Art is now digital, and a debate is raging: Are non-fungible tokens (NFTs) worth the exorbitant prices they are selling for? The simple answer is yes. If someone voluntarily pays a huge amount for something, he values it more than the money he hands over. Others may disagree with his choice, but that’s what makes a free society.
How else could you explain an “invisible” sculpture that recently sold for over $18,000? Price is guided by scarcity and subjective valuation—not by the cost of raw materials and labor or objective truth. Sculpturist Jeff Koons broke a record several years ago selling a rabbit statue made of stainless steel for $91 million. If you broke down his creation into scrap, it’d be worth a few feet of train track. Yet this was heralded as a wise investment in the art world.
With money machines around the world humming, it is not surprising that pieces of digital art have been selling at record prices. More money is chasing fewer goods, which causes prices to rise. A virtual collage from the artist known as Beeple recently sold at Christie’s for $69 million.
It is easy to mock this digital development in the art world as a form of central bank-fueled inflationary decadence, but to do so would miss an important reality: Digital art is art. To celebrate Koons and Dada but mock Beeple seems to be arbitrary and hypocritical.
This new medium has its genesis in digital currency, but with one key difference. Unlike bitcoins which are created equal to one another, just like dollar bills or pennies or dimes, NFTs are not interchangeable. By using advanced cryptography, an artist is able to create a digital file and tie that digital file to a particular private key. Tying an asset to a unique key is what creates scarcity and therefore ownership.
This has created creative possibilities in a new medium, much like the invention of the camera.
“The explosion of digital imaging techniques has produced far more content than the analog corollary in painting, drawing, and printmaking. No doubt these spaces hold enormous pools of latent talent, and NFTs allow these individuals to find audiences and sales platforms,” said Ben Tritt, founder of Artmatr, a Brooklyn-based art tech startup.
When artists create or “mint” their works as digital assets, they trade like any other asset on exchanges and online auction houses. The largest of these exchanges is a company called OpenSea, which recently raised $23 million dollars from some of the biggest names in Silicon Valley. Pieces of digital art can range from the sublime to the ridiculous and right now the market is sorting everything out, with huge fluctuations in prices that can be watched in real time.
This get-rich-quick mentality does not sit well with many in the traditional art world who feel something is off. Probably the most common gut objection to digital art is to say that because digital art can be replicated, it is not scarce, and therefore does not make sense to own. The truth is, however, that physical art can be replicated as well. Photographs, for instance, sell for millions of dollars, but can be practically copied. And art forgeries show that even experts can be tricked into duplicates. In other words, ownership, not possession, is what matters. Someone could possess the Mona Lisa, but without legal title to it, its resale value is nil. Crypto technology has enabled legal title to images to exist on the internet, even if those images can be copied. Humans have a desire to own scarce things—think stamps—regardless of their functional or even aesthetic utility.
Now, a more complex answer from the above is that price is an aggregation of subjective valuations, and for those who believe in an objective aesthetic, price and value could have nothing to do with one another. For those who think that art has been going downhill since the 16th century, it seems fair to lump Beeple in with newfangled creators like Monet and Rothko. But for those who think an upside-down urinal is genius, yet rail against NFTs—there is some hypocrisy at work.
In a world where we spend hours on our smart devices, it is not surprising that our desire for ownership has moved online. “Every work of art is the child of its age and, in many cases, the mother of our emotions. … Each period of culture produces an art of its own which can never be repeated,” wrote artist Wassily Kandinsky. Like it or not, we are a digital generation, and our art is an expression of this. Things like memes and NFTs are much more suited to our times than oil paintings or ceramics.
In hindsight, artistic evolution is always easy to recognize, but not so much moving forward. We like to think that had we been in Paris in 1874 we would have sided with the Impressionists, but these artists were attacked by the establishment—someone had to be doing the mocking.
We are certainly living in a precarious monetary environment right now with an asset bubble that may pop at any moment. But to throw the baby out with the bubble would miss the power of this technology. To be sure, not every group seeking to change the nature of art does so—breaking with tradition is necessary but not sufficient to revolutionize art. NFTs may not be the future of artistic expression, but the emotional reaction they elicit is a good first step.
Max Raskin is an adjunct professor of law at New York University and the director of research of QVIDTVM Inc., an investment holding company. Follow him on Twitter @maxraskin.
The views expressed in this article are the writer’s own.