you the most about NFT cultural conversation? I know for me, it definitely is the pushback from the more established art forces that view the tokens as a pure expression of the market that does not hold any of the aura of a “real” art object. This was condensed for me in a recent tweet by Jerry Saltz, who, to be fair, has quickly moved on to have a much more of a nuanced position.
I am not sure that an NFT can (the way art can and does) cast curses, declare oaths, conjure the Gods, watch-over armies, act as fertility spirits or give us visions of Elysium. If you see that one does this, let me know. I wonder if NFT can permeate that metaphysical membrane. pic.twitter.com/vwH1hKBcG9
— Jerry Saltz (@jerrysaltz) April 10, 2021
Jonathan: If you get into the NFT space, what is selling the most is work that meets almost all those criteria. If you follow Beeple (one of the highest-selling artists in the space,) his work has that. He’s been creating his own mythology for over 13 years.
Dima: So he didn’t just pop in out of nowhere?
Jonathan: Oh, no. If you get into Beeple, he’s a very interesting character. He’s been doing a picture, an image, every day for a long while. You should definitely take a peek at some of the stuff. For example, he did a series of political figures – Trump and Hillary, and they had tubes coming out of them and they’re grotesque. He’s creating this mythology, this language, and every one of his works had been building upon that for about 13 years. Not in the NFT space but just online in general. It’s just really interesting to see that he’s finally at this point.
Dima: Gotcha. So, he’s been developing this over a period of time. I assume mostly on social media. Posts mostly to Twitter?
Jonathan: I believe he has an Instagram as well but he also does a lot of sponsored work for companies. I know he’s done stuff for Adobe. He has built a pretty significant presence on the internet. Followers – the more you have, the more likely your art is going to be sold.
Dima: So he’s built up a number of followers on a couple of different platforms and then he’s able to commercialize it. From what you’re saying, and this is really interesting, there is already kind of an “aura” at work here. Except this is sort of an aura for digital natives. It’s not the same type that, per Saltz’s tweet, we would associate, for example, with a fertility spirit.
Jonathan: If you are looking for a fertility spirit, if you’re looking for something to, you know, put your faith in, it’s out there. Someone has made it for you.
A really exciting thing is, some of the artists actually have the NFTs working with tangible objects. So you pay for the NFT, Etherium is spent and a contract created, and when you buy from them, the contract is written to the blockchain and the artist will send you a real object. Some other people will sell you a high resolution image and a link to a form to put in your address so they can send them a print or a painting. So, you can have both physical and digital versions of these objects. There can also be something magical about that.
Dima: Well… Saltz is intentionally making a rather hyperbolic statement. It’s Twitter and all. But there is an interesting subtext here; the fine arts world has this boogeyman that constantly pops up – the market. And NFT is a perfect embodiment of this particular boogeyman – it’s a contract, a market spirit divorced from an actual product.
I can think of many arguments for and against the current commercial gallery-dominated system. But I think a lot of the conversation around the traditional art market and the aura can be summed up the following way. There is this magical thing that’s floating in the realm of an art object that very reluctantly agrees to play in the market. The market co-opts the magical qualities of an art object through sales, and also exerts this kind of alien, extrinsic kind of power on what’s being made within this “pure” world of art production.
Jonathan: Yeah, but I think, if we talk about the market, the purest forms of selling, specially time-based and video art, is NFT. I think there’s so much potential here that the art world needs to jump in on.
Dima: Let’s look at that because I think you’re making a really good case for, let’s say, performance-based work or film. For example, if we take Matthew Barney’s Cremaster Cycle, I don’t know if I should admit it on record, but I’ve never seen it in the quote unquote legal way. Always, bootlegs.
Jonathan: Who has?
Dima: There’s something really powerful here because NFT is a contract. And we can structure this contract in a variety of different ways. This can make the whole issue of public presentation rights and provenance of a digital file significantly easier to track and will open the work to much greater public sharing.
Within the fine arts proper there’s been a lot of different kinds of contract-as-an-artwork type movements. Seth Siegelaub’s sales contract work comes to mind immediately. He specifically targeted resale value of a work, and we should get to resale a bit later. Another, more contemporary example is someone like Tino Sehgal with his prohibition of documentation of his work: the only thing sold is an agreement to “perform” his pieces a certain way. So, we already have this way of representing the work that’s pretty much a part of the art world vocabulary. I think there are a lot of really interesting possibilities here.
Let’s go to the mechanics of how artworks are sold using NFTs.
Jonathan: Most of the NFT sites make you first go through a process to prove you are the artist. But before you’re a verified user, you have to go in and create at least one work. You’re not gonna sell that until you are verified and you don’t know if you’re going to be and it costs money to mint an object. Gas fees.
Dima: Yeah, can you explain that.
Jonathan: So, anytime you want to create an NFT, no matter if it is video, a gif or a sound file, it has to be minted creating a transaction on the blockchain and a corresponding contract and that contract requires you to put a little bit of Etherium down.
The problem is that a little bit of Etherium was a few dollars, you know, like last year and this year it grew by crazy multiples. I think right now, last time I looked, it was $60 per transaction. And of course, the prices fluctuate. If the network has more transactions on it, the price goes up; if you want to get your transaction done quickly, you pay more. The more people in line, the more I have to pay. I’ve gone low on the gas fees before and had it not even go through a week later and had to cancel it. The queue never took my money, whoever processes it gets that cut of the transaction, you know, so it got sent back to me but I lost $3.
There’s definitely a barrier of entry purely in terms of money, and there’s a barrier of entry for just the knowledge of how to use Etherium and to how to set this up.
Dima: So, the services that you’re using put that burden, the burden of transcending these barriers, on the artist?
Jonathan: Yes, and most of these places have fees. You put something up and you sell it, they’ll take 2.5% (or something like that) to facilitate the sale to a collector. How many of the NFT sites are you familiar with?
Dima: Not that many. I mean I sort of started digging and then I was like these [expletive] are multiplying.
Dima: Got it. So switching again. One of the biggest criticism right now that we’re seeing is environmental criticism. This is, of course, and issue with cryptocurrencies but NFP folks are getting the hate right now in particular.
Jonathan: Yeah. There are “kill lists” around – it’s more of a targeted lists for people to target artists that are big in NFT. Twitter people were making these lists and being like, ”Okay, go and you know, harass these people.” And people are like getting death threats, you know. I don’t think there’s anything that’s really come of it. It’s more just like internet crusaders. Yeah, they sit at their computers watching YouTube videos which costs so much more energy than NFT’s could ever hope to, but that’s another story for another day… The real problem with crypto is no matter, if there’s a million transactions or one, there are these miners doing proof of work: their computers are running, and looking through all of these blocks and making sure everything’s correct. If all the computers say yes, then you know the block is added, and then they start mining again and looking for more blocks. There does not have to be this much computing power to run that, you know, to run that set of data. But the miners have the computers turned on. And regardless of wherever or not you put an NFT into the mix, they are gonna keep mining, the same amount of power is gonna be used.
I’ve seen some people put up figures of like – minting one NFT is like someone in Europe that uses power for four days or something like that.
Dima: But this is an aggregate from all over the world.
Jonathan: Exactly. You can’t break it down like that. The train analogy works out really well. You have a train, the train is pumping out diesel, it’s moving nonstop. If you’re on it or not, it’s still going. Yeah, there are other things going on. On, for example, Etherium, it’s not just NFT’s, you know there’re other transactions, there are a lot of things happening. But the computers are gonna be mining until they eventually change over to proof of stake instead of proof of work.
Proof of work requires computers, proof of stake just requires a computer with X amount of coins or tokens on there to just say you’re a stakeholder.
It’s based on staking the coins. As an Etherium user I have to put in a pretty large number of coins to begin staking. What does that mean? Well you’ve tied that Etherium up and you can’t use it. You can’t spend it. You have a stake in making sure that the blockchain is correct, because if your computer gets chosen to validate the information and it’s off some of your coins get burned. However, once it is validated you get paid, you get a little bit of coins for your effort, you get part of the gas fees that were used for that transaction. If I have a minimal stake (just a few coins) there’s a very small chance of me getting chosen to validate but I’m still going to get some residuals. I still get small amounts sent to me even if I don’t validate. But if let’s say I am somebody who has $100 worth versus $10,000 stake, the likelihood of them getting chosen and validating is much much greater than my likelihood of getting chosen because they have more stake in the game. Now there’s always a small chance you could still get chosen and get like a huge payday. But…
Dima: Got it. So at that point it’s just a random chance of you getting paid out.
Jonathan: Yeah, exactly. And that also like, increases the security of it because some people will try to slip in. They’ll give a false block. But with proof of stake it behooves you not to do that because you will lose a lot of coins if it comes back because you’re wrong.
Dima: Finally let’s talk about resale. The art world proper has been talking about resale forever.
If the artist does their work well – their collectors’ holdings go up in value. There have been some effort to create contracts that will reflect some sort of resale fee that’s going back to the artists, but it doesn’t seem like anyone’s been able to create and enforce them. What’s kind of exciting about what’s going on with tokenized art is that that’s built into the whole NFT ecosystem.
Jonathan: Yes. And so, whenever I’m minting an NFT I am asked a few questions. Like, how much you’re gonna charge for this? What’s your edition number? I can have one or a million. Then I get asked, how much percentage back do you wanna get every time this is transferred to someone else? Every time someone buys it, how much do you want to get? And I think, by default it’s something like 10% but you could go higher.
Dima: Yeah, I can totally see a video artists benefiting greatly from this right. Essentially, at this point you are selling a file. And every single time you get this resale you can actually track this and that smart contract moves with the work.
To sort of get back to the the critique of this whole thing, you can definitely dismiss it as “naked capitalism.” And if you are an artist, or a collector, or some sort of cultural entity that is not particularly interested in reaffirming the capitalist framework, then it’s really probably not something that you want to participate in. However, if you have a different conception of how you want to live your life that’s a really interesting, and really game-changing option.