The Grand Illusion

Anyway, if fraud is a form of art, then art is a form of fraud. It always has been, and no one would have it any other way. After all, art is the only consumption good that consumers don’t understand. Hell, artists usually don’t understand it either, they just wave their hands and put on a good show. It’s the blind leading the naked, which is always amusing.

But everyone understands money, so they inevitably use it as a proxy. How do we know art is good? Everyone wants to buy it. Why do they want to buy it? Because everyone else does, obviously. Art has always been about power. After all, it is ostentatiously pointless. Only those with money to burn are willing to pay for it, and only holy fools create it, unless they are being paid. The art market is just a way of reifying power in peculiarly convenient morsels, which are shared with everyone, in order to make them even more powerful. Whatever doesn’t bore you makes you richer.

Fine. But modernism complicated the model, especially when artists started questioning the relationship between art and the objects that embody it. Duchamp’s readymades teed up the challenge by styling household trash as art objects. And postmodernism ran with it, enabling artists to sell cans of shit, abstract ideas, or literally nothing.

The Rules of the Game

You’d think it’d be fatal to the art market, but you’d be wrong. Markets can recuperate just about anything. Conceptual art was a piece of cake. The art market just transformed all of those subversive provocations into valuable works of art. These days, if you want to buy a can of Piero Manzoni’s shit, you’ll pay a pretty penny for it. The market doesn’t care what you’re selling. It only cares about supply and demand. When it comes to art, the supply is always limited, and the demand is whatever you can gin up. If you pitch it, it will sell, and all will be well in the gallery.

Until now? No market is impervious to change, and the art market is no exception. It weathered modernism, postmodernism, and all the other isms without a care, but the one thing it’s never encountered is competition. Historically, if you wanted to tastefully flaunt your wealth, the way to do it was by buying extravagantly priced works of art. Of course, there were plenty of alternatives. You could donate to charity, build a tacky mansion, or buy a giant yacht. But art was always the classy move, not to mention usually a wiser investment, so long as you bought blue-chip.

Maybe change is coming. At the very least, the art market finally has a competitor. Inevitably, it came in the form the art market chose, the most harmless thing it could imagine, something it loved, something that could never, ever possibly destroy it: the internet. Or rather, #blockchainblockchainblockchain. The art market made a wish on the monkey’s paw, and got what it wanted, good and hard. Now, it has become efficiency, destroyer of profits. If video killed the radio star, maybe the internet will kill the art star. And if it does, will anyone even notice?

The Death of Art

In 1967, Roland Barthes famously announced the “death of the author.” Of course, it was really more of a prediction, not to mention an exaggeration. Barthes argued that the modern concept of the author as the source of the meaning of a text was being replaced by a postmodern concept of the author as merely the source of a text and the reader as the source of its meaning. He believed this shift would transform the way we use literature. “We know that to give writing its future, it is necessary to overthrow the myth: the birth of the reader must be at the cost of the death of the Author.”

While the death of the author has long since come and gone, the author abides. For better or worse, copyright continues to automatically protect original works of authorship fixed in a tangible medium, and automatically vests in the author or authors of the work. 7 Authors continue to own and exercise the exclusive rights of copyright owners. And they continue to have strong feelings about how the works they own can and should be used.

But that’s all beside the point. The art market has never really cared about copyright. Sure, artists are usually authors and copyright owners, and occasionally even assert copyright claims, but the art market is all about unique objects, not reproducible works of authorship. In fact, artists are usually delighted to see people reproduce images of the work, because it’s free publicity for the objects they actually want to sell, not to mention their brand.

Indeed, artists and the art market writ large are often blissfully indifferent to the realities of copyright. They confidently sell “exclusive rights” to works of conceptual art that copyright can’t protect, entirely unaware that no such exclusive rights actually exist. It seems absurd that anyone would invest in “ownership” of an uncopyrightable idea. What do they own? Literally nothing. And yet, it seems to work. If the art market says you own it, who cares what the government thinks. All that matters is only you can sell it.

The art market is peculiar. It enables artists and their proxies to sell all manner of things, so long as they can convince collectors to buy them. Plywood boxes? Sure. Instructions for abstract drawings? No problem. The idea of duct taping a banana to the wall? You bet. The only thing collectors expect in return is a plausible expectation their purchase will increase in value. If it sounds like a scam, it usually is. Normally, we would expect the government to step in, but it doesn’t seem interested. It’s probably because the high-rollers buying conceptual art don’t want government protection. And also because they tend to turn a profit on their investment.

The problem is that the art gradually became irrelevant, superseded by its value as an investment property. Of course, the art market demands an elaborate charade, in which artistic expression is all that matters, and the money trading hands is an unseemly side-effect to be ignored. But everyone knows the money is what makes it “art,” as opposed to a mere stunt that everyone would ignore. So why bother with the art? It’s just a distraction, anyway. Focus on the money. That’s what makes the game worth the candle.

Enter the NFT.

There and Back Again

A “non-fungible token” or “NFT” is an encrypted unit of data on a digital ledger, typically a “blockchain.” An NFT is a “token,” because it consists of a particular unit of data. And an NFT is “non-fungible” because only the owner of the NFT can access or transfer that particular unit of data. Essentially, an NFT is a unique “digital object” that someone can own, sell, or buy.

In many respects, NFTs resemble digital currencies like Bitcoin and Ethereum, which also consist of units of data on a digital ledger. The primary difference between an NFT and a digital currency is that digital currencies are intended to be infinitely divisible, but NFTs are intended to be indivisible. In other words, you are supposed to transact in fractions of a bitcoin, but you are only supposed to transact in entire NFTs.

Of course, whatever markets want, markets get. If people want to buy and sell fractional NFTs, someone will help them, no matter what anyone says. In fact, it only requires a modicum of creativity to make an NFT effectively divisible. For example, if a single-asset LLC owns an NFT, you can divide ownership of the NFT by allocating shares of the LLC. Even simpler, the owner of an NFT can just securitize it and sell shares.

How does one create an NFT? It’s easy. Just visit one of the many NFT exchanges, create an account, name your NFT, and offer it for sale, either for a fixed price or at auction. Typically, NFTs are associated with an image, but it isn’t required. After all, when you buy an NFT all you are buying is exclusive access to the data that constitutes the NFT, nothing more. Owning an NFT associated with an image doesn’t give you any rights in the image. Even the name of the NFT is irrelevant. All that matters is the data. The image associated with the NFT could change, the name of the NFT could change, but NFT itself remains the same.

The Emperor’s New Works

All well and good, as far as it goes. But this description of how NFTs work totally misses their point. At least insofar as they have a point.

NFTs were intended to make digital artwork more palatable to the art market, by facilitating “ownership” of “unique” digital artworks. Or rather, NFTs were supposed to make digital artworks artificially scarce. But it seems like some wires got crossed in the process and everything went bananas.

The problem with “owning” a “unique” copy of a digital artwork is there’s nothing to own. Obviously, you can own the copyright in a work of authorship fixed in a digital medium. But there is no such thing as a “unique” copy of a digital file. The concept doesn’t even make any sense. Every copy of a digital file is identical, typically consisting of information that can cause a computer to do something.

For better or worse, the art market runs on scarcity. Artwork is valuable because demand is inelastic and supply is low. Really low. Most artworks are unique, and artworks created in a reproducible medium are inevitably produced in a limited edition, in order to impose artificial scarcity. Relatively few consumers participate in the art market, but they compete to purchase an even smaller number of artworks.

Ironically, copyright indirectly enables artists to create artificial scarcity. Copyright says authors can publish as many or as few copies of their works as they like. But it assumes that rational authors will publish as many copies as the market will bear. After all, most authors want to sell as many copies of their works as possible. The art market is a glaring exception. Artists don’t want to sell a lot of copies, they want to sell the “original.” Or rather, in copyright terms, they want to sell a unique copy, or limited edition copies. Copyright makes it possible, by enabling artists to prohibit reproduction. Nothing could make the fundamentally monopolistic logic of copyright more starkly apparent. The art market’s prevailing business model is pure deadweight loss.

But what if an artist can’t use copyright to create artificial scarcity? While the subject matter of copyright is large and contains multitudes, it doesn’t include everything, and many artworks don’t qualify for copyright protection. Copyright only protects the “original” elements of a work of authorship. “Originality” is a pretty forgiving standard, but it doesn’t include generic elements and “ideas.” And a lot of contemporary art consists of nothing more than generic elements and ideas that copyright can’t protect. 11 For example, minimalist art often comprises a generic element like a geometric pattern, shape, or color. Not protected by copyright. And conceptual art typically comprises an abstract idea. Also not protected by copyright.

What a conundrum! How are artists who create works that copyright doesn’t protect supposed to sell anything? If minimalist and conceptual artwork are in the public domain, how can artists make them scarce, and encourage people to buy them?

Of course, the art market “solved” the scarcity problem a long time ago, by simply ignoring copyright. Artists who create uncopyrightable minimalist and conceptual art just claim ownership of the works they create, irrespective of copyright. Most artists have no idea what copyright protects anyway. They just assume their work is protected, because they created it.

Thankfully, collectors are willing to play along. People buy minimalist and conceptual works, with no concern about copyright or reproduction. Everyone involved in the art market knows who owns what, and if anyone presented a work without the permission of its owner, everyone would get upset. Usually, that’s enough to keep everyone in line. After all, there’s a lot of money at stake, and social connections ensure that everyone has an incentive to play along. If the art market agrees about who owns a work of minimalist or conceptual art, maybe copyright is irrelevant.

So, how does the art market keep track of who owns what? Certificates of authenticity. When you buy an artwork, especially an artwork created in a mechanically reproducible medium, the artist typically provides a certificate warranting that the artwork is “authentic,” whatever that means. In the case of a unique artwork, it usually means the work is or will be included in the artist’s catalog raisonne. In the case of an artwork created in a mechanically reproducible medium, it usually means the particular copy you purchased is part of a “authentic” limited edition. And in the case of a work of conceptual art, it’s unclear exactly what it means, if anything, other than that you are the “owner” of the work, whatever that means.

Anyway, when you buy a work of conceptual art, you get a certificate stating that you are the owner of the work. The certificate is not the artwork. The artwork is the abstract idea. The certificate doesn’t even represent the artwork, although certificates often describe the work they convey. On the contrary, a conceptual art certificate of authenticity does nothing more or less than purport to convey ownership of an idea attributed to an artist. In a purely legal sense, it’s quite possible, if not likely, that conceptual art certificates of authenticity actually convey absolutely nothing. But never mind the law. If everyone acts as if certificates convey ownership of something valuable, then they do convey something valuable. All that matters is whether you can actually sell it.

All Your Artworks Are Belong to Us

NFTs were supposed to make digital artworks “unique” by connecting them to a digital file that only one person can own. But there’s a problem. The digital artworks exist, and the digital files exist, but they aren’t connected. When you buy an NFT, all you’re buying is unique access to a digital file. You aren’t buying a unique digital artwork, because it’s impossible. There’s no such thing. And even if the digital artwork associated with the NFT is protected by copyright, you aren’t buying copyright ownership or any kind of copyright interest. All you own is the NFT.

Essentially, NFTs reinvented certificates of authenticity, while largely misunderstanding their point. Certificates of authenticity exist in order to facilitate transactions in the art market that reflect ownership claims the art market has collectively agreed to recognize, irrespective of the law. Certificates of authenticity matter because they reflect the art market’s practical needs. One might productively analogize to the law of secured transactions, in which formalized documents facilitate the transfer of assets.

NFTs fetishize the mechanics of certificates of authenticity, while ignoring their purpose. They are intended to enable secure transactions in artworks by ensuring that work is authentic. But they can’t actually accomplish that purpose, because they lack any meaningful connection to the work they are supposed to authenticate. NFTs are gangbusters at authenticating themselves, but utterly incapable of authenticating anything else. Knowing who owns an NFT tells you nothing about who owns the artwork it ostensibly authenticates. Or at least, nothing you didn’t already know.

Even more quixotic, NFTs try and fail to solve a problem that never existed, while ignoring the problem that does. The art market’s problem is fakes. Some people sell forged artworks. Others sell unauthorized copies of editioned works. Many people sell stolen works. And tons of people sell comically bad ersatz antiquities. But the art market is caveat emptor on steroids. If you get burned, there’s little recourse, especially if you thought you were getting a bargain. Certificates of authenticity help, but they can be forged, just as well as artworks, probably even easier. But when it comes to works of conceptual art, certificates work quite well. After all, the question isn’t really whether the work is “authentic,” but whether the artist endorses the collector’s “ownership” of the work.

All digital art is a form of conceptual art, when it is “sold” as a “unique” work.” When you “buy” a digital artwork, all you are buying is the right to say you own it. You are literally buying a concept, albeit often a rather dull one. But still. There is nothing particularly novel about selling the right to claim ownership of an attributed idea, no matter how silly it is. If Sol LeWitt wants to sell the right to create wall drawings and call them artworks by Sol LeWitt, and people are willing to pay for it, we should let them do their thing. Of course, we can also reflect on what their thing is and what it means.

Anyway, NFTs are supposed to ensure authenticity. If you buy the NFT associated with an artwork, then you know you are the owner of the artwork, because you are the only person who can access the NFT. Baloney. All you own is the NFT, which has no relation to the artwork, unless people believe it does. Maybe some people think owning the NFT means you own the artwork. Great! But what if other people don’t? And what if the people who don’t believe in NFTs are your customers?

The problem with NFTs is that they are designed to solve a problem that doesn’t exist. For better or worse, the art market knows how to buy and sell conceptual art using certificates of authenticity. It doesn’t need NFTs, which just make transactions more risky and complicated, without creating any additional certainty about ownership.

Oh no. Maybe NFTs are just a ridiculous dead end. And yet, many people seem to be buying and selling them anyway. Why? Do they know something I don’t? Probably. The meteoric rise of Bitcoin and other virtual currencies triggered an explosion of related products, including NFTs, which soon attracted billions of dollars in investment. You can’t argue with an existing market, and you certainly can’t argue with windfall profits. But you can wonder whether the market is sustainable, and whether the profits are just the proceeds of a tech-fueled Ponzi scheme.

Collector-Gang & Its Discontents

In any case, the market for NFTs is volatile, but seemingly robust, at least for the time being. A congeries of different digital marketplaces have sprung up and enabled people to create, sell, buy, and trade NFTs, and speculators have poured in, hungrily snapping up the highest-profile NFTs. Most notable, Christie’s auctioned an NFT associated with a digital work created by the artist Beeple for $69 million. 14 Even the artist seemed perplexed and amused. A New York Times columnist sold an NFT associated with his newspaper column about NFTs for $560,000. An artist’s heirs have offered to sell an NFT associated with one of his paintings, throwing in the painting itself as a bonus. And a robot “created” and NFT that sold for almost $700,000.

All of this is quite odd. The art market has always been strange, because it essentially consists of people buying and selling objects with no intrinsic value for vast sums of money. But it was at least nominally rationalized as reflecting the cultural value of the object. Sometimes, it was hard to keep a straight face, but the pretence was real. Sure, the artwork was a token that represented an investment, but it was also a physical thing you owned and could hang on the wall.

NFTs strip away all the pretence and go full virtual. An NFT is a token for nothing but itself. When you transact in NFTs, all you are selling or buying is the NFT. Even if the NFT is nominally associated with an artwork, the artwork is irrelevant to the transaction. It doesn’t matter what the artwork is, except insofar as the artwork helps people identify the NFT. After all, NFTs themselves are so perfectly distinctive, they are essentially meaningless, without an association to something else, no matter how nominal.

The genius of NFTs is that they’re a reductio ad absurdum of the art market. Everyone knows the art market is really just transactions in non-fungible tokens that take the form of artworks. They’re just too polite to say it. NFTs throw politeness out the window, by dispensing with objects entirely, and allowing people to just transact in tokens.

Understandably, the art world is perplexed, at once horrified and fascinated by NFTs. Of course, NFTs rudely pull aside the curtain separating art and commerce, by focusing on commerce and ignoring art. But at the same time, they kinda look like conceptual art themselves. And think of all the money at stake! Unsurprisingly, many artists are jumping on the NFT bandwagon while the getting is good. And in the midst of a global pandemic and economic downturn, there’s no shame in a beautiful grift, especially if you can call it art.

Locus Solus

So, how should we think about NFTs in relation to art? I’m optimistic. I like to define “art” as “a consumption good consumers don’t understand.” What do consumers understand? Pleasure and money. Many works of authorship are pleasurable to consume, and most works are at least intended to be pleasurable to consume. As it should be! The whole point of copyright is to encourage authors to produce works people want to consume. Authors don’t always succeed, but they try. And consumers benefit as a result.

But that isn’t “art,” in any meaningful sense, it’s just a consumption good. Art is the aspect of a work that consumers don’t understand. Art is confusion and misunderstanding. Often art is even invisible to most people. It’s ineffable and evanescent. It’s hard to identify and impossible to define. Art is the aspect of a work that doesn’t appeal to consumers, but makes them uncomfortable. Art is weird and awkward and confusing. Art is what you don’t know you like, and maybe don’t like, but maybe could like, or maybe not. Art is what happens when other people are trying to make something consumers will like, or when you are trying to make something you like, assuming that everyone else will like it too, but they don’t.

Money is easy. Everyone understands money, even though no one understands how it works. We understand how to use it, and that’s all that matters. The art market is all about money. Everyone says they’re talking about art, but they’re really talking about art people want to buy. Or rather, they’re talking about “things” people want to buy that might or might not be “art,” but are at least a decent facsimile.Whether its a painting or the idea of a banana duct taped to a wall, the point of the art market is to buy something notable that others will want to own. It doesn’t really matter what you’re buying, all that matters is the demand to own it. It makes perfect sense to buy the idea of duct taping a banana to the wall, if you think you can resell it. Especially if you think that buying it in the first place will enable you to resell it.

NFTs are the obvious next step. Why bother duct taping a banana to the wall, or even entertaining the idea, if you can engage in a transaction that accomplishes the same thing, without all the hassle? Or, to put it another way, NFTs mean the art market doesn’t need art anymore. From its perspective, NFTs are just as good as art. After all, they’re tokens that represent value, that’s all the market needs. So why not dispense with the art and the inconvenient, difficult artists who make it? Why not give art back to the artists? Maybe the art market has to die, in order for art to live.

Why bother with art you have to store and maintain, when you can just use digital files? So convenient.

Someday, maybe people will talk about how NFTs destroyed the art market, in order to save it.