Oscar Wilde again:
“All art is absolutely useless.”
Put usefulness first and you lose it.
Put beauty first and what you do will be useful forever.
It turns out that nothing is more useful than the useless.
- Sir Roger Scruton, Why Beauty matters (2009)
This is part 3 of a series of articles about the current state of crypto.
If you haven’t read the previous entries, please start with:
If we study a little the history of art as an economic phenomenon, we discover that there is a first phase, which lasts approximately until the Renaissance / Baroque, in which art has a single, simple economic goal: increase the real estate value.
It is not so much the phenomenon of patronage: and we can easily observe that throughout this period art was completely concentrated in the rich areas, in the homes of the rich, in the lands of the rich, in the hands of the rich. There is not even a faint hint of art, even for amateur purposes, inside the homes of the less wealthy.
The reason is simple: patronage had an economic purpose. Increase the real estate value of a building, a neighborhood, a city. That is, it was a collateral sector of what we would now call "real estate".
Moreover, there is a theory that art production was absolutely optimized for this: in Michelangelo's time it was possible to make mineral-type colors with a very slow degradation, but it was preferred to use organic-based colors, such as egg yolk and other perishable substances: the reason could have been "planned obsolescence", that is, to keep the property at its value, maintenance was required, and to make sure that maintenance was necessary, they used art as a marker: without maintenance, in a few decades any painting or statue would have degraded .
The idea being that the value of the building, the neighborhood or the city, it had to go hand in hand with the value of the art contained in it. Therefore, a building in a bad state of maintenance could not use a fresco to hide its state, on the contrary: the fresco would have betrayed the state of maintenance by degrading at the same speed as the building.
This way of making art in order to increase the value of objects, buildings, furniture, neighborhoods, cities, lasted until about 1700, that is, the mercantile period. Previously, in fact, those who wanted to increase the value of their building had to ask themselves how good an artist was. With the creation of state entities, national academies took control of the scene. The best known was the French one: if you came out of there or were recommended by them, you were the kind of artist they would use to embellish churches, palaces, and other real estate properties.
On the other hand, this gave even more value to the works, as they could ONLY be found in the homes of rich people, nobles, in churches, and in very few other places such as the squares of some very rich cities.
At a certain point, in the 1700s, the bourgeoisie arrives and opens the market.
Here comes the art gallery. The art gallery is a private that organizes an exhibition, where a painter exhibits his works as a private, and the recommendation of the Academy is replaced by the approval of the market. The paintings are sold, part of the proceeds go to the owner of the gallery, part goes to the author.
But here the business model changes enormously: what gives value to an art gallery? The bourgeois rich man does not understand shit about art, but he does understand a very banal concept of commerce: The Brand. In this period, and from this period onwards, the name of the author takes value. Let's be clear, anyone with some training could paint like (for example) Monet, but Monet is a brand. He is known. It is said that he is a genius. Everyone is talking about Monet. Everyone wants Monet. Everyone goes to Monet's galleries. All galleries want Monet.
This business model continues to grow and structure itself, in this way:
the author invents something "new" or creates a scandal (until for example he paints with his own shit), so that people talk about him.
get invited by galleries that only host famous or controversial names
and his art takes on "value". It must no longer embellish buildings, it must no longer produce value for cities, churches or neighborhoods. Everything is in the hands of the market, where the scarcity of original works by a specific author, combined with the demand, produces a price.
At this stage there is no longer "art", there is only branding: the reputation of the author. You can't use this stuff to increase the value of a building, there is no scarcity because any idiot can do the same thing again (except he’s a no one).
Beauty doesn't exist, and it doesn't even have to please the human eye.
The business model, in fact, is completely speculative: anything done by a famous guy is famous, so the price goes up. End of it. It’s all speculation.
Then comes the Internet.
The Internet produces an economic model that doesn't give a damn about the brand, and doesn't care about the relationship between scarcity and demand: anything digital can be replicated. In the world of the internet, especially after the consolidation of commercial algorithms for advertising, it’s not even about authors anymore.
And with this, the artist becomes a "content creator".
But what is the economic model? Well, it is the one followed by the algorithms that give value (and "monetize" art) according to some criteria.
the impressions
the virality
the dispute
engagement
etc.
These are all criteria that were absolutely not present before. Since art was NOT for advertising, no one had ever really calculated these things.
The new commercial model, therefore, is completely flattened on the measurement of the audience and some of its derivatives, such as engagement or virality.
In this situation, NOT ONLY the art no longer exists (understood as the production of an aesthetic value) but the artist no longer exists either: there is only "the content".
And with this, the artist becomes a "content creator".
If you are "artist" in the classical sense (that is, if you are Michelangelo) or if you are an artist of the mercantile period (if you are Monet or Van Gogh), you do not have the slightest chance of being "monetized", for the simple reason that what you do is judged according to the parameters of the "content", which do not include the value that your content could give to the real estate market, nor the value of your brand: your “art” will be buried under millions of results of literally no-ones doing tiktok dances.
Enter the NFTs.
NFTs exploded in popularity in 2021, despite technically being around for longer.
The business model of NFTs as art so far tried to replicate the “mercantile” era of art, with “galleries” like Artblocks hosting mints of “brand” authors, like Tyler Hobbs and similarly known artists.
An army of twitter influencers “in the know”, that is, a closed circle of individuals who decide “who’s who”, rode this wave and pumped the hype and prices of such “art” into the usual dynamics of a mania.
Separately, some bottom-up collections of NFTs exploded with different mechanics:
the so called profile picture NFTs.
Riding on the success of the first really succesful collection, the CryptoPunks, many other who started without making much noise, quickly gained popularity thanks to virality and the mechanism of internet engagement mentioned above.
BAYC, Bored Ape Yacht Club, “flipped” CryptoPunks market cap, and went on to become a huge economic success, launching derivatives, a token with a 6 figures airdrop for owners, and now launching a metaverse (sic).
Pfp collections surely benefited from influencers shilling them, but their immense success wouldn’t have been possible without internet users adopting them as their profile picture, thus becoming hosts of the “virus”, and creating microcultures around them (for example the meme of BAYC owners being redacted and often falling victim to scams and frauds gained huge visibility to the collection itself).
On the topic of pseudonymity, digital identity and profile pictures, I could never write better than cat (CL207), so I humbly point you to read Online identity, NFTs, Human reasoning, Markets.
At the time of writing, as with the rest of the crypto markets, NFTs are in bear market and valuations of both “art” pieces and PFPs are plummeting, in part also victim of mass serialization from people trying to milk the NFT wave as long and as much as possible and not understanding scarcity.
If a 10k pfp collection mints every 15min, is there really scarcity? If every single project now has a metaverse, and every metaverse has 10k pieces of land, is virtual land really scarce? Artblocks themselves eventually found an absorption barrier, if there’s a “big name mint” a week, and second hand sales are not going anywhere for previous mints, eventually you run out of buyers.
But NFts still represent a new experiment on profitability and economic models for art on the internet, not to mention the plethora of starving “artists” who joined NFTs and managed to make an income if not even getting rich, and I believe NFts are here to stay, probably going through some evolution in the near to medium future.
Great read, I really enjoyed the historical background on art and how it relates to the overall NFT industry. Pretty interesting way to view how monetization/advertisements has impacted art over the years!