NFTs are tearing the art community apart

Currently, the collision of artists and cryptocurrencies is playing out across Twitter and other platforms, dividing artists who normally praise and support each other into two camps. One camp wants to make money selling their art as NFTs, and the other camp hates the idea.

If you haven’t heard already, NFTs are enjoying increasing popularity alongside the current record-high cryptocurrency values. NFT stands for Non-Fungible Token – an atomic digital token that can be traded for cryptocurrency. Many artists are now selling “digital editions” of their artwork as NFTs on special-purpose marketplaces – the buyer can call themselves the owner of a piece of digital art, similar to how one might purchase a limited edition print. Some of these art NFTs have been trading for the equivalent of tens of thousands of dollars, despite granting the buyer no physical copy, no reproduction rights, or anything other than the ability to say, “Yes, I own this token,” and to sell it to someone else.

What’s been particularly divisive is the objection to the shockingly high energy usage of the most popular cryptocurrencies. One estimate puts the energy consumption involved in a single NFT sale at around 340 kWh, equivalent to driving 1,000km in an ICE car. Most of this is due to the proof-of-work algorithm that’s core to Ethereum[1], the blockchain that most of these NFT sales take place on. Essentially, many objectors see making and selling NFTs as something akin to clearcutting rainforests in order to grow crops.

The artists putting their work up as NFTs see this as an opportunity to live the artist’s dream – to produce highly sought-after pieces for which collectors will pay large sums of money. It’s simultaneously an elevation of their value and status, and also their ticket to a life free from the struggle of paying the bills. Is it so easy to pass on what could be a once-in-a-lifetime chance at wealth, even when people are telling you that it’s contributing to environmental harm?

The YES NFT camp has a few arguments, including that NFT transactions are not 1:1 correlated with increased energy use[2], and aren’t you eating meat anyways?

The NO NFT camp seems to have been already stressed out by anti-maskers, racial injustice, income inequality, and all the other ills of the world, only to find out that their beloved colleagues are willing to sell out the environment for a chance to make a quick buck. Depending on who you ask, the whole thing smacks of tech-bro[3] greed, a pyramid scheme, or abandoning your morals.

This has caused some heated threads on Twitter around these talking points, and since it doesn’t seem totally fair to air all the drama – Twitter is very public though! – I’ll put my predictions here instead:

The NFT gold rush won’t last forever. Yes, some artists and speculators have made a good chunk of change selling NFTs. But the idea of artists simultaneously having trouble getting $1,000 commission work while selling old JPEGs for tens of thousands of dollars doesn’t add up. The money that’s buying NFTs is either speculators hoping to resell it for more, or people who previously accumulated cryptocurrency and are either reluctant to cash out or are under the endowment effect. They wouldn’t spend $1,000 on a digital picture, but would happily spend 0.7 ETH ($1,137).

As more NFTs are minted and put up for sale (supply increases) and the cryptocurrency wealth sloshing around settles or hype dies down (demand decreases), I think NFT prices and volume will settle down to lower levels. No artist (ed: other than Beeple) to my knowledge has become wealthy by selling NFTs yet, but in the future the chances of even paying your bills via NFTs will be very low.

Despite my negative outlook on NFTs, I think they’ll be around in the long run with limited use[4] along the lines of Patreon – if people are willing to pay monthly to support an artist, why not also be the Digital Owner of one of that artist’s works? It’s a way to publicly show your support for your favorite artists.

[1] Ethereum is not scheduled to move to proof-of-stake until some time in 2022. The NFT gold rush may run out of steam by then.

[2] The USD price of a cryptocurrency has a bigger correlation to its mining electricity consumption. The higher the price, the more profitable it is to keep your computer on all night mining cryptocurrency, thus the best way to fight the environmental cost is to crash the USD exchange rate. There’s even a plausible scenario where artists selling their earned ETH to pay their bills puts downward pressure on the USD-ETH rate, reducing ETH’s electricity consumption.

[3] The artists selling NFTs seem to be mostly men, like cryptocurrency enthusiasts who are also mostly men. This is based on my limited non-scientific browsing of NFT marketplaces.

[4] One legitimately interesting use case for NFTs could center around tracking ownership of Original Characters (OCs), for which there already is a thriving market for trading and selling. Basically, the artist draws a cool/fierce/cute/sexy paladin/drow/khajiit/whatever character, and the buyer gets exclusive rights to own that character, use it for role playing, take the included “refsheet” to other artists to commission custom art of said character, or resell the character. It’s all very ad-hoc and exists largely outside the world of copyright law as we know it. The demographic also seems to be teenagers, which might hamper adoption of NFTs.

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