I’ve been thinking a lot about the transparency that comes along with transactions happening on-chain. Especially with art this takes some big steps to demystify a lot of what happens behind closed doors in the traditional art world, and the benefits to artists are obvious. While this doesn’t solve every problem, it’s the right steps forward for many. Shining a light onto this part of the business takes a lot of the power away from the dealers and puts it directly into the hands of the artists. It also makes the collectors who are more interested in flipping work a little easier to spot. Obviously this makes some dealers and collectors uncomfortable, but that’s how you know it’s progress. When the people who have traditionally held power start seeing the cracks in their structures, they start complaining.
Conversely, this is also really good for the collectors who are focusing less on the investment and more on the artists. The philanthropists and art lovers. Public ledgers make it much easier to know exactly what an artist wants and needs for their work without having to navigate through multiple layers of middlemen which has typically been the case. Even when dealers would put artists and collectors into direct communication, many were afraid to talk “business” out of fear of alienating a gallery or dealer who might feel threatened or cut out, and thus losing that resource for the future. Again, not every problem is addressed, but this is movement in the right direction.
But I think there’s an even more interesting aspect that hasn’t been widely discussed. We all know that the blockchain provides concrete provenance for the work, we’ll now be able to see everyone who owned the work going all the way back to the moment the artist minted it, or look ahead and find where something ended up. This is exciting because artists often lose track of where work goes once it enters the secondary market, unless the new owners are committed to being public about it, which many aren’t. We’ve all been talking about that for months, but another potentially fascinating detail is the ability to see everyone who ever tried to buy a work. The losing bids, the rejected offers – those are on chain too. At the moment we’re focusing on acquisitions and winning bids, but the story that gets us to that point is far more layered.
Imagine being able to look back in history and see everyone who ever tried to buy a Warhol, or a Basquiat, or a Haring – before they were popular. We know who ended up with the significant works, and work is being done by their foundations to fill in the blanks, but that focus is entirely aimed at knowing where those works are now. But consider how interesting it would be to be able to see the unsuccessful offers. To be able to cross reference those people and find someone who tried to buy work from all three of those artists, but didn’t. Then, being able able to see what work they did buy. Are there artists from that area that have been flying under the radar all these years? Did someone repeatedly get out bid by a specific rival? Were artists supporting each other?
I’m thinking about these on-chain transactions, documenting the bid history as a snapshot of community. Let’s talk about right now. A number of artists who are selling work in the NFT space are talking about how they are reinvesting their proceeds back into the community. They are putting some % of the crypto they make from sales back into the market by purchasing works by other artists. It’s been obvious to anyone paying attention that there is a huge (and important) overlap between people selling and buying work. Collectors are also selling their own art, artists are also collecting their friends work. That’s powerful today, but how about in the future? Think 20 years from now, being able to look back on a sale today with a bidding war between friends. This is evidence of a social network, and the power of a community. This of the forensics this will allow as well – being able to see the exact moment that an artist started gaining momentum. Or pinpoint a single collector who funded an entire group of artists with a buying spree, and how those artists in turn lifted others up with them. We’ll be able to see friend groups and shared interests – and divergences. Again, that’s pretty interesting today but it monumentally more so if a relatively unknown artist today blows up in the coming years.
Today we’re focusing on what all this changes and what is suddenly possible, but it’s all new in so many ways and I think we’ve only scratched the surface on how much this all will really change. I can’t wait.
(for easy reference this post can be found at the domain: wtfnft.art )
Last week I wrote a quick intro to NFT’s entitled NFT WTF which, if you haven’t read yet you should go read now. Since then I’ve had a lot of conversations with a lot of people and have seen recurring questions and patterns emerge which have sharpened my thinking on a few things and I thought it would be useful to keep passing that info on.
“There are decades where nothing happens; and there are weeks where decades happen.”
Vladimir Ilyich Lenin
Earlier today when I was speaking with Nick Philip he astutely noted that this has been one Lenin’s weeks. There was a shift in the force and it’s been really fun to step back and watch the shock wave ripple across the landscape, though if I’m honest there hasn’t been a lot of time for that kind of quiet reflection because my phone has been blowing up all day long.
One thing I didn’t mention in my previous article is why you should trust me. The simple answer is that you shouldn’t. Not because I tell you to anyway. What you should do is look at my experience and decide for yourself if what I’ve done for the last 30 years gives you enough reason to hear me out. I don’t know how many other ex-art gallery owners have spent the last decade building an environmental nonprofit and studying the blockchain but I suspect it’s a very small number. Related, I’d love to meet them. While I believe my art+tech background usually gives me a somewhat unique vantage point, cryptoart is a rare combination of all the above.
My last article was more of an explainer/how-to kind of thing but with this I want to hit a few more specifics.
Gas Fees This is probably one of the most confusing aspects of buying & selling NFT art, largely because the platforms aren’t exceptionally transparent about it. First of all, what is gas? Think if email and how much spam you get? Spammers keep spamming because if they send 10 million emails and 100 people fall for it, they make a profit. Now imagine if you had to pay $1 to send every email – you’d probably send fewer emails, but so would the spammers. That “send as much as you can” business model would disappear – and that’s what happening here to some extent. To prevent people spamming up the blockchain there’s a cost involved with every transaction. Technically, this cost is associated with the miners who are confirming the transaction. But this isn’t a fixed fee, when the network is very busy gas fees are higher – the exact same transaction might incur the equivalent of $30 in gas fees one day or $80 another. This is because you are effectively paying to push your transaction to the front of the line. Some platforms allow you to pay less gas and stay at the end of the line, but that means your transaction could be pending for weeks so it’s not really advisable to try and cut corners there. Here’s a dashboard where you can see what current gas prices are on different networks and platforms, and here’s one that looks at trends and helps predict when gas prices might be lower or higher so you can plan ahead and mint things on the down cycle.
Additionally, the fees are handled slightly differently by each platform so it’s worth it to spend some time looking into whatever platform you are using to see how fees are handled. Some examples of differing policies: Makersplace will pay gas fees for you unless gas is very high, then they will give you the option of paying it or waiting and trying to list your item some other time. Most platforms charge gas to the creator on minting and listing, but OpenSea defers that to the buyer of a successful fixed price listing, however for auctions that end with a price less than 1ETH then the seller has to cover the gas. Policies differ, so do your homework here.
Secondary Sales I talked about how absolutely important this is in my last article but I need to clarify an important detail. This royalty paid from secondary sales is platform specific, it’s not baked into the token itself. What this means is that if you mint something on Makersplace and sell it and whoever buys it from you sells it on Makerspace then you get the royalty as expected, however if they transfer it to OpenSea (or somewhere else) and then sell it there that royalty is no longer in effect, and I believe (though I could be wrong here) that on that new sale a new royalty is set up so long as future sales take place on OpenSea. I do think this is a problem, but I don’t think lock in is the solution. Hopefully this is something that continues to evolve in the favor of the artists. That said, very few people are moving NFTs from one platform to another right now and many don’t allow you to bring them in, even if they do allow you to transfer them out. So we’ll see how this goes.
Another super important question to be asking here is what happens to these NFTs in the future if the platform doesn’t survive? One one hand these platforms are all counting on surviving forever, on the other hand this is the internet and we all know that companies (and platforms) come and go like the tides. What happens if Google buys one of these platforms? What happens if one of these platforms absorbs one of the others? What happens if in 5 years after Google buys one they decide to shut it down because it’s conflicting with their other NFT site or just isn’t profitable? There’s no clear answers to these questions, and with real money changing hands it’s something we’ll need to get answers to soon.
Hidden /Unlockable Content This is another platform specific function (meaning it’s implemented differently from one platform to another) but generally the point here is that people can see something before buying the NFT, but gain access to further materials only after buying it. This is commonly being used by bands, where you can see the album cover and the songs are the unlockable content, but I’ve also seen people do lottery things with 10 NFTs, one of which has a ton of extra stuff included, or where the unlockable content is a download code to get something else. I saw one artist list 10 plain white squares, and you only got to see which art piece you’d bought after buying it. There are a lot of fun things that can be done here.
Physical / Digital This is something that a lot of people seem to be asking about. Does an NFT need to have a physical counterpart? No. Can you make an NFT of a physical piece of art? Yes. Does that mean the NFT and the physical piece are connected or joined somehow? No. If someone buys the NFT do they automatically own the physical piece too? Not unless that was part of the offering. It’s easiest to think of the NFT as it’s own thing entirely. So an NFT can be the only representation of a piece of art, or it can be just the digital representation.
Environmental Concerns I received a hilarious amount of criticism about my last post for “glossing over how bad NFTs are for the environment” with the recommendation that “do some research” with links to various hot takes on Medium. Get it? Hot takes? “HOT” takes? Honestly I crack myself up sometimes. Anyway, as noted earlier in this piece (and in my bio) I’ve spent the last decade running an environmental non-profit in which we’ve done a lot of work with Blockchain, so yeah, I’ve done research and I didn’t “gloss over it” I simply didn’t mention it because it doesn’t exist. Creating NFTs doesn’t use any more energy than not creating NFTs, just like sitting on your front yard reading a book doesn’t use any more sunlight than not reading a book. The sunlight is there if you read the book or not, and the Ethereum blockchain uses the same amount of power if NFTs are being made or not. Now, you could argue that “cryptocurrency uses a lot of energy” and you’d be right, but NFTs don’t add anything to that and you could make an even more accurate statement by simply saying “currency uses a lot of energy” because our existing banking/currency systems use a shit ton more energy than cryptocurrency does. That’s not whataboutism, it’s realistically looking at the situation – and it’s part of the reason that there are already steps being taken to improve the energy usage of cryptocurrency. Anyway, point is there is a lot of well intentioned but misplaced criticism being thrown around by people who simply misunderstand how the blockchain works and are pulling various scary numbers out of context to justify prior bias. Also, angry rants catch on and spread much faster than boring truths. We’ve seen this time and time again at Safecast over the last 10 years. Jacqueline Choe has written the most comprehensive debunking of the environmental criticisms I’ve seen yet. If you still think artists minting NFTs are destroying the world it’s an absolute must read.
The Man I continue to be skeptical but cautiously optimistic about the various NFT marketplace platforms. I’ll have more research to publish soon, and more opinions to throw around. I’m disappointed how most of them are handing the surge in traffic they are seeing and that they claim they weren’t prepared for, when that’s literally the thing most of them raised money promising. I also think it would be a shame to move from one middleman ruled centrally controlled system (galleries, art fairs, traditional art world stuff) to a decentralized utopia (ok maybe it’s not quite that) which promises no need for centralized middlemen, only to attach our collective hitches to some centralized middlemen. I think open standards, transparency, and artist driven initiatives will be the best course of action however those aren’t always the most profitable for venture backed companies. So as a community, we’re going to have to push for the tools that work for us.
I’m going to wrap it up on that note, but I assume this semi-series will continue. I’ve been hosting a few “office hours” things on zoom explaining NFT’s to artists and artist advocates and recently started doing some on Clubhouse as well. If you want to keep up with this discussion follow me on twitter and clubhouse.
Again, if you’ve found this useful and want to say thanks and see how this works, NFT’s I’ve minted are available for sale here.This is part of an ongoing series of posts about art & NFTs.
In the past decade I’ve spent many years living in Tokyo and Los Angeles, and have recently relocated to Vancouver. I’ve run hackerspaces and blog networks, an art gallery, a design firm and a record label. I’m one of the co-founders of the environmental non-profit Safecast, a Shuttleworth Fellow and have been an Associate Professor at Keio University and a Researcher at the MIT Media Lab. I take photos and make noisy ambient music under the name Delay 5000 (D5K).