NFT’S MAJOR SALES PLATFORMS CONTINUE TO RECORD RECORDING RECORDS. ARE THEY FRUIT OF SPECULATION OR EVEN MONEY LAUNDERING? IN THE MEAN BUT, ARTISTS WHO UP TO A FEW MONTHS AGO EARNED VERY LITTLE FROM THE SALE OF THEIR DIGITAL WORKS, NOW ARE ABLE TO LIVE FROM THEIR ART …
In the midst of the NFT boom, Beeple, aka Mike Winkelmann, sells Everydays: The First 5000 Days for $ 69 million during an online auction organized by Christie’s. The sale makes it jump to sixth place in the ranking of the most expensive works of art of all time and to third if private transactions are excluded.
The news quickly went around the world, bringing the NFT, acronym for Non-Fungible Token, to the attention of the general public. This is followed by a riot of articles on the subject and interviews with digital art collectors, which go hand in hand with generalized skepticism about the value of a jpeg file or gif, exacerbated by the record sale for 2.9 million dollars of the first tweet of Jack Dorsey, CEO of Twitter.
WHAT ARE NFTs REALLY?
The acronym of NFT, we said, stands for Non-Fungible Token. That is to say? Let’s start with token: literally translated from English it means ‘token’, like the one used in the arcades of the past or to start the bumper car. The principle is very similar. Both the game room and the bumper car are a micro-economy that, for the duration of the game or race only, provides a token with which you can use a certain service in exchange for a payment in current currency. Now let’s translate this example to the phantom world of blockchains and cryptocurrencies, since understanding NFTs without understanding this world at all is equivalent to settling for a very limited vision of the phenomenon.
Each blockchain offers services, whether they are transactions or provide a platform for the creation of dapps (decentralized apps). To use this service, you must pay with the native token of the chosen blockchain. At the moment, the most popular is Ethereum and the token is called ETH.
Let’s move on to the concept of non-fungible. Let’s take the example of the token for the game room: let’s say you have it in your pocket and ask our neighbor to exchange it for his. The request is senseless, because the two tokens have the same identical value, that is, they are fungible. Now let’s say we have a one-way train ticket to Rome. Would you exchange it for one for Milan? It would not make sense, given that our destination is Rome, and above all because each ticket is unique, identified by a very specific abbreviation. The train ticket is a non-fungible token.
NFTs IN PRACTICE
Creating an NFT on the Ethereum blockchain means registering a certificate of ownership of a unique object on it. This object can only have one owner at a time (for now, but that too is changing) and, like everything else on the blockchain, the certificate is unchangeable. This means that the NFT cannot be copied to sell it fraudulently, at least it is not easy to do so.
A clarification is required, because when it comes to NFT there is a misunderstanding. When someone buys an NFT, they are not buying the digital file, gif or jpeg that is; he is not buying a digital work of art. Buying an NFT you buy a certificate of ownership that refers (links) to a digital file, a copy of which is sold together with the certificate. Unless otherwise specified, buying an NFT does not imply the purchase of commercial rights on the digital work. The certificate, which is none other than the NFT itself, is registered (in English minted) and sold with a series of information, metadata, regarding the digital work to which it refers, such as the author and the type of file.
To recap: by buying an NFT you get hold of a certificate of ownership registered on the blockchain, linked to a copy (often an NFT is sold in editions, from 25 to 100 or more) of a digital work. The artist often sends the buyer a high-quality version of the file, or other extras (and in some cases a physical copy of the work). Quoting from the Ethereum website: “An NFT is minted from digital objects as a representation of digital or non-digital assets”. Note the use of the term “representation”, which confirms what has been said so far behind an unusually conceptual language for the hyper-technological world of the blockchain.
WHAT DETERMINES THE VALUE OF AN NFT?
With this question, we cross the line of what is more “easily” explainable about NFTs. Because? Because evaluating a material work of art is already very complex and the factors that determine its price are many and not always transparent. When we then try to understand what determines the price of a digital work associated with an NFT, the task becomes even more complex.
Let’s start with the million dollar question: how can a digital file, which can be saved on one’s computer by anyone, be sold for millions of dollars? No need to go around it: anyone can save Everydays: The First 5000 Days on their computer or smartphone. Of course, we are talking about a lower quality file than the one sent by Beeple to MetaKovan, the collector who paid 42,329 ETH to win the work.
But focusing on the availability of the work, albeit in low quality, does not hit the target. Those who buy an NFT are not worried about the “copy-paste” of the digital work they are receiving. An NFT collector is usually quite integrated into the Crypto Art community and the world of cryptocurrencies. For example, MetaKovan, born Vignesh Sundaresan, is the founder of Metapurse, a start-up linked to the world of NFTs. What matters in this community is the fact of owning a “piece” of blockchain, of entering the history of Ethereum and, as far as the work is concerned, of being the sole owner of the token that represents the digital work in question – and that’s what matters, as (almost) everything on the blockchain is immutable.
Parallel to the possession of an NFT, a virtual world has developed for the display of one’s collection, the metaverse, of which the most famous example is Decentraland, a digital place where you can buy (virtual) plots of land and build galleries to be visited by admirers of digital art.
A PACK OF VIRTUAL FIGURINES?
At this moment, it is not the individual digital works that record millionaire collections, but the automatically generated collections.
An example is that of the CryptoPunks created by Larva Labs: they are 10 thousand pixelated characters generated by an algorithm by mixing a series of properties such as color of skin, hair, eyes and many others. Each punk is different but – this is the betting element – when it comes to buying one, collectors don’t know if their punk will be rare or common. A bit like buying a pack of stickers hoping to find the one you can’t find inside. At the time of the official sale, a base price is established for each punk, after which a thriving secondary market develops for NFTs which by divine (or algorithmic) grace have been found to be the rarest of the lot.
Let’s reiterate it: many NFT collectors have no artistic interest; indeed, very often they are cryptocurrency investors who are just looking for another way to get rich. Today the NFT market revolves around these digital stickers with a potentially millionaire value, thanks to a digital rarity automatically generated by a few lines of code.
If we talk about the value of an NFT, however, it is impossible not to mention money laundering. Converting profits made with a cryptocurrency into fiat currency (euro, for example) is a taxable event, and quite a lot. On the other hand, the cryptocurrency market is still de-regulated and, although the blockchain was born to guarantee total traceability of transactions, today it is more than possible that many launder money by converting it into cryptocurrencies or, better still, into an asset. intangible as an NFT.
THE SUNSET OF MATERIAL SKIVINISM?
Why spend millions on something intangible? You can put a Picasso in a safe, it can be exhibited in an exhibition, its colors are true, it is matter. But is this enough to justify the price of a Picasso compared to that of Beeple’s work? Obviously not: behind the evaluation of a work, especially today, there are many factors. Yet, an auction house would hardly justify the price of a canvas based on the quality of the colors (not in an aesthetic sense) or of the canvas itself as a surface. Even the canvas on which Guernica is painted isn’t worth that much. If someone erased Picasso’s work with white spirit, only an old fabric would remain. Perhaps someone would still buy it for its provenance, because it belonged to Picasso or because it was once the canvas on which Guernica was painted.
And yet, when we discover that a jpeg or a gif has been sold for thousands of dollars, the first thought is: “Absurd to pay so much for a digital thing”. Retro-thinking is something that we could call material chauvinism, that is the idea, rooted in all of us, that what is real is material and, therefore, that what is tangible has greater value than the intangible, the digital. Of course, as human beings we give immense value to intangible things such as stories, pieces of music, ideas. But when it comes to giving an economic evaluation, a problem arises: would we pay millions of dollars for a book? Perhaps, if it were a signed edition, ancient and linked to one of our favorite writers. And here we are again with the same problem: are three hundred pages of paper worth millions of dollars? The real difference lies in the materiality of both the book and the painting. Even the way we refer to them makes us understand: we use a metonymy, say the book or the painting to actually indicate the work that is printed or depicted on them. This is where what we have called “material chauvinism” comes into play, our deep-rooted attachment to material supports, even for works of art.
In the case of NFT we believe that there is no support, that the work of art is completely dematerialized, lost in an ether, like all digital objects with which, despite everything, we interact on a daily basis, but to which we do not recognize a license to reality as we do for tables, canvases or books. But the truth is that digital objects are “ghosts” only on the surface – they have support, only it is remote. They are the ever-increasing ranks of servers, crammed into ventilated warehouses around the clock to keep the Internet up and running. Destroyed the server, destroyed the NFT (but a solution has also been found to this eventuality, making the NFTs “almost ghosts”).
The servers are far away and it is trivial to say, but we cannot touch a digital work and this sensory limitation makes us suspicious, makes us skeptical about the actual value of the object. Of course, there is also a commercial issue to consider. To replicate a digital object we simply have to right-click while to replicate a book we have to print another copy, but this is not enough to explain the different perception we have of digital objects compared to material ones.
A QUESTION OF EXCLUSIVITY
The second “main” cause of distrust towards NFTs is exclusivity. A collector buys a material work at an exorbitant price because he will be the sole owner of this work. You can put it in a vault or display it in your living room. He will be able to admire it in the middle of the night, do what he wants with it, because he will be the only one in material possession of the work. Of course, even a digital work related to an NFT can be displayed with a special frame. But the principle of exclusivity of collecting material art continues to fail. In fact, even if we bought a single edition NFT, anyone could save on their desktop the same jpeg that we are paying millions for.
The answer of the supporters of the NFTs is: even if I had the copy, the real and only owner would be the collector who bought the digital work, because the blockchain is authentic. But herein lies the second component of what we have called material chauvinism. Even if we put aside our skepticism regarding digital objects, we would still not be willing to give up the exclusivity that the purchase of a material work guarantees us. Being the sole owner of a work gives the collector a power, a status and a capacity for enjoyment of the latter that NFTs today cannot match. Perhaps in the future a digital work associated with an NFT will be sold so that no one can copy it. Then the buyer will be the sole owner of a digital image and can decide, for example, to allow it to be exhibited in a museum, or in a private gallery, or simply admire it privately and enjoy the total exclusivity of the work.
WORLD OF WARCRAFT AND AROUND
We talked about the apocalyptic, but what about the integrated? For some time now there have been those who have played online, once in World of Warcraft and today in Fortnite, creating an avatar and equipping it with accessories obtained with great effort after hours and hours of play. For those who spend most of their time on an online platform, immersed in digitality, a rare accessory for their avatar has much more value than a material counterpart, a shirt to wear at a birthday party, for example. banal.
More and more people spend a significant amount of their time interacting with digital objects and this will certainly lead to a paradigm shift in our perception of the value and importance of digital objects. A digital certificate of authenticity will perhaps be more important than a paper one attesting the same thing. And perhaps this is where the contradictory nature of NFTs lies: they confront us with this ancestral attachment to materiality and its possible overcoming.