In Token Supremacy, Zachary Small chronicles the meteoric rise and dramatic fall of the NFT market and its associated artists, collectors, and hangers-on. Despite this segment of the art market grossing somewhere in the billions in the span from March 2021 to October 2022, many of you still might not be familiar with NFTs. That’s okay. Some of the people most closely associated with the form don’t entirely understand it either.
NFT stands for “nonfungible token.” An NFT is a piece of digital art or digital cultural detritus the ownership of which can be tracked as an asset. The digital image becomes an NFT when someone mints it on the blockchain—a digital system of recorded transactions maintained across computers linked in a peer-to-peer network. The blockchain is also the most common home of cryptocurrency, which aspires to be a decentralized financial system. That means there is no single form of authority, a role traditionally played by banks.
In short, if you have a work of art that someone turned into an NFT, you have a verifiably unique digital piece. Think of the last meme you saw float by. Now imagine owning the “original” of that meme. That’s more or less the appeal of NFTs. Such a rare work has value to a select number of collectors, and from this value, a new art market has emerged.
But this isn’t your parent’s art market, as Small chronicles. The original art represented in the most famous of these digital mints—cartoonish apes, crypto-punks, squiggly lines—receive much less reverence than the Rembrandts and Moneys of yesteryear. Their value is, by and large, tied more directly to how much you can get for them—whether in Bitcoin or conventional currency—than in anything having to do with the work’s aesthetics. From reading Small’s book, an outsider might get the impression that an NFT worth $100 is virtually always better than one worth $99 and not as good as one worth $101.
Small insightfully ties this focus on dollars to an evolution in the meaning of the word “priceless.” “Masterpieces were supposedly incomparable, and therefore incapable of being judged within the economic terms of the marketplace.” In other words, you couldn’t put a price on it. But tell that to the insurance company you want to cover your Picasso. “Priceless,” in this context, means a certain number, albeit sometimes a very, very high one.
When we start putting price tags on subjective works, that opens the door to anything being considered worth anything. Many if not most NFT collectors don’t seem to think much about the works they collect. “Degens,” short for “degenerates,” as some of the collectors call themselves, see this lack of interest in the actual work not as a bug but a feature of the market. There are no hoity-toity people with their noses in the air talking about what this or that piece supposedly renders—unless of course that discussion adds to the dollar value. In other words, tell me how much it’s worth, and I’ll tell you if I’m interested.
Of course, no one thinks that the traditional art market isn’t dollars-driven. According to Small, “Over the last forty years, the contemporary art market has served as an economic laboratory for the rich to develop a shadow banking system of alternative assets and hedged liquidity.” The NFT market takes this unfortunate quality to a new level. On the whole, Small’s book clarifies that the NFT art buyer cares even less about the art than the conventional one, and that’s saying something.
This quality creates a strained relationship between the collectors and the visual artists who made their fortune during the NFT bubble. The artist Mike Winkelmann seems the most intent on getting past the one-hit wonder aspect of his $69 million dollar haul from the March 2021 sale of his work via NFT. He’d just as soon get on with his career as an artist who people might one day speak of in hushed tones. Small reports that Winkelmann pooled his auction winnings into a 50,000-square-foot art studio in South Carolina. “‘I am focused on legacy now,’ [Winkelmann] said. ‘It’s about the real shit that people will give a fuck about two hundred years from now. Who cares about a stupid auction anymore? I don’t care.’”
Of course, if those NFT auctions were still breaking financial records, Winkelmann might find the capacity to care again. By the summer of 2022, a year and change after Winkelmann had his big night, “the once booming market for nonfungible tokens deflated by nearly 97 percent of its record volume,” according to Small. For Winkelmann and others, it was clearly an easy decision to move on. He was already a millionaire. Why not swing for the same fences as Michelangelo?
More concerning from the NFT crash of 2022 were the number of people who saw much of their financial worth disappear. Small describes the pride the degens exuded in placing so much faith in the market, doing what it took, as they saw it, to establish a new financial system, which eventually drained their accounts. Many don’t want your sympathy. They made their bets and lost, and they’re fine with it. Americans have been trying to make their nut on the next big thing since before the Gold Rush. There will be another opportunity, and I suspect these folks—or folks much like them—will be waiting for it. Next time, feel free to skip the art and go straight to the money.
(Knopf, May 21)