Tokenization and the Art of Rent: Part One
I’ve long been fascinated by what Bill Maurer and Lana Swartz call ‘money-like things’, describing the explosion of alt currencies, cryptocurrencies and new payment solutions driven by the Internet and social media. Some examples of the kinds of things that can be used to store value or to move it around are cryptocurrencies, loyalty points, airmiles, phone credit, FitBit Units and personal data. These things can’t always said to be money proper, in that you can’t use them to pay your taxes or as a universal equivalent for all goods and services. A better explanation is to say that they are tokens of a sort.
Tokens are a larger set of which money proper is a subset. As well as publicly mandated currency it includes things like vouchers, bonds, casino chips, Amazon API keys, promissory notes, coupons, food stamps and the new networked forms of payment listed above. Tokens have narrower and more specific conditions for their creation, redemption and transfer than money. Let’s look, for example, at the difference between a €50 note and a €50 book voucher. The European Central Bank issues and guarantees the €50 banknote. It can be put towards goods and services in Europe or exchanged for other publicly mandated currencies like dollars and Sterling. A €50 book voucher, on the other hand, can only be redeemed for books and only in participating bookstores. These participating stores guarantee it. Unlike the banknote, which is redeemable in all participating European countries and which I can transfer to anyone, the book voucher has specific conditions of redemption and transfer.
Tokens can represent a share in something; a membership certificate; or they can be a codified representation of an object that exists in the real world. Take, for example, the gold standard, where paper money, prior to 1971, was a representation of bullion stored by a central bank such as the Bank of England or the United States Federal Reserve. With Bretton Woods and the abolition of the gold standard, these monetary tokens were decoupled from any real world referent
In the case of Bitcoin, the coin is a cryptographic token that is mined and issued on the Bitcoin blockchain. With Bitcoin the ‘valuable thing’ that is turned into a token or ‘tokenized’, is the computational work and as such the electricity involved in the verification of bitcoin transactions taking place and recorded on the blockchain ledger. But more recently, a number of start-ups are moving from minting cryptographic coins to tokenizing real world assets on the blockchain. This means that they are storing details about the ownership, authenticity and provenance of assets on a distributed ledger (Ethereum, Hyperledger, permissioned blockchains) and issuing tokens that represent shares of these.
As well as encoding transactional data in a hash on the blockchain, you can also encode details of the provenance, ownership and transfer of digital and physical assets. Tokenizing involves digitizing an asset and appending a digital representation of it to a distributed ledger by transferring a discrete piece of data from one person to another. A token is created and linked with an asset such as an art work or gold stored in a warehouse. Once the token is issued, its owner can store it or transfer it to anyone else with a digital wallet. The physical asset remains in the same place, while the ownership of the token can circulate from owner to owner in the network.
The tradeshow Money 2020 in 2016 placed a lot of emphasis on how the Internet of Things might facilitate markets in the latent capacities of material things, a trend already well under way in the sharing economy, where owners transact in spare rooms, car rides and CPU. With many networked devices, the imaginary goes, ‘a thing might trade equity in just about any other thing’. Imagine, for example, a raincoat or an umbrella that traded shares in itself when it rained, or an Airbnb style property with fluctuating rental prices that in turn speculated on and invested in the outputs of nearby artists and cultural practitioners. Tokenization, in sum, means turning things or shares of things into assets, derivatives, securities and other financial instruments.
Tokens are a representation of a particular asset or utility that resides on top of a blockchain. They can be any asset that is fungible and tradable, from commodities to loyalty points to other cryptocurrencies. Let’s look at a few examples of this. Since 2015 companies have been exploring the tokenization of digital files. By harnessing the same process that prevents double spending in Bitcoin, creative and cultural industries are looking at ways of reintroducing the notion of artificial scarcity into digital culture (art, images, music). Other processes include the creation of tokens for environmental externalities such as natural capital tokens and carbon tokens; and the licensing of portions of the electromagnetic spectrum on the blockchain. IBM recently introduced a proof of concept for trading loyalty points between different platforms at the ‘Using Blockchain to Secure the Supply Chain’ conference in UC Irvine in November 2017. Still other companies have explored how fungible exchanges might be established between various forms of data produced by the Internet of Things.
But what about the tokenization of real stuff, where objects that exist in the world are associated with or represented by a digital token? There are, for example, proposals to tokenize gold bullion, diamonds, real estate and precious works of art. In the face of Bitcoin and Ether’s volatility, Singapore-based company Digix Global are returning to the principles of the gold standard and tokenizing gold bullion stored in the Singapore Safehouse. 1 DGX token is equivalent to 1 gram of stored gold. There is no fractional reserve and Digix make use of an auditing system to ensure that they have the gold they say they do at any time. Their next project involves doing the same thing with silver. Maecenas, a company I met with and interviewed this weekend, are attempting to create an art securitization service by listing works of fine art (of values greater than £1 million) on the Ethereum blockchain. Maecenas allows dealers to list up to 49% of the value of a painting on the blockchain, opening up a dealers’ collection to new streams of finance, while allowing investors to diversify their portfolios by investing in fine art. Everledger, though mostly associated with provenance and authenticity is also tokenizing diamonds. Land registries on the blockchain too are a kind of tokenization.
From here many of these works would be physically secured and stored in ‘freeports’. These are duty free, extra-territorial spaces that offer a range of tax advantages. Due to the historical legacy of these spaces as ports and bonded zones, goods housed in the Freeport, though physically stationary and not going anywhere fast, are fiscally ‘in transit’ and therefore avoid duty fees. Buy a painting in London for £500,000, and ship it to Le Freeport in Geneva and the associated tax bill disappears. Freeports are now vast repositories for the asset investments of the world’s super rich or HNWIs investing in what Deloitte has termed ‘passion assets’ to describe fine wines, fine art and vintage motorcars. With many tokenization schemes, therefore, the Freeport warehouse becomes a kind of ‘bank’ for the physical assets in question, a place where they can be stored securely and indefinitely while its virtual twin circulates as code in the network, endlessly deferred. Like data in a ledger, ownership of a painting might change many times over without the physical work ever changing location. Like fiat currency, the persistence of a material from which to abstract starts to seem less important than the mechanics of the abstraction itself. Assets on the blockchain are continuously encrypted, both in the sense that they are cryptographically secured and buried deep in the crypt of the Freeport, and continuously in transit, both in the sense of their liminal status between one judicial zone and another and their continuous circulation as code in the network.
Tokenization works to overcome a lot of the frictions and difficulties associated with securing, storing and transferring physical assets. Instead of buying the thing itself, you can buy a token that represents a claim to a portion of that thing and store it in a digital wallet. The advantages are that you don’t have to store and secure the thing yourself; that you might also take advantage of tax or regulatory advantages based on the jurisdiction of the physical good and that you can trade in fractions or shares of things that you couldn’t otherwise afford to buy. Similarly to the concepts of ‘lumpiness’ and ‘granularity’ that Yochai Benkler put forward in his argument for sharing as a modality of economic production in 2004, tokenization works to overcome and bypass the material and lumpy qualities of physical real world goods. It works to make illiquid assets more liquid and conducive to a market. It tries to break down the distinctions between commodity, asset and currency so that a thing can behave as a commodity in one moment and a means of exchange or a financial instrument in the next.
Arguably tokenization is part of a broader trend that begins with Bretton Woods. It describes an economic rationale in which the token – an economic tool that stands in for the relation between real things – comes to be operative in and of itself. A solution to the dearth of investment opportunities and falling profit margins from the 1970s onwards was to utilize financial products as a means of maintaining and expanding monetary assets, placing these resources in financial activities remote from the production of material goods and services. In turn, financial institutions came to the fore with an array of new instruments: futures, options, derivatives, hedge funds and so on. This shift from production to finance has materialized in every aspect of the economy, including an increase in financial profits relative to real profits; the growth of so-called FIRE economies (Finance, Insurance, Real Estate) as a share of national income; rising debt relative to GDP; the proliferation of increasingly exotic financial instruments; and the expanding role of rapid financial bubbles.
A number of autonomist Marxist critics have theorized this shift in terms of transformation from an economy centered on ‘profit’ towards one centered on ‘rent’. David Harvey describes rent as income that comes from 'exclusive control over some directly or indirectly tradable item which is in some crucial respects unique and non-replicable'. Where classical economics views rent as a pre-capitalist hangover, theorists such as Harvey, Carlo Vercellone and Christian Marazzi have argued that the growth of finance requires a reconsideration of the category of rent. Today rent takes precedence over profit. Instead of investing in the production of material commodities and labour production, in other words, you invest in monetary streams that can accrue simply by owning assets. The landlord or art dealer is largely external to production. She or he doesn’t make art or houses or necessarily pay others to do so; they speculate on the value of what they own and acquire and find new ways of making money from the act of ownership, through hedging and speculation, accessing credit to purchase new works or the securitization of their existing collections. A common example of how 'rent' is now central is the business model of Internet platforms. These aren't based on organising and paying people so much as the free work of Internet users, responding to posts and sharing content that can be harnessed simply by virtue of owning and controlling the platform (I'm being reductive here: take a look at Tiziana Terranova's work on free labour or Matteo Pasquinelli on rent and cognitive capitalism). Arguably the tokenization of physical assets is another example.
January 23rd 2018.
The work of art in the age of CRYPTography: the tokenisation of art on the blockchain
Tying in with recent work on the freeport institution a site of financialised art and b) the rise of art as a financial instrument, I want to explore a further expression of this in the development of blockchain technologies for the (physical) art market.
Much of the art collections of High net worth individuals (HNWIs) now reside in freeports, liminal tax-free spaces that bypass National sovereignty . These are large, high security, climate controlled spaces often located in the transit zones of airports or in tax free or tax friendly zones such as Switzerland and Singapore. They have a historical legacy is colonial trade but today they function as duty free storage spaces for accumulated wealth, or what Deloitte calls ‘passion assets’: fine wines, cars, and fine art that once purchased is shipped to and stored in the freeport for an indefinite amount of time. Here duty associated with a purchase can be endlessly deferred because, due to some strange legal heritage, goods housed within the freeport are deemed as permanently in transit from one space to another, even when they’re not going anywhere fast. The freeport has recently captured the interest of art criticism as it seems, as an institution, to exemplify the infrastructures and networked processes of the contemporary art market. In place of the public museum, vast collections are now housed in high security and climate controlled freeports. And the purpose of the artwork, it seems, is not to be possessed or traded as a commodity, but to function as an asset - a pure cypher or financial instrument that never sees the light of day and doesn’t need to. Because of the opaque nature of the freeport, it can be difficult to account for how many works of art are permanently housed in spaces such as Le Freeport in Geneva. a recent New York Times article, however, claims that the number is close to 1.2 million, with some 1,000 Picasso's in that bunch. More recent freeport spaces are more like museums than warehouses i.e. Singapore Freeport has commissioned a piece in the foyer un-ironically entitled ‘Cage sans Frontieres’ (Cage without borders). The Freeport creates a space of flows beyond state jurisdiction. It facilitates the circulation of material artworks as liquid assets in a supply chain. Borders or their absence are significant in this. Theorist Hito Steyerl has described this situation as ‘duty-free art’, while art critic Stefan Heidenreich coined the term ‘freeportism’ to describe the modes of production, circulation and distribution in the art market that accompanies these trends. The Freeport is a kind of blind spot in the supply chain, a place where regulators and states can turn a blind eye or, as Keller Easterling puts it 'selectively lose control'.
The freeport is emblematic of the broader financialisation of the art object. Of course, Art and the market have always been deeply imbricated, but, as Max Haiven points out in his brilliant forthcoming book, Art after Money, Money after art, we’re experiencing an intensification of these processes and conditions in which it is very difficult for artists to adequately critique, trouble, or work against this trend. I found Deloitte’s reports on 'Art and Finance' from the past few years enlightening in this regard. In particular, a shorter report entitled ‘should art be treated as an asset class?’ argues that while art has always functioned as a financial investment, this is growing in significance due to low interest rates, the need for new financial instruments and markets, and the sense that burgeoning technologies can solve extant issues regarding authenticity, risk, high transaction costs, market transparency and market regulation, as well as providing new mechanisms for making illiquid assets more readily liquid. These reports are a fascinating read for anyone who’s interested. They also highlight a number of new mechanisms for speculating on art, including art investment funds, art securitisation, and art-secured lending, which is particularly popular in the US. Players in the space include traditional banks, new boutique lenders such as Athena and Artemis and traditional auction houses like Christie’s and Sotheby’s.
Enter the blockchain.
Blockchain technologies are now being used with art in various different ways, as a provenance, traceability and authentication tool (see Deloitte’s POC Arttracktive, Verisart’s system and Everledger’s partnership with Vastari) as a visibility tool for artists, as a model for new payments models such as crowdfunding and as a form of asset exchange, where physical works of art are stored in freeports, represented by cryptographic digital tokens and traded as equity in a market, divided into shares or used to secure loans. It’s the latter condition that particularly interests me here. Art is being transformed from commodity to financial instrument, or ‘tokenised’, as the lingo describes it.
Art is just one example of the rise of asset exchanges on the blockchain: companies are tokenising real estate, natural assets, gold bullion, and just about any tangible or intangible asset imaginable. Cryptographic tokens are used to represent a specific object that exists in the real world. This coupling of the physical, material thing to a cryptographic hash is called ‘tokenisation’ and the broader shift of revenue streams towards utilising the latent equity in everyday things is called ‘tokenomics’.
Companies such as Maecenas are tokenising art that is held in freeports so that it can behave as a speculative financial instrument. It might be broken into shares for investors who wish to diversify their portfolios, used as equity in a loan application or various different future selling prices might be hedged and sold as a derivatives. While the co-construction of art and finance isn’t a new phenomenon, this is a further step in the financialisation of the art object.
These tokens are subsequently traded on blockchain platforms. Digix Global have tokenised gold bullion, so that each token represents one gram of gold housed in a Singapore freeport, while a company called Maecenas is tokenising fine art with the token ART, a clearing and settlement token for art auctions. So too, Maecenas is in the process of developing alliances with the Geneva freeport. Works of art listed on the Maecenas blockchain would be housed in the Geneva freeport, a historical Swiss tax free zone close to the airport. What’s significant here is that works would not need to be seen or possessed or move around as ownership or fractions of ownership change hands. All that circulates is the physical token. Tokens representing physical works or portions thereof could be traded in the market without the work ever physically changing hands or moving locations. In this sense, while the work of art remains static in liminal condition of always ‘in transit’ it continues to circulate as a cryptographic token - as a hash within the blockchain ledger. And this is what is particularly interesting to me – the circulation or dematerialisation of the physical object, not as a way of shirking off commodification, but as a way of maintaining market value while surpassing the lumpy granularity of everyday things and conditions.
The Maecenas whitepaper provides a description of this process:
Maecenas uses blockchain technology to create tamper-proof digital certificates linked to pieces of art. These certificates are highly secure and impossible to forge thanks to the cryptographic properties of blockchains. A single artwork is broken down into thousands of certificates, similar to how a public company issues shares, Investors can then purchase these certificates to own a percentage of a given artwork, and they can sell them back to other investors at any time via the Maecenas exchange. Artworks can be listed in any fiat currency (e.g. USD, EUR) or cryptocurrency (e.g. BTC, ETH). [Maecenas also issue their own native token called ART]
I think one particularly significant aspect of the tokenisation of the art object in this sense is the relationship between the fixed financialised object and its concurrent position in two different spaces of circulation at once, both the ‘calculated geography’ of the freeport, where the artwork is static, sitting sealed up in a crypt somewhere while fiscally the work is recorded as being continuously ‘in transit’ between one Westphalian zone and another, evading the specific duties and regulations of any particular nation state. At the same time, when it is tokenised and stored on the blockchain, the work continuously circulates as code in a digital ledger, endlessly deferred. Just as the blockchain seems to allow physical objects to behave like code, therefore, it is part of a growing process in which physical architectures and geographies and the logistical arrangements of broader supply chains increasingly conform to network topologies and stacks. The concurrency of the digital token that can be moved around and transferred in new ways and the fixed object which makes use of extralegal and territorial exploits and which is juridically/fiscally ‘in transit’ is an interesting one.
There are lots of classical economic theories of what money is and is not (a store of value, a means of exchange, a unit of account etc.) and within that histories of the token as a money-like thing that includes not only publicly mandated currencies but promissory notes, vouchers, loyalty points, phone credit and cryptographic tokens like bitcoin. But a definition that has always intrigued me comes from the German media theorist Sybille Kramer. Kramer theorises money as a kind of desubstantiated property, a form of media that facilitates the dematerialisation of physical goods and their circulation within broader networks of exchange. The development of physical asset exchanges on the blockchain seems to be an extreme example of this, where tokenisation becomes a process for overcoming the liquidity of physical things so that everything can circulate as money or somehow be liquid and illiquid at the same time. I’m reminded of a Money 2020 panel on blockchain economics in 2016 where a panellist described a scenario where one could trade equity in an umbrella whenever it rained. The expressions as something like 'We can trade equity in any ‘thing’ for any ‘thing’ else'. So is ART the new currency? And what kind of money is art? What are the conditions for transfer and redemption?
Furthermore, what are the ontological implications of this shift for art more generally? I’ve been lucky to read an advanced copy of Max Haiven’s Forthcoming Art as Money, Money as Art in which he argues in a later chapter that the creation of new forms of financial instruments from contemporary art relies on dematerialisation, but, unlike the dematerialisation of the 1960s, where the rise of conceptual and performance art was a strategy to decouple art processes from the market, this form of financial dematerialisation specifically aims to make arts circulation in the market more frictionless and fluid. Instead of taking the work out of economic circulation by undermining its commodity status it makes it streamlined for a market regardless of its position in time and place. In that vein, it’s tempting to think about the ontological implications of cryptographic encryption and tokenisation in the trend of mechanical and digital reproduction. Where Benjamin argued that mechanical reproduction damaged the aura of the artwork because its unique position in time and place cannot be reproduced, and others have pointed to the tendencies of digital reproduction to further this trend, as a technology that reintroduces the notion of scarcity, uniqueness and originality into the digital , that, in other words, allows a specific coupling of token to THE one and only ORIGINAL, the cryptographic token invites a new relationship to the auratic. The consensus mechanism that allows for this coupling of object to token was initially developed as a cryptographic protocol to limit email spam (putting a nominal cost on the free reproducibility of digital objects) and later to counter the double spend problem in digital currencies. Now it’s being used to couple original works of art to original digital identifiers or tokens. A work of art cannot be coupled to more than one token, although theoretically the work could be broken down into different shares. In this sense, the encryption and tokenisation of art on the blockchain reintroduces the notion of the aura, but because the work is immaterial, deferred and further/doubly ‘encrypted’ (in the sense that it’s housed in a vast crypt-like vault where nobody has access to it anymore and where it merely functions as a financial instrument), this aura is reincorporated as an intangible asset, as an externality, or as a derivative.
These are just a few ideas I’m trying to tease out…
some influential work (links to follow):
Keller Easterling on Freeports
Hito Steyerl on duty free art
Stefan Heidenreich on Freeportism
Max Haiven on Art, Money and financialisation
The work of Furtherfield, such as the edited collection Artists: Rethinking the blockchain and the Institute of Network Cultures' Moneylab Readers
January 13th 2018
A Token called ART
Last February, I interviewed Max Haiven about his upcoming book, Art after Money, Money after Art: Creative Strategies against Financialization (Pluto Press, forthcoming, 2018). Going against the idea that artistic practices are somehow separate from economic practices, Max explores the ways in which art and money have been intertwined since the dawn of capitalism. Unlike some other critics, he doesn’t have any faith that art can challenge or defeat the financial system. What Max does believe is that, in exploring the ways artists work through and engage with categories such as money, cash, financial systems and debt, we sometimes get a ‘glimpse’ of ways of resisting that system. The first question I asked Max was why he thought artists were so fascinated with money in the first place. He had two suggestions: first that artists are fascinated with money because they usually have so little of it themselves, and second, that money and art are connected in a specific way – both operate on our collective imaginations, but more often it’s money that succeeds in firing our creativity and aspirations, where art sometimes fails.
In the current realm of Bitcoin Ponzi schemes and increasingly speculative ICO tokens, it’s perhaps not surprising that artists are so interested in the blockchain, the underlying database that supports bitcoin transactions, and now supports the dreams of a FinTech industry determined to create self-executing legal contracts from everything from property sales to marriage, to trace the provenance of fine diamonds and yellow fin tuna and create transparent voting systems. The blockchain is technical enough to be very boring and banal on the one hand, an example of what Matthew Fuller and Andrew Goffey have termed ‘evil media’ to describe the systems, algorithms and data structures that make things work well in the background, while also being vague and fantastical enough to facilitate a whole range of wild imaginaries: a blockchain for sexual consent! A blockchain for adorable virtual cats! A blockchain to chronicle the lives of thanksgiving turkeys! And so on.
Art is a financial asset.
I think artists are really interested in the blockchain because it’s a technology that chimes with the broader financialisation of art. As Max Haiven is quick to point out, art and finance have always been in bed together. We’re seeing an extreme example of this at present. Alongside its annual report on ‘Art and Finance’, a document that charts investment in art and market sentiment, the consultancy Deloitte also published a document entitled ‘Why should Art be Considered an Asset Class?’, which argues that art buying should be treated less as an expensive hobby and more as a shrewd investment, as a store of value and as potential security for future loans. In the past fifteen years or so there’s been a significant increase in what are called ‘High Net Worth Individuals’ (or HNWIs) looking to invest their capital in what Deloitte are calling ‘passion assets’ such as cars, fine wine and fine art. Often the future market value of these goods is divorced from any pleasure or use on the part of the buyer. In fact, artworks bought for investment are often housed in special extra-legal or tax-free spaces known as freeports where they don’t incur duty fees. Because of the fiscal legacy of the freeport, as spaces where goods were stored while being shipped from one place to the next, the works in question are technically ‘in transit’ from one place to another, even if they are going nowhere anytime soon. Here the freeport is a kind of ‘bank’ for art investments and the works in question are just assets, often staying in their high security vaults indefinitely or even changing owners without changing location. I visited one such freeport in Switzerland on a recent visit and wandered the barbed wire fences lined with container ships and warnings of surveillance and dangerous ‘chiens’. It’s hard to imagine that such a nondescript space in the suburbs of Geneva allegedly houses more works of valuable art than the museum of modern art in New York. There’s an estimated 1.2 million artworks in the Geneva freeport, with some 1,000 Picassos, and many of them haven’t left the space for decades.
Alongside the growth of art as an asset class, companies are looking to use the blockchain to monetise art in new ways. In 2014, Kevin McCoy set up Monegraph (Monetised Graphics). From its inception the project was couched as a sort of speculative or critical design innovation, but it was also a working business with numerous technical patents. Described by one critic as bringing meatspace scarcity to digital art, Monegraph uses the bitcoin blockchain to allow artists to assign a unique cryptographic hash to otherwise reproducible images and digital files and store this record on a blockchain. Unlike a lot of digital art that challenges the cultural economy through abundance and anti-scarcity (see for example works from The F.a.t Lab or Hacking Monopolism Trilogy) this is about transferring business models from the traditional art market to a digital space, creating a way of objectifying and monetising freely reproducible files. Monegraph was just one company experimenting in this fashion. Another company, Ascribe, who have now moved into blockchain platforms and protocols, initially wanted to build ‘an ownership layer’ for digital goods on the blockchain.
Things got even stranger when start-ups emerged who wanted to use the blockchain to transform physical art markets. This included using blockchains to record the provenance and authenticity of works of art, but also to sell artworks more easily, to crowdfund their purchase and to refinance works for loans. A new company called Maecenas are currently attempting to use the blockchain to record physical works of art and associate these artworks (or parts of these artworks) with cryptographic tokens that can be traded and redeemed through their platform. The company also released an ICO token called ART, currently worth $0.543936. The purpose is to create a system where shares in works of art can be traded in a market as cryptographic tokens and where investors can buy shares in particular works or use their artworks as collateral or security when financing loans. Targeting the illustrious HNWIs, Maecenas is currently trying to develop partnerships with freeports in Geneva to house works that will be listed on their blockchain.
If companies are taking art and turning it into a token, we’re also seeing tokens sold and exhibited as artworks. Distributed Gallery, a space that describes itself as a gallery dedicated to blockchain art, recently developed an art piece called ‘Readymade Token by Richard Prince’ (Olivier Sarrouy, a sociologist involved in the piece, is interviewed in this issue). Prince is an artist notorious for appropriating digital images from Instagram and selling them as gallery photographs, so this segue into speculative tokens didn’t seem out of character. The work initially went on sale for 1 Ether (approximately $650). The plot thickened, however, when it became clear, through a twitter conversation, that Prince had no knowledge of the work, or indeed, of the blockchain. The work was revealed to be a conceptual experiment on the shifting nature of the readymade and the artist’s public signature in the age of cryptography.
Even more recently a number of art fairs and galleries have focused on artworks that are native to the blockchain. Take, for example, the strange world of ‘cryptokitties’ - gorgeous, unique, infinitely collectible kitty animations representing ERC20 tokens. Ironically these cute virtual creatures have more market stability than many ICOs and their value has, as one commentator put it, “risen (and fallen) faster than just about everything in the analogue art world.” Why are these so marketable? It’s partly because, almost for the first time, they’ve succeeded in creating artificial scarcity around something digital, but also because the works of art are extremely tradable; kitties make cute digital pets but they also make good (if not exactly shrewd) investments.
At the recent Ethereal Summit in Queens, artist Kevin Abosch exhibited the ‘Forever Rose’, an ERC20 token called ROSE on the Ethereum blockchain that derives from Abosch’s photograph of a rose. “It doesn’t exist in a physical sense.” Abosch explains, “it is the result of using blockchain technology to create a virtual proxy of the photographic work.” Unlike Monegraph and Maecenas, then, which link works of art that exist in the digital or physical sense, the ethereal ‘Forever Rose’ doesn’t have a physical presence, or even a virtual presence, just a monetary one. The artist suggests that this work, as well as a similar project Potato #345, pose crucial questions concerning the relationship between objecthood, scarcity and value. In reality, many of these art tokens seem less concerned with the metaphysical properties of the blockchain or with probing the boundaries of the readymade, but with finding new ways of financialising art and turning it into the ultimate tradable, fungible luxury asset. In other respects, it’s often a marketing stunt, hedging and trading on the popularity of the blockchain concept.
On the flipside, the wild speculation of blockchain and the financial system look more and more like performance art. A recent Ethereum project PonzICO comes with a satirical whitepaper that includes a section for what the author will do with his purloined Ether “exchange 70% of his ETH into a cryptocurrency with a monetary policy that doesn’t scare the living shit out of him.” As Matt Levine argues:
"The great art project of our age is to entirely collapse the distinctions between 'fraud' and 'performance art,' so that one day mortgage-bond traders will be able to say, 'Wait, no, I wasn't lying about bond prices to increase my bonus, I was performing a metafictional narrative about bond-price negotiations in order to problematize the underlying foundations of bond trading in late capitalism.”
We’re left wondering what’s really interesting here or if the blockchain, and by extension, ‘blockchain art’, is just one long conceptual exercise into the performativity of markets. And yet, while Sarrouy acknowledges that ‘Readymade Token by Richard Prince’ was a provocation into the relationship between art markets and authenticity, he’s not particularly interested in the ‘art as token’ concept. Like Sarah Friend Sarrouy feels that the conceptual possibilities of the blockchain lie, not in its financial capacities, but in the opportunities it presents for alternative forms of social organisation. These artists are hopeful that the blockchain might become a framework to experiment with alternative forms of rule making and social interaction – as relational rather than financial art. Friend mentions that she is inspired by the radical possibilities of Circle, a universal basic income blockchain project that calls itself art to avoid legal scrutiny. Even if the majority of works fully identify with the financial system, these experiments might also, as Max Haiven suggests, provide an occasional glimpse into what alternative monetary and market organisation could look like.
Type your paragraph here.
Interview with Sarah Friend
Sarah Friend (isthisanart_) is a software engineer working at a large blockchain development studio on tools for financial transparency/accounting. When not doing that, she creates games and other interactive experiences. She has recently exhibited at Ethereal Summit, New York and presented at NorthSec, Montreal and Transmediale, Berlin.
What drew you to the blockchain initially?
Well, before I was a developer and before Bitcoin even existed, I was an activist who protested finance. Specifically, I was involved with the Occupy movement. So when I first heard of Bitcoin, I had this moment of profound recognition. Like, maybe this is a way out of the deadlock between protest and power.
Later, with the development of smart contracts and more complex blockchain applications I began thinking of the blockchain as offering even more, maybe a possibility for entirely new governance structures. I’d say the first project that really sparked my imagination was Bitnation, a project that was founded in 2014 on the Ethereum network. It’s basically the audacious - and totally sincere - attempt to create a decentralized voluntary nation using the blockchain.
I actually got to interview Suzanne, the founder of Bitnation, for an article that never got published in Dazed. You might say that article was my foundational blockchain project. I ended it with the sentence "Dreams die by becoming real," which I still think is a good mantra to keep in mind when confronting utopianism.
You’re both a blockchain developer and a practicing artist who works with the blockchain. How do you separate out your identity in these spaces? Is it difficult?
It can be very difficult to reconcile. In the context of a socially critical artist practice, I often end up at this question of whether we can develop work that is outside of or critical to capitalism or the financial system in a capitalist space. Or even within a capitalist economy. I’m not really sure what the answer is.
I try to keep my artistic practice as separate as possible from the kind of development work that I am paid for. You might say I maintain a separation between church and state - and let’s leave deciding which is which as an exercise to the reader.
I do sometimes find myself doubting whether this separation serves me (or anyone), or whether it’s just an overcommitment to a vision of ideological purity that doesn’t really exist anyway. But there are definitely moments when I have to be mindful of the IP and confidentiality relationships I have with my company.
I think the tension you’re pointing to is quite interesting, because it seems to be a feature of a lot of the work I’ve encountered during my research. Rather than blockchain art being a salient critique or something that’s happening ‘apart from’ or ‘outside of’ a financial space, the artists have become speculators who completely identify with the language and ethos of the financial system, even to the extent that they speak about their use of the blockchain as a kind of hedging in the face of future art markets. And I don’t know if that’s a very deliberate, philosophical position, or if it’s completely unconscious.
I’d have to agree. A lot projects we’re seeing are just a one-to-one relationship, art as another kind of token or financial instrument, and that’s not all that interesting for me. I’m more interested in work that’s taking place outside of that space - moving art from being a “thing” that is ownable to being situated instead in the relationships that blockchain allows. Art that is a series of cryptoeconomic mechanisms, for example. And I’d trace a lineage here less from, like, collectible paintings, and more to social practice work or conceptualism.
For example, my friend Marie Claire LeBlanc Flanagan is doing a really interesting project called Common that will be part of Cafka in Waterloo very soon. It’s a game that’s inspired by the blockchain, though not yet actually “on” a blockchain. In the game, a community of players builds and sustains a network with small interactions, like cell phone minigames, over time. In the blockchain world, we use the word “trust” a lot and we only ever mean one thing by it - the same cosmological diagram of the individual trusting the system. But Marie is envisioning how we could re-draw the diagram; for example, she’s created a mechanism where users can log in and play as each other, so you are metaphorically sharing each other’s private keys and negotiating those permissions in the game space.
My project ClickMine, that was commissioned by Furtherfield gallery in London, is an attempt to negotiate a different aspect that. It’s a clicking game (or incremental game). For those who maybe aren’t familiar, clicking games are games where ‘playing’ basically consists of doing some small repetitive action over and over, like clicking a screen repeatedly to earn points or currency. Examples are Cookie Clicker and Cow Clicker, where you earn in-game points from clicking on cookies and cows. ClickMine does something similar on a blockchain, so not only is a player clicking, they’re sending transactions to the Ethereum blockchain and minting new ClickMineTokens.
When I was writing ClickMine, I was thinking a lot about the implicit social contract of tokens - that they have value or could have value, that their creation or destruction could be meaningful, that their creator isn’t an absurdist troll, etc - and thinking about ways those assumptions could be flipped. ClickMineTokens are probably not art and certainly not valuable. Instead Clickmine is a series of mechanisms that ask what can we reveal about tokens, by making tokens that don’t behave “properly”?
A third project that springs to mind that both is and isn’t ‘art’ is a Universal Basic Income project called ‘Circles’ that will be run on a blockchain. The project refers to itself as an art project in their documents and I love that. The team is planning an upcoming pilot in Berlin. The idea is that everyone has their own personal cryptocurrency that’s minted at some fixed rate, and it layers a web of trust on top. So when I choose to accept your currency, I’m basically trusting that you’re a real person and not a sybil account or minter of multiple currencies. The idea is that, though these currencies start off valueless, as more people accept one another and the density of trust graph grows, they can take on value and, at least in a local context, behave like a unified monetary system.
It sounds like you’re particularly interested in the game aspect, and potentially in games as ways of testing out new modes of organisation and trust.
Yes I definitely feel that. Games create situations for people to react in and allow behaviors to emerge.
I think that games are appealing if you are interested in alternative forms of governance, alternative economic orders and systems, how we might arrange society very differently from our own. The nice feature of games is that you can experiment with those things in a comparatively safe way.
I think that actually shaping a blockchain-based governance system that we meaningfully expect some large body of people to use, at the moment, would be incredibly dangerous. But shaping an in-game governance system for a small or even large amount of players isn’t dangerous in the same way. That's definitely part of the interest for me.
Do you have any projects that you're currently working on within that game space?
I'm not sure it's actually a game, and it probably won't be fun (They're never fun). But I want to collect a bunch of screenshots of social networks and feed them through a Generative Adversarial Network. This will generate images based off sample training data. And then I would like to actually build the social network, inspired by the components of what it makes. I think it's very debatable whether such an interface could be considered a game. But at the same time, what is a game at all? Is a game a system with quantifiable success metrics that we interact with over time? Because if so, Facebook is certainly a game. And I mean, there are all kinds of things that we can think of as games that we aren't necessarily used to thinking of that way.
Another project I’m stewing on — and this one is inspired by my conversations with Marie as well — is a token, probably a non-fungible token, but one that will be destroyed if you don't give it away. You’ll have to trade it every several days or it will disappear.
A bit like demurrage (a proposal to institute a cost associated with hoarding a currency rather than circulating it). It seems like, from some of the projects that you're describing that you're interested in not just blockchain, but also in money as a social technology.
Definitely, yeah. I think that's like the promise of blockchain really - that we could use it to change our financial system - that it provides a site to imagine alternatives. And to be honest, I think that one of the biggest dangers or risks for the blockchain industry right now is that we'll do none of that. That we may just recreate the current system, which is, sure, working for some, but definitely not for others.
You mentioned at the start of the interview that Bitcoin really appealed to you coming from engagement with Occupy and a critique of the mainstream financial system. Given how much has happened over the last five years, has your feelings about blockchain as a mechanism for potential social good changed a lot?
Yeah. I think many of us who joined with some type of utopian fervour have had to confront a lot of things about this industry, among them that, though certainly some people are wealthy now who would not have been had this technology never been invented, we have not meaningfully redistributed wealth. The blockchain world has as much income disparity, or more, depending on which stats you look at, as the traditional financial system. And one has to confront that.
I think that what it means to write immutable code that will self-execute is something very few people understood at first. By now we've seen some of the things that can go wrong. Blockchains are immutable and also public, so whatever we put on them is recorded forever. I think there's a risk there that I would have mentioned a couple years ago, but I would now approach even more cautiously, which is that it could be a very powerful tool for totalitarianism. Most of history’s listmakers are not innocent.
So we have this uneasy relationship where a lot of the people who got involved in blockchain early are actual anarchists, but they are working with a technology that could serve the exact opposite inclination just as well. Maybe there are such contradictions in every technology
I don't know what it means to make emancipatory technology. I'm not sure if there's such a thing and that one can make it, and I'm certainly not sure that someone can make it by setting out to.
When I heard you speak at Money Lab, I was fascinated by how you're so integrated as a practitioner. I’m not a developer; In fact, I constantly have to keep going back to check various technical details in relation to bitcoin, blockchain and smart contracts. I’m tempted to do some tutorials to see if it will further my understanding. Do you think that in order to be critical or to be really active in that space, you also need to be a developer, or do you feel it's something that people can comment on without actually being fully integrated within that space?. On one hand, it seems to me that it would be really important to have that practical engagement and experience. And yet, chatting with you about your experiences and chatting to other researchers like Quinn DuPont, there's also an ethical conundrum that sometimes gets thrown up, because it can be quite difficult to be impartial when you are working closely with companies or startups.
Regarding whether you need to be a developer, I'm going to go with no. Not because it's not helpful. But I'm not a coding or programming purist. I don't think that it's necessary to literally write code in order to have an opinion or to make a critique. I do think there is a phenomenon of pop blockchain criticism that doesn't really go deep enough. We've made a lot of headlines lately as an industry and people do things like raffle off Aston Martins during Blockchain Week. It’s cartoonish and we're an easy target. I completely understand that. And in many situations, I'll be the first person to criticize the industry. But I do think that when those criticisms are not actually right, like the core facts that underpin the arguments are wrong or misconstrued, it can be very frustrating. That said, I don't think that's the phenomenon you're describing. And I don't think programming itself is what is specifically necessary to avoid falling into that trap.
As for an ethical conundrum, I definitely experience that. Like, I work in the biggest company in the space, I think. And I am under a contract that means that in some circumstances, I have to get legal exception that the company doesn't own side projects. I did that with ClickMine and may with future work too.
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