NFTs and art blockchain: what exactly are we buying and buying in to? That is the question…

As the digital art Non-Fungible Token (NFT) boom rages on, and one Clubhouse session after the other waxes lyrical about decentralization and how we are on the cusp of disintermediating established art market protagonists, one really has to ask what actually is this whole thing about?

Having been shouted down once too often for suggesting that established auction houses, dealers and galleries are here to stay, as bastions and market-makers, as they have been for centuries, one could be forgiven for thinking that this all sounds a bit cultish in its adoption and fervor. Granted it was our error in joining a room called ‘for the love of NFTs’ or something like that.

The thing is that if one actually looks at what we are buying when we click and send an unearthly sum of Eth across the distributed landscape into the wallet of an ever-so-centralized platform that mints and cultivates the market for these works of digital art, many may be surprised as to how NFTs (or Nifty’s) are structured.

Michal Rovner’s, ‘Nilus’, 2018, two LCD screens and video, 145 x 166, 12 cm, from an edition of 5 with two artist’s proofs. As presented by Pace Gallery.

Its Metadata, Folks

First thing is that the digital art doesn’t sit on the Blockchain. Nope it, exists in the other netherworld of either a centralized or decentralized server and is linked to the Blockchain minted token as ‘metadata’.

The metadata includes the digital image that is the subject of the purchase, which may be a larger or smaller file depending on what was uploaded to begin with.

So, in essence, the many millions are being spent on digital images that many may not know their size or resolution or whether in fact the artists regard them as the ‘high-resolution’ files, or original artifacts of the works, or what is being, or may be done with other sized versions of the same images, where these have been minted or may be minted or who owns possible iterations of the same images.

Digital Art Isn’t New

Digital art isn’t new. By any means. Digital images, film and slides have been a staple fine art medium for decades, at least. There is a culture, market and ecosystem that has emerged around what some call ‘time-based media’ art that has flourished, has its key protagonists and its rich collections.

But now, simply linking an image or a clip to a Blockchain minted token has, in the minds of the many, in a matter, literally of weeks, emerged to definitively and undoubtedly usurp the traditional art markets and protagonists so, it is chanted, that the art world will never be the same.

Somehow hard to believe, or to digest. But the cult is strong and so far it has been the tail wagging the dog as established auction houses, perhaps blindsided by the enthusiasm and dare we say fear of being usurped, have climbed aboard to propel, in some cases, otherwise unheard of digital artists to lofty heights and prices.

The Devil may be in the Detail, it Seems

And this brings us back to what exactly are we buying?

Is a low-resolution image, the same as a higher resolution image? Is a physical work interchangeable with the digital artwork you just minted? Some, we hear, are even giving the physical work away as a freebie or ‘unlockable’ with a purchase of the digital version.

Talk about the tail wagging the dog.

But seriously, one of the Blockchain’s great uses is authentication. Consensus confirmation across a distributed ledger of many nodes or supernodes that something is what it purports to be, or at least is the original, unique, immutable record of what was put there to begin with.

So, does that mean that a low one megabyte version of a ‘minted’ image is the same as the 20 megabyte version? Or is the digital image different to the physical image? Are we going to forget completely that there is value in physical artworks, not to mention that assets existing IRL are the real McCoy of the world we exist in and by far the more mainstream of art media, and chuck the physical out (or give it away) in favor of a digital image so that we can neatly metadata it to a Blockchain token and call it an NFT?

We think not. For us there is a difference between different images, between the digital and the physical. Both may have value and both need to be treated separately, as what otherwise then is the point of authentication, of using Blockchain to make an item unique, of even attaching an image to an NFT to begin with?

So, one has to be conscious, we feel, of the differences in what is being minted. It is one thing treating the digital image as the authenticated, original artifact, and letting your buyers have a paper print to put on their walls, as a purely decorative, valueless copy. It is entirely another believing that digital NFTs have somehow turned the fine art world on its head, making real world assets old school.

Conversely, where the physical artwork, for example a chromogenic print in a numbered edition, is the item of value, that is the original artifact, the asset worthy of tokenization. One may also mint a digital image of the artwork, but it is a different asset, a different kettle of fish.

NFTs as Ownership Interests

And thats what we feel leads to further confusion.

People tend, in our experience, to see the actual digital art image as the item that is minted, or stamped into the Blockchain. As we have seen, it isn’t : the image sits off chain. So, conceptually, it may be hard for them to see how the token actually relates to the digital art. Is it a representation of it? Is the art the token, etc. etc.?

We see it differently. For us, the real opportunity in art blockchain is seeing NFTs as ownership interests in the underlying asset: whether the asset is digital or physical art.

This where Blockchain genius lies. The ability to have direct asset ownership, even held by multiple people, potentially, without the need for an intervening entity structure.

Traditionally, when investing in physical assets, or even digital ones, we have used REITs, mutual funds, hedge funds, alternative investment funds, etc. etc. All requiring that intervening substrate of organization, centralization, which Blockchain, in its ability to authenticate ownership in assets, can potentially obviate.

Centralization of this nature brings with it administration, management, costs, and discounts from underlying net asset value. All inefficiencies, among others, that Blockchain, can solve, at least to some extent.

So, we want to see Blockchain used for its full potential. We want to see NFTs in physical assets. Not only digital art as the flip side of a digital token. There is no reason why physical art cannot be ‘minted’. Not just given away as an ‘unlockable’ because suddenly, magically, just because a digital edition can now be ‘metadated’ to an image that it somehow must have magical, unprecedented significance and value.

The Traditional Art Market Way

After all, digital art, digital fine art, has been successfully bought, sold and collected in limited editions, as unique, original artifacts for decades.

There was no need then, as there is no need now, to tie it to a digital token to make it valuable, appreciated and significant. And the artists who produce it, from Michal Rovner, to William Kentridge to Doug Aitken, remain superlative for who they are and what they produce. No technology is going to change that.

What it will change is how we own, manage, archive, collect, promote and buy and sell art, and there Blockchain and NFTs are significant and disruptive.

And perhaps it is time now for the established fine art market to stop letting itself be wagged, and to set its own path and truly show how useful NFTs and Blockchain can really be.