In the art world, nonfungible tokens (NFTs) are regarded with both excitement and suspicion. And since the record-breaking sale of an NFT of an artwork by Beeple (a.k.a. Mike Winkelmann) at Christie’s for $69 million in March 2021, they’ve been impossible to ignore.
Some believe they’re a holy grail for artists to support themselves, particularly the makers of hard-to-monetize digital work, and that they’ll democratize the elitist traditional art world. Others contend this is an aesthetically shallow, morally suspect bubble driven by the cynical agendas of cryptocurrency boosters and emitting disastrous levels of carbon dioxide into the atmosphere. For the art-skeptical general public, NFTs provide a handy update to the old joke — “My kid could paint that.” Now it’s: “Why would anybody buy a JPEG?”
NFTs are a funhouse mirror reflecting the flaws and asymmetries of the current art market. In their distortions, they highlight an array of unresolved problems, ranging from legal to conceptual to ethical. And amid the carnivalesque hype of cryptocurrency, NFTs may crystallize some of these issues in a way that prevents truly radical alternatives — for art and for culture as a whole — from being imagined and built.
First, what exactly are nonfungible tokens? A “fungible” good is one that is interchangeable, like a U.S. dollar bill. Cryptocurrencies are fungible tokens — one Bitcoin is interchangeable for any other. But in 2017, the Ethereum blockchain standardized a new type of nonfungible token linked to a unique digital asset such as an image, video, song or any digital file of any kind. That year, the first popular use cases for NFTs emerged in the form of CryptoKitties, a game that allowed players to buy, sell and “breed” digital kittens, and CryptoPunks, retro-pixelated portraits of punky characters with variable attributes. In February 2022, one Punk sold for over $23 million.
Inspired by those successes, several start-up marketplaces have since emerged to streamline the process for creators to register their work as NFTs on the blockchain (a process known as “minting”) and for collectors to purchase and resell them; typically, an NFT platform earns revenue by taking a percentage of the creator’s sales or levying other fees. It’s perhaps unsurprising that NFTs exploded by the end of 2020 — a year of global pandemic when more of our physical lives became digital than ever before and widespread financial precarity contrasted with surging speculations in cryptocurrencies. Marketplace platforms, cryptocurrency evangelists, early-adopter artists and digital creators spread the gospel that NFTs were not only a financial lifeline for struggling artists but a radical disruption of the art world.
But let’s investigate the proposition that NFTs represent a revolution in making, selling, distributing and appreciating art. Such a pitch has a few components, and at each turn, there are important footnotes that complicate the picture.
The most well-known (and obviously appealing) aspect is that they allow artists with digital practices to monetize their work more easily. Digital or ephemeral artworks are more challenging to sell than a traditional object like a painting.
This spotlights a fundamental tension that has existed since at least the advent of the mechanical reproduction of images, which Walter Benjamin famously described in his 1935 essay “The Work of Art in the Age of Mechanical Reproduction.” For many centuries, a painting like Leonardo da Vinci’s Mona Lisa existed in a single time and place: It was imbued with the aura of its authenticity, clearly embedded within a social context and historical provenance. But ever since the birth of lithography, the specter of reproducibility has threatened to strip art’s aura away.
For the Mona Lisa, this question is more or less settled: Only one hangs in the Louvre, and no one mistakes a postcard of the Mona Lisa for the real thing. But it’s not so simple for reproduction-based art forms like photography, film and video, where there is no clear “original.” It’s even less clear for ephemeral works like performance and conceptual art, where there is no clear “object” at all, or works that originated on the internet and circulate freely online.
Integrating these ephemeral art forms into the mainstream market — and gaining support from collectors, patrons and museums — is the story of constructing enough aura to have value. Often this is through innovative contracts that sometimes became conceptual gestures in themselves. One frequently cited example is Rafaël Rozendaal’s “Art Website Sales Contract,” which allows a collector to purchase one of his sites and assume responsibility for maintaining it; it remains visible to everyone but is owned only by one person. This contract could be considered a foreshadowing of the concept of an NFT. It highlights websites as a type of digital asset where unique ownership can be verified by a centralized authority (domain registration), whereas NFTs seek to verify that through a distributed authority (the blockchain).
Some NFT art marketplaces tout the potential of the “smart contract,” which stipulates that all future sales of an artist’s work automatically transmit a percentage of profits back to the artist via the blockchain. In contrast to musicians and other creators who can receive royalties and licensing fees, most artists never see a penny of any profit if their work is resold.
It would be momentous if NFTs could normalize and empower artists to set their own conditions of sale and better control the afterlife of their work, but it still relies on artists to be proactive in shaping such an arrangement. Already, conflicts that have arisen over NFTs in the gray area of copyright and “forgery” (like artists finding their own work being minted and sold by other parties without their approval or control) demonstrate how traditional contracts, and the resources to enforce them, may still be essential to this market.
Another promise of NFTs is that the artwork and its transactional records will live forever in perfect transparency on the decentralized digital ledger. The basic logistics of this have already been challenged by technologists who observed that the storage of the actual files — the image or file that the NFT points to — is fundamentally unstable on most platforms. Remember that an NFT is like a receipt — a string of code indicating a link elsewhere. If that link is a file hosted on some server somewhere, it could disappear if the server owner shuts down. If it’s hosted on IPFS (InterPlanetary File System), a peer-to-peer network like the kind used for torrent files, it will only live as long as it’s being seeded from other locations.
The concept of transparency around sales is often invoked as a contrast to the traditional art world, where many buyers remain anonymous, where art objects are used for money laundering and tax evasion by the uber-rich, where countless treasures languish unseen and untraceable in warehouses around the world, where even discerning appraisers are fooled by forgeries. An authoritative database of art sales would be a radical shift in the way things are done in this industry — and, of course, such a shift would be obstructed by the forces that benefit from not having one.
The blockchain record for the history of an NFT is public. It’s also anonymous: a buyer’s activities may be visible, but their identity is decoupled from real names. Cybercriminals could easily convert ill-gotten gains into clean cash by buying and selling NFTs. This is also fertile ground for tax evasion, insider trading and other troubling activities — which obviously already exist in the IRL art world of auctions, shady dealers and freeports. It’s therefore hard to argue that NFTs have solved the problem of provenance, authentication and transparency for art.
Finally, there is the argument that NFTs are democratizing the art world by giving artists direct access to the public, potential collectors and each other. With all the hierarchies and entrenched inequalities of the commercial art world, the idea of bypassing gatekeepers is attractive and, of course, has animated many art movements in the past (some of which eventually get co-opted by the art market anyhow, like street art).
In the present landscape, however, structural obstacles and asymmetries still exist. Minting an NFT costs up-front money in the form of Ethereum “gas fees” and other per-platform costs, shutting out those who cannot afford it. More significantly, there is the fact that those with large preexisting fanbases or more established art credentials are better positioned for success. Most artists experiencing big sales fit into one of these categories; social capital, a key part of the traditional art world, still matters.
The largest NFT platforms have thrived despite — or because of — murkiness around these and other issues. Again, we have a mirror to the often-obscure systems and power relations of the traditional art world.
But the most troubling opacity — and in some cases deliberate misinformation — has been around the carbon emissions incurred by NFT activity. Most of these platforms utilize the Ethereum blockchain, which, like Bitcoin’s, is based on “proof of work” — the “work” being all those computers crunching deliberately complex and energy-draining equations for exponentially increasing numbers of kilowatt-hours (reflecting the extractive logic of false scarcity that underlies cryptocurrency).
The ecological cost of minting a single NFT, while still a sliver of the overall activity of a blockchain like Ethereum, is shockingly high — in some cases, it could use more energy than an artist’s studio uses in an entire year. This has already divided many communities in digital art between those who find it ecologically unconscionable and those who feel they cannot forgo a once-in-a-lifetime windfall that might allow them to pay off school loans, medical bills, mortgages and everything else.
There are platforms that are already using a more energy-efficient method: “proof of stake.” These have a fraction of the carbon cost, but so far the art platforms based on “proof of stake” blockchains are not seeing anything close to the sales of their Ethereum counterparts (one notable exception is NBA Top Shots, which runs on the Flow blockchain and has had astronomical sales, but for sports clips not artworks). This illustrates how the initial phases of the NFT market have been fundamentally shaped by Ethereum as a speculative asset and its current high price, but both will undoubtedly evolve. In the meantime, to convince large groups of people that it is not only profitable but culturally important to embrace cryptocurrencies is a brilliant move by anyone who wants cryptocurrencies to succeed at all costs.
Even if all NFTs were carbon-neutral and on more efficient blockchains that were better customized for art, they still would be only a small part of the so-called Web3, a concept for what comes after Web2.0 (which emphasizes user-generated content) and has an ethos of monetizing every aspect of our digital lives. This is perhaps the most ominous shadow lurking at the edges of the funhouse mirror of NFTs — the prospect that when we try to turn away, these distorted visions will follow, augmenting our entire vision of the world to fit their contours.
The art world is a strange place that, for better or worse, has remained a bastion of mutant feudalism and quasi-religious economics in the midst of late capitalism. It’s concerning to think that NFTs may not revolutionize it, but could instead further extend the reach of cold market logic into our everyday lives.
Art has value to society, and cultural workers should have ways to support what they do. But the type of radical thinking and re-envisioning of the world that art ideally makes space for shouldn’t be limited to new ways to buy and sell things. Many artists and researchers are inspired by Decentralized Autonomous Organizations as another potential use of the blockchain, which could help groups create robust cooperatives and new systems of collaboration and support — but which some worry may also assume the default perspectives of commercial relationships, when other dynamics should be explored.
The financialization of everything may be the opposite of what it’s trying to fix, and it may prevent us from discovering other possible solutions. The question may not be simply, “How do we build a better business model for the art world?” but rather: “How do we build sustainable, humane economic systems that allow all people to thrive and create?” If we are reinventing monetary systems and value itself, the change we make should better align with what we actually value.
UPDATE: This essay was originally published on May 25, 2021 and has since been updated with information about more recent NFT sales.