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Your Most Comprehensive Guide to NFTs and Crypto-art — and What’s Wrong With Them

Most of those, who follow the art world, have heard of the bizarre sale of a digital painting for over $69m at a digital Christie’s auction. Since then, social and news media have been flooded by talk of NFTs and crypto-art. More prominent are the astronomical sums of money anonymous buyers are willing to spend on, virtually, nothingness.

From JPEGs of artwork to digital houses to memes — everything is being sold on the internet now. Is this a revolution within the art world or another way for the world’s richest to convert their money into a new kind of assets?

“Everydays: The First 5,000 Days” by Beeple, which sold for over $69m as an NFT. Image Source: Beeple

Decoding NFTs

Non-fungible token, or NFT, is anything digital, tied to a code that makes it one-of-a-kind. In economics, a “fungible” item is interchangeable — for example, a $10 bill can be exchanged for another $10 bill because their value is the same. When an artwork becomes an NFT, it receives a unique code recorded on the blockchain. The blockchain is a system that records all transactions made with Bitcoin or any other cryptocurrency.

Hence, ownership of a particular piece becomes tied to this special code. Screenshotting or downloading the file does not mean that you become its owner since you cannot download the code that makes the image “non-fungible”. Ideally, this allows digital artists to sell their artwork and prevent the risk of it being duplicated and spread without permission.

At the same time, buying an NFT does not grant you copyright: you do not become the direct owner of the artwork, only of the set of numbers assigned to the NFT. The only profit one can make from a purchased NFT is by auctioning it. If put in terms of physical art: you can own the print of a famous painting, but you’re not the owner of the painting itself.

“VIBE CITY” by Beeple — part of “Everydays: The First 5,000 Days”. Image Source: Beeple

NFT’s Are All The Rage

NFTs are not a new concept. They had first appeared around 2014, but only started gaining popularity recently. The explosion occurred at the beginning of March, when a digital artwork titled “Everydays: The First 5,000 Days” by Mike Winkelmann, also known as Beeple, was sold for over $69m at a Christie’s auction. According to Christie’s, this is the first time a major auction house has hosted an auction for a digital-only artwork in the form of an NFT.

Unsurprisingly, COVID-19 and the lack of in-person art auctions could be credited for the rise of NFTs. On the one hand, one could criticise Christie’s for being opportunistic — after all, it is questionable whether they would’ve ventured into NFTs in the first place, had the physical art market not been affected. On the other, it is still exciting to see major auction houses diving into these uncharted waters and using progressive technology in order to sell digital art.

Following the loud and expensive sale of the artwork by Beeple, everyone started jumping on the NFT-train. It is not necessary to be a major auction house to sell — you just need $70-$100 to mint your artwork. In March, Twitter CEO Jack Dorsey minted his first tweet “just setting up my twttr” as an NFT and sold it for $2,9m. Musician and artist Grimes sold a collection of digital art for $6m: images, animations, film clips and even poems made in collaboration with her brother, Mac Boucher.

Love-Hate Relationship

The explosive popularity of NFT’s brought mixed opinions to the table from the members of the traditional art world. Critics state how Beeple’s and Grimes’ images ‘suck’. Even Beeple himself labels his work as ‘art crap’. Certainly, this is not to say that all NFT artwork is of low quality. Nevertheless, the flood of low-quality and low-effort items into the market, such as memes or audio recordings of farts, does not really associate with art as we are used to knowing it.

Perhaps, this is what happens when the world becomes overturned by COVID-19. Traditional art is scarce for the mass public, available to view only at museums and online — almost always owned by oligarchs or large institutions. Artwork ownership usually connotes wealth. However, NFT’s changed that, allowing anyone to become somewhat of an owner of whatever they wish. When given the ability to own artwork, even in this unconventional way, it is natural that some people may go overboard.

J.J. Charlesworth of ArtReview notes how the NFT craze reflects the state of the American economy today. In a system, where physical money is becoming less and less valuable, it is notable how people would rather invest in something that may gain value in the future. And considering how the physical world has stalled, there is no wonder these investments are becoming digital.

The Problem’s Rising Cloud

However, not all is sweet and swell with this new method of trading digital items. Not only are there ethical issues, such as people minting Tweets and images that are not their own, but also massive environmental consequences.

Bitcoin, which is one of the currencies used to trade crypto art, is known to consume a lot of energy. Same with Ethereum, another cryptocurrency that is used to primarily buy and sell NFTs. These currencies do not come and go out of nothing: simply put, they require a computer to run a set of code to produce it — in other words, ‘mine ‘ it.

This would not have been a problem, had most of the energy been supplied by renewable sources. Nevertheless, most of the power used to run these computers comes from fossil fuels, causing the total carbon footprint left by Bitcoin energy consumption to be equal to that of Hong Kong. Similarly, trading with Ethereum annually consumes as much energy as the country of Serbia.

It is obvious that with the growing popularity of NFT’s and a greater amount of exchanging of Ethereum and Bitcoin online, this energy consumption will only grow. Surely, this wouldn’t have been the issue if the sources of energy have been renewable. While it is unreasonable to ban cryptocurrency altogether because it harms the environment (anything else that also does will need to be banned, then), governments are beginning to come up with solutions to tackle individual extreme consumers of energy.

For Better? Or For Worse?

Naturally, the lack of regulation of the NFT market allows for freedom in terms of trading and minting — however, it also makes this way of investing in artwork extremely problematic. The undeniable environmental consequences and art theft that NFT’s facilitate are far too great of issues to ignore. Unfortunately, what could’ve been the perfect way for digital artists to sell their work has become another tale of opportunism and greed.

The takeaway? NFTs are not about art or the artist: they’re about money. While artists get their ‘coin’ (and some of them get a lot of coins), this system does little to protect them and is more focused on people emptying their digital wallets for that short-term profit. It is a gold rush. Artists are rushing in to sell their work; crypto-investors are rushing in to buy more and more.

And naturally, just like in any tale about greed, the miraculous $69m Beeple sale acts as a guiding star for anyone looking to make some quick Bitcoins.

Featured Image via Beeple

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