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“When I was a congressional aide, we had an expression, ‘No idea was too stupid to say out loud,’ so here it is, hear me out. Instead of buying these ships? Don’t buy these ships. Buy other ships. Better ships. That’s my idea.”
Like me, you may be following the NFT craze with interest, some puzzlement, and a bit of skepticism. Are NFTs here to stay, or are they a fad, like the Dutch tulip mania of the 1630s, or the mid-nineteenth century “hen fever,” fated to peak and crash over the course of a few years? Do NFTs afford museums a legitimate opportunity to turn a profit, even if only while the fad lasts, or a long-term way to expand their mission-related outreach? Do the risks (environmental, financial, reputational) outweigh the potential advantages?
The more I think about these questions, the more I wonder if the current debate about NFTs is missing a major point. The strengths and weaknesses of these digital assets are tied directly to blockchain. Blockchain, and the cryptocurrency world it supports, is a gigantic experiment in generating wealth based on finding new ways to exploit existing infrastructure. Skeptics might well tag it as a classic example of the “tragedy of the commons,” in which individuals or companies exploit a shared resource (in this case the internet, and national and state power generation and distribution grids), while offloading the costs (environmental impact, energy scarcity) on society. And this window of entrepreneurial profitability may close when legislation catches up with the technology. However, for the moment cryptocurrency speculation is a de facto digital gold rush in which fortunes are being made while many, many other people lose out. One facet of the blockchain rush is the demand for digital assets as collectible and tradable items. Perhaps museums can meet that demand in ways that are actually better than blockchain using traditional infrastructure.
(For a primer on blockchain, revisit this chapter from TrendsWatch 2019.)
So, here’s today’s provocation for museums. Instead of minting NFTs? Don’t mint NFTs. Create other digital assets. Better assets. That’s my idea. Hear me out.
In the episode of the TV series The West Wing I quoted above, an oil company hires the (fictional) prestigious law firm Gage Whitney Pace to structure the purchase of some old oil tankers while protecting the company from any potential liability. As Sam Seaborn—the young, idealistic attorney assigned to the case—notes, the company needs that protection because the ships are “twenty-year-old single-hulled VLCCs that nobody wants. When they hit things, they will break. And they will hit things, because they don’t have state-of-the-art navigation systems. They don’t have G3 tank gauging, or EM-5000 engine monitoring, the recommended staletronic, or electopneumotronic ballast.” Sam proposes that instead of evading liability, the company simply “buy better ships.” Instead of buying a flawed asset, and paying the costs of cleanup and reputational damage control, buy something better-designed.
Many NFTs are the digital equivalent of aging oil tankers. In time they will break, because most don’t have the protections that would help ensure they are stable in the long term. Jason Bailey (@artnome on Twitter) recently published a compelling, data-based post explaining why more than half of all NFTs are likely to break (i.e., disappear) in the next five years. And as I’ve written about on this blog, even when designed correctly, NFTs consume wads of energy that could be devoted to essential needs, at a time when people are increasingly aware that we need to carefully ration our energy use to combat climate change. As Sam said in making the business case for buying better ships, “there’s a broader liability to think about. People drove past Exxon stations after the Valdez [oil spill].”
Bailey offers advice on how collectors can select and maintain NFTs for stability. (Which I highly recommend you read.) But even the best NFTs, managed with the best state-of-the art practices, inherit the growing skepticism about blockchain itself, including challenges to the underlying premises that:
Can museums achieve these goals through creating, marketing, and managing digital assets that don’t live on the blockchain? My proposal is that yes, they can, for the following reasons:
“NFT” stands for non-fungible token. Tokens are digital items tracked and traded on a blockchain. Cryptocurrencies consist of fungible tokens—just like dollar bills, every Bitcoin is equivalent to any other Bitcoin. While one could create an unlimited number of identical copies of a digital collectible (whether that’s a work of art, a digital image of an historic document, or a scan of a scientific specimen), their monetary value lies in their intentionally engineered scarcity. NFTs are valuable because they are created as limited editions that are recorded, tracked, and traded on the blockchain, which serves as a convenient digital platform to record sales, transfer the link to the asset, and process payments in the form of cryptocurrency.
But digital collectibles don’t have to be NFTs. Museums can and do create and sell digital assets independent of the blockchain while, as argued above, meeting or exceeding most of the benefits afforded by NFTs. A 2021 study of NFT buyers found that potential buyers were split equally between collectors (having no expectation of selling it later at a higher value) and investors (expecting to sell the asset for a profit). Collectors might be the best fit for museums’ audience and mission, and for collectors, museums can provide better assurance of stability and authenticity than NFT marketplaces. And collectors, with no expectation of profit, presumably don’t base their purchasing decision on the future ability to use the blockchain as a platform for resale.
If museums want to take advantage of the hype around NFTs to court new audiences, they might focus on redirecting prospective collectors to trusted, stable, museum-certified digital collectibles. To use the current fad as a point of entry, they might brand these assets as “non-blockchain NFTs.” (Ok, that’s an oxymoron, but…marketing, right?)
Just before he quits, Sam defends his proposal to his boss, saying, “Maybe they want to buy safer boats, but we never gave them the option.” Maybe collectors want to buy better digital collectibles. Museums can give them the option. And, (final Sam quote), “Maybe they’re really going to thank us for this suggestion.”
I have not yet addressed one aspect of NFTs that I find intriguing: by embedding “smart contracts” on the blockchain, artists can ensure that a portion of every resale is automatically transferred to their crypto-wallet. This practice could theoretically help redress some of the structural inequities in the art market that result in the majority of profits going to dealers and collectors, rather than creators. I’m still thinking about how museums might replicate that function, without creating an unrealistic burden for tracking and enforcement. Please let me know if you have thoughts…
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