NFT and the definition of art
The author poses the simple discussion of whether NFTs are technically “collectibles” or are really art.
“Non-fungible tokens,” more commonly referred to as NFTs, have gained attention as this market cycle’s equivalent to the initial coin offering. They dominate the spirit of “standards” in space. While Bitcoiners don’t like to talk about it, they are undeniably a big part of market dynamics this cycle, and personally I don’t think they’re going away anytime soon, if ever. There are a lot of things I want to unpack as to why I think this is the case. The first question to ask in this sense is: what is art?
The philosophy of art
This question immediately raises a host of other questions. Almost anything can be art these days. You only have to look up to Mark Rothko to see it. His pieces are literally just colors and shapes. His work is widely praised and sells for massive amounts of money. Where is the line between what is and what is not art? For one person a Rothko is a masterpiece they would pay to own, for other people (like me) it is just colors applied to a medium that a child could recreate. I wouldn’t pay a penny for a penny.
So where is the line between what makes something art and what not? There are not any. It is a completely subjective line which is different depending on the eye of the beholder. There is no “line” in the objective sense from the point of view of definition. With that in mind, let’s consider my point of view, which is really all I can talk about in such a context. Art is something that moves me. Whether it’s emotionally, or intellectually, or whatever, it’s something that evokes a spontaneous visceral reaction on my part – the statue of David, for example. Every time I see a marble statue of such precision and scale, it amazes me. It makes me think about the skill, the patience, the time it took to create something so realistic and precise in detail; or to put it another way, imagine the “proof of work” required to produce such a thing. Just contemplate the skills required and the time it took to hone them, such as knowing how to shatter a block of marble so accurately that the human form can be replicated from what is left. You need to know exactly how to break the marble so that you leave the basic space of these shapes intact, and then refine all the details. A single chipped block too far ruins that potential, and the way to make those decisions is different for each piece of marble. Thinking about all of this evokes a feeling of real dread in me, considering the person who has learned not only the theory behind these things, but how to put them into practice to such a precise degree. A colored line on a white background does not evoke such fear in me. I could do it myself in a minute.
In discussing my attitude to art in the context of TVN, I have never seen a TVN that I consider to be “art”. Not a single NFT I have ever seen, even Rarepepe’s, has moved me more than making me laugh or laugh quickly. If I had to categorize NFTs, I would call them collectibles. To me, they are not art in any sense of the word as I see it or define it. Think more of a Pokémon card than of the Mona Lisa. Your favorite Pokémon doesn’t evoke a deep sense of near-spiritual awe when you look at them on a map, but there’s always an emotional reaction to owning it at a lower level. I would compare it to an obsession with owning something. When people collect Pokemon cards, baseball cards, coins or whatever it is in my opinion it boils down to an obsession / compulsion to own more and more said stuff. I think it’s a lot closer to the roots of what NFTs really are than trying to compare them to art in the classic sense.
Market dynamics and money laundering
The global art market in 2020 was valued at nearly $ 50 billion collectively with $ 31.4 million in artistic transactions completed that year. It’s a huge market. Most transactions involving works of art take place very privately, with minimal paperwork or records, and in some cases completely anonymously. Historically, this is a very lightly regulated market. It has also led to the abuse of art galleries and auctions to launder money acquired through illegal activities, i.e. money laundering (although its extent by compared to the total market is contested).
A major aspect of facilitating such activities is what is called a “free port”. These are specially zoned warehouses, usually located inside or next to airports, which, for tax purposes, are considered outside the borders of the host country, regardless of their geographical location within these. This allows art owners and sellers to store valuable works of art in a tax shelter and defer customs taxes to the point of taking the art out of the free port. It is quite common that one takes the opportunity to perpetually defer these customs fees by simply never removing the art from the free port, because it can be shipped from free port to free port internationally after sale without ever “going through customs. “for tax purposes.
Two examples of documented bleaching on two extremes of the spectrum come to mind. The first concerns Brazilian banker Edemar Cid Ferreira, who was convicted of money laundering and other offenses in 2006. He fled Brazil and smuggled Jean-Michel Basquiat’s painting “Hannibal” to the United States. United States, with fraudulent customs documents claiming the value of the item shipped was only $ 100. It was valued, however, at $ 8 million. The painting was recovered by US authorities and Ferreira was reprimanded in custody in Brazil, but his intention was clearly to take advantage of the unregulated nature of the art market to sell the painting to finance his living expenses after having fled Brazil.
Another example of the more extreme side of things would be the documented cases of ISIS (the Islamic State of Iraq and Syria) acquiring ancient works of art from the region and smuggling them into the Western world for finance their operations. The Gilgamesh Dream tablet purchased by the president of Hobby Lobby for display at the Bible Museum in Washington, DC is an example of a potentially ISIS work of art. This tablet is (as of September 22, 2021) in the removal process to Iraq after being seized by Immigration and Customs Enforcement (ICE).
However, the severity of money laundering in the art market as said above is a much debated issue, but it is undeniable that such things happen regularly regardless of the scale in relation to the global market. For this reason, a slow wave of governments around the world have started to introduce the sale and transfer of works of art into the anti-money laundering regulatory regimes that many other financial markets are forced to comply with. . The first example I know of is a bill passed in Mexico in 2012 to combat alleged money laundering by drug cartels. The bill brought art, along with other markets such as casinos, jewelry stores, and pawn shops, under anti-money laundering regulations in Mexico. Most of the art galleries operating inside auction houses as a result of this have seen an average drop of almost 30% in their sales. Regardless of what this was due to the fact that cartels could no longer use art auctions to launder money versus genuine buyers reluctant to comply with breaches of their privacy, the bill had a substantial effect on the market.
Similar bills have recently been passed in the EU and the US. In 2018, the EU incorporated art dealers into their anti-money laundering regulations under the Fifth Anti-Money Laundering Directive, and in January 2021, the United States did the same with the Anti-Money Laundering Act. of 2020. The US Congress has given itself until 2021. to clarify who qualifies as an “antique dealer” as defined in the bill that will come under the regulatory authority. So what’s the takeaway here? Money laundering occurs in art markets regardless of the scale debated. To apply deductive logic, the same thing probably happens in NFT space. This does not preclude a genuine request for things from real people just for the purpose of appreciating “the art”, but it should not be ignored either. Governments are clearly recognizing this, as evidenced by the rampant regulation of art markets over the past five to ten years, just as the same regulatory drift is starting to occur across bitcoin and the wider ecosystem.
Curve of emotional value versus economic value
Getting back to the philosophical side of things, I have one final point to try to make by trying to really contemplate what’s going on in the NFT space. When discussing the value of art, I think it’s important to separate the emotional / intellectual value from the economic value. To illustrate why, let’s take three examples.
Consider Beethoven’s music: it’s completely in the public domain, in and of itself, it has no economic value (ignoring things like live performances, selling recordings, etc., that anyone can do and usually goes for nothing) but it still maintains a deep social and cultural value hundreds of years after its creation. Now think about Metallica. They are a well-loved and known group, and their art still has substantial economic value to them. It’s nowhere near as deep-rooted as Beethoven, but it’s undeniably a culturally and emotionally valuable value. Finally, think of an artist you’ve never heard of, who never became popular, or who never created touching art for anyone, whose art is worthless and in a landfill. somewhere.
Art can retain a deep emotional value that lasts for generations, regardless of any economic value it may hold. In my opinion, collectibles are different because the connection between the obsession with collecting and the economic value of collectibles is more closely tied than with art like music. This is something that should be taken into account when thinking about NFTs. How many people in the market see them as art versus collectibles?
This is a guest article by Shinobi. The opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.