What the Art: Deciphering Beeple, NFTs, CryptoArt — A Primer of Sorts
Kevin: Welcome to class kids. Today let’s talk about Non-Fungible Tokens and whether we’ll still have a job at the museum in 10 years’ time. Buckle up!
1. The Phenomena
This month, the name Beeple may have hit your screens.
You may have heard that his digital work fetched US$69.346.250 on Christie’s.
You may have also understood that his work consisted of 5,000 days’ worth of artwork, produced every single day, for thirteen and a half years.
What you might not have fully understood, is how it is the first purely digital work sold by a historic auction house, with a unique NFT (Non-Fungible Token) to guarantee its authenticity. Also interestingly, this is also the first major auction to accept cryptocurrency as payment.
To truly feel what it is like to be Mike Winkelmann (aka Beeple) right now, watch how he reacts to the historic US$69.3m sale of his digital work at Christie’s. Know that this marks the third-highest price ever paid for the work of a living artist at auction.
These are many firsts, complementing our era of utter disruption.
And while to a non-art trained eye “EVERYDAYS: THE FIRST 5000 DAYS” does look to have the signs of a worthy artwork, how should the rest of us feel about all this?
Do you feel disgusted (this is NOT art), delighted (yay, artist livelihood), or detached (meh, red herring)? Do leave your thoughts in the comments, before you continue reading. This way you can see if you experience cognitive dissonance after diving deeper.
Put on your research hat, and let us try to understand the phenomena, rather than speculate or validate its significance. We won’t be going into if this is the workings of a self-organising crypto cult; exercising their iteration of #Gamestonk, but rather look productively if NFTs can potentially grant artists a brighter future, reducing middlemen, going direct to their patrons while providing greater access to the public through online marketplaces.
2. Nature of Digital Goods
While digital art in itself isn’t new, the biggest challenge between digital and physical art, is perhaps the nature of being digital. Understanding the affordances of digital goods, and what NFT brings to the table, then allows one to piece everything together. Hopefully.
Between 2015 to 2017, two marketing researchers, namely Ozgun Atasoy and Carey K. Morewedge, developed a study to illustrate how the feeling of ownership impacts the perceived value of physical and digital goods, creating new insights into the relationship between consumers and their possessions (see https://www.researchgate.net/publication/319976271_Digital_Goods_Are_Valued_Less_Than_Physical_Goods).
Since you’re probably TL;DR (Too Lazy; Didn’t Read), their findings are as follows:
a) Psychological Ownership
Since physical goods are material goods, they are easier to hold and manipulate, thus establish control over than immaterial goods. Psychological ownership has a big significance in the effect of product format and on the willingness to pay. That said, differences in psychological ownership for physical and digital goods are directly related to their value.
b) Expected Ownership
The expected ownership of a good is critical to define the difference in the value associated to physical and digital goods. In other words, if someone expects to possess a good in the future, it is more likely that this person would pay more to have it in its physical format than in its digital. This makes sense in our era of online subscriptions, where ownership is temporal, thus pricing has to match market expectations (ie lower).
c) Association with Personal Identity
Although personal taste varies from one individual to another, it is more likely that consumers intend to buy physical goods when they are considered to be more relevant to their identity than others. As our psychological ownership mechanism determines the value, this is regardless of whether the owner intends to flaunt or remain anonymous as an owner. It’s more intrinsic to self.
d) Need-For-Control as a moderator
A stage before the psychological ownership comes the need-for-control and, because being able to control one’s environment is more important for some people than for others, it is expected that differences in this need would influence the difference in psychological ownership. Thus a rare book may carry generally more value than an eBook, latter of which can be infinitely replicated if no controls were in place.
3. Non-Fungible Tokens (NFTs): Artificially Rendering Digital Assets with Physical Realities
If we were to use the four points above to shape our understanding of ownership, Non-Fungible Tokens (NTFs) allow digital goods to be non-replicable, nor replaceable, when authenticated. In a sense, NFTs can render digital goods as if it were almost having the limited scarcity of physical goods. If the user understands (and trusts) how NFTs work, there would naturally be a greater sense of psychological ownership, increased valuation on expected ownership, and naturally allows the user greater control as a moderator, as set in the governing code of the NFT. The part which makes NTF unique when applied to art (which some dub as crypto-art), is that art fundamentally fulfills the “meaningfulness” aspect of ownership, where the user has a choice over which artwork they prefer or represents them best.
How is it that NFTs are not divisible, nor replaceable? NFTs have identifying information recorded in smart contracts, which is simply a contract, expressed as a piece of programming code, that’s designed to carry out a set of instructions (see TEDx Talk on Smart Contracts, Nov 2018). Unlike conventional written contracts, smart contract has self-sustaining, autonomous code, removing the need for the middleman, by a) being secure through cryptology, b) being transparent by logging all activities in the transaction, even when passing from owner to owner, and finally, c) being accurate by being written in logical code, rather than rely on the grey areas of language interpretation. Beyond art, this is why NFTs can work for an infinite array of digital goods, including music, literature, and in-game tokens.
4. Are you buying the art, or the NFT?
While NFTs can potentially legitimise a free marketplace for digital art, what does the Beeple phenomena signal to us? To understand NFTs and where its at, you’ll need to take a step back to see the big picture by looking at how society tends to react to new technological innovations. While studying rural communities, Prof Everett Roger produced one of the most popular communication theory called the diffusion of innovations (1962), which illustrates how new ideas propagate and are adopted across society. His research clearly influenced major technology and business consultancies which use it as a way to understand adoption trends to project the future.
Case in point, Gartner has their annual Technology Hype Cycle to help businesses make sense of what’s to come. Simply put, the hype cycle recognises how we as a society have to allow our dreams and expectations to shatter first (I know drama much, ie. Stages of inflated expectations falling into trough of disillusionment), before we come in full circle to realise the true potential of an idea or innovation, without rose-tinted glasses (ie. slope of enlightenment to plateau of productivity). Every new idea typically experiences this roller-coaster ride.
In the case of NFTs, Gartner classified this under the larger concept of “Algorithmic Trust” where “increased amounts of consumer data exposure, fake news and videos, and biased AI, have caused organizations to shift from trusting central authorities (government registrars, clearing houses) to trusting algorithms. Algorithmic trust models ensure the privacy and security of data, provenance of assets, and the identities of people and things.” (See Gartner Hype Cycle for Emerging Technology, 2020).
Taking a deeper dive into blockchain technology specifically, which NFTs come from, Gartner notes that blockchain for enterprise use (ie business use) is just starting its long climb out of its trough of disillusionment. These refer to applications of blockchain which most of us might not be concerned about, such as a) central banks adopting digital currencies, b) truth in supply chain management relating to environmental, social, governance (ESG) goals, c) blockchain middleware to allow businesses to employ smart contract within their organisation as autonomous governance (ie auto-auditing). That said, if you look at the chart above, you’ll see that our earnest interest in NFT application toward art can be likened to “Authenticated Provenance”, which is freshly birthed and likely to continue to soar in speculation. Once we demand of NFTs dies down (Gartner predicts in 5 to 10 years!), will it then be even a backend enabler for art transactions, instead of being the forefront driver for most NFT artwork purchases today.
5. What can I do for now?
Do try buying “crypto-art” for the experience, but start small by looking through which of the NFT art marketplaces appeals to you. Prices used to start at 50 cents, but go take a look at how speculative this NFT art world is today. In fact, I’ve already purchased my first “Looking Glass holographic display” in preparation for digital virtual artworks I’m hoping to collect like trading cards of the future.
Also, stay tuned for ArtTech Immersion programmes by Y-Lab, where we’ll bring in experts from different technology domains to offer crash courses on how these things work, and you can ask about how it could change the way you work.
What a time to be alive. As Andy Warhol, once said which still holds true, “Art is what you can get away with”
Kevin Lim (PhD) // Deputy Director
CoLabX : Innovation Team 🛠 +
YLab.sg : ArtTech Accelerator 🤖
at National Gallery Singapore 🇸🇬
