Welcome back to what happens next the podcast that examines some of the biggest challenges facing our world and ask the experts what will happen if we don't change and what can we do to create a better future? I'm dr Susan Karlin, keep listening to find out what happens next. N. F. T. S. Are an interesting use of crypto technology and could enable artists to make a living from their work. But they could also be, well kind of silly. Do they work are they here to stay R. N. F. T. S.
As nifty as they seem? Stay with us over the next two episodes of what happens next As we take a look at N. F. T. S. So firstly and don't laugh at me. Tech heads, what the hell is an N. F. T. Oh boy. How long is this podcast?
This is going to be a challenge. But I'll try. It exists in this world we can't touch and we can't see.
The short answer is it's a non fungible token. Non fungible. Hey, when
it's non fungible it's got an identification number that's unique to that token.
Okay, so N. F. T. Stands for non fungible token. Non fungible means it can't be replaced. But that sounds odd because an N. F. T. Is usually an artwork in the form of a digital file, like a jpeg or video, which can obviously be duplicated copied and shared over and over again. However, and if I'm following this right. What makes an N. F. T. Unique is that every N. F. T. Artwork has its own code. Can someone please just give me a simple definition. Okay it's a it's a digital receipt
a digital receipt a digital receipt. There we go. That was easy attached to a Blockchain which is okay so an N. F. T. Is a unique token that is attached to the Blockchain. You know the Blockchain? It's like a shared database of transactions on the. Okay how about I get art lawyer Alana Kushnir to explain. Well the first question really is what is Blockchain? I think when you're trying to understand what an N. F. T.
Is you have to question what is Blockchain? Blockchain is a type of a technology which is a distributed ledger where transactions are recorded and the idea is they're immutable in that they can never be hacked or change. They can only be built on top of it's written in stone is written in stone. So part of the value of N. F. T. S. Comes with this immune ability that the block chain gives N. F. T. So tokens essentially live on the Blockchain tokens represent the transactions that are recorded on
the Blockchain and some of those are fungible. Some of those are non fungible and fungible tokens are Bitcoin ethereum that your cryptocurrencies and the idea is if I had one Bitcoin and you had one Bitcoin we exchange those, we would end up with the same amount. Whereas a non fungible token is slightly different. So it's kind of like if I bought a Picasso and you bought a Rembrandt and we exchange those paintings, we wouldn't end up with the same thing that we started
off with. So they're non fungible. So the idea is the token is unique and that's also a part of the value of non non fungible tokens lies because they are unique on the Blockchain. We can tell that there's only one of that type. So if I'm an artist, how do I create one of these tokens? How do I make an N. F. T. I need to speak to a digital artist.
Hi I'm john McCormack, a computer artist and computer scientist and I'm the director of Sensei Lab, a creative technologies lab at Monash University's caulfield campus.
Right? I want to create an N. F. T. For this painting that I've created. How do I do that? How do I make an N. F. T. For that?
So usually you do it via one of the many sites that deal in cryptocurrencies and N. F. T. S. So you basically go onto the site, you have to have a digital asset usually associated with your work people have associated with physical paintings or physical objects as well.
Um And then basically you pay what's called a gas fee which is the fee to generate some unique token which is the N. F. T. Itself and you get given the N. F. T. Digitally and then someone can buy that N. F. T. From you and transfer ownership from you to the person who buys that.
Okay, so if I'm an artist I can turn an artwork into an N. F. T. And sell it. However, if I'm buying an N. F. T. What do I actually own?
Hi, My name is Ben Hayward. I'm a senior lecturer in the Department of Business Law and taxation at the Monash business School. And my research work looks at how the law can support international trade in various forms in particular.
So
you don't really own that artwork in the same way that you might own a physical painting. What you worrying is the token and it's linked to some extra right?
You can actually think of it like buying a bottle of water from a vending machine or um you know, buy a cup of coffee when you buy that bottle of water or a coffee. You own that property, you can enjoy it to the exclusion of anybody else. That's the kind of that's the fundamental principle of personal property. It's something that you can possess and you can possess it to the exclusion of anyone else.
So take that in the context of a painting or a sculpture, you buy your painting, you buy a sculpture, you can display in your house, you can loan it to somebody. You know, you could loan it to a museum for an exhibition, you could sell it as well. Um So that's your kind of traditional artwork. Um But you know when it comes to digital artwork it's a little bit different and that's because it's so easy to reproduce. Right?
So you don't necessarily, you know, if I send it to you via email, you know, a digital file, we could both enjoy it at the same time. You could look at the image the digital file and I could look at it on, you know, we could be in complete other sides of the world and we can both enjoy it um as it's meant to be enjoyed. So in that way a digital artwork has some fundamental differences to a painting or a sculpture.
Um And you know if we look at the history of art and especially you know, late modern art and contemporary art, a lot of artists were um driven by this idea of wanting to question this idea of what is an original artwork. What is an authentic artwork? The idea that there's no, you know, in today's world there's no such thing as the one authentic piece. Um You know, think of like performance art for example, that's also intangible.
So you know in some ways I also think digital artworks and FTS not so new artists have really been pushing the boundaries when it comes to what is art and what you buy when you buy an artwork for far longer than N. F. T. S. Have existed. What N. F. T. S. Do though is um you know from a very practical level they do tell us who owns that N. F. T.
Who owns that digital artwork. So that's the that's the basic benefit of minting your digital artwork as an N. F. T. So why are people so excited about N. F. T. S. Here's Ben Hayward.
I think people get excited about anything that's new. People got excited about the Beatles and Elvis when they hit the scene. And I wonder if it's really much different, much different to that. Um I think it's it's a way for us to explore new types of trade and you know in the future this may be something that persists. We might end up using N. F. T. S. For different purposes. It's a bit hard to know at this stage but they give us an opportunity to do something
we've never really done before. And I guess for the purpose of trading art where previously you have a digital file that represents some artwork that's infinitely reproducible meaning its value is basically nothing. Not really a very attractive prospect for trading those kinds of artworks online. And this is a way to maybe deal with that make online artwork unique and allow it to have a tradable value and possibly support artists at the same time.
Do you think N. F. T. S. Are beneficial for artists?
They could be in the sense that I don't know that there was really an effective way to trade digital art before this technology. I guess artists are going to want to make sure that the contracts they have in place around the trade in these N. F. T. S are beneficial to them.
Whether that means retaining the intellectual property rights, making sure they are properly paid for the work they're producing, but I guess, as we've said, if you've got an ordinary file infinitely reproducible, so effectively worth nothing, this situation has some definite advantages over that. Personally. I have a lot of reservations, so I've never really used them.
Here's Director of Sensei Lab, john McCormack
dabbled a little bit, but I didn't really get in when it was, I probably could have probably wouldn't be talking to you now, or you'll be talking to me from my multi million dollar apartment somewhere wherever. Um if I had. But um I'm not sure, I mean, I do appreciate the fact that there were a lot of people who had menial jobs who wanted to be artists who suddenly could could live that that possibility.
I mean, being an artist and earning money to things that normally don't go together, and if you look at, even in Australia, the average income of people who professionally say, the artist is amongst the lowest of any profession, so I certainly don't want to deny people, you know, if a technical mechanism enables somebody to earn a living from something that is creative and gives them enjoy them pleasure and gives other people enjoyment, then I think that's a fantastic thing,
but also, you know, cryptocurrencies ultimately are kind of Ponzi schemes. They're basically they rely on a whole lot of collective herd mentality about the value of something that doesn't really actually have that value.
N. F. T. Proponents might say that it helps protect from fraud and theft, because you've got this untraceable digital receipt that's forever linked to a particular artwork, but that's yeah, that doesn't, to my mind that doesn't hold up to scrutiny at all, josh. Drummond is an artist from new Zealand and a very proud N. F. T cynic.
One of the major problems when I first got big was people would um N. F. T. Fans or grifters or whatever, um would grab someone's jpeg that's floating around on the internet, like like a named artist or someone, someone with the following, they take their work and just sell it, make an N. F. D. Of it and sell someone else's stuff that's that's just that's just stealing and it facilitated tons of this stuff and none of the N. F. T. Marketplace is originally,
and I still don't really think currently had super robust systems in place to protect against this. So they didn't really facilitate um and viability, they actually just made it a lot easier to steal I'm not gonna lie, this is a big problem at the moment, and I'm finding that a lot of artists that I work with are finding copycat N. F. T. S of their works online and they ask the same question, what do I do, what can I do at this
point in time? Most mainstream and FT platforms have set out what we call a D. M. C. A takedown notification process. And that's essentially an american style of requesting that you take down infringing content and you have to follow the strict guidelines that the platform sets out in order to do that. But you know, even myself in practice when I've acted for artists and we've done these takedown notices, it hasn't been that straightforward
even a year ago. I would say, you know, a lot of the mainstream platforms perhaps didn't get as much legal advice as they have at this point in time. And so those processes that are set up weren't that straightforward. They weren't easy for some, you know, for somebody who's not a lawyer to be able to navigate and do, they are getting easier. Um But you know, there's been lots of instances in which artists have tried to get their content taken down. They haven't had the
result that they wanted. Some of them have gone out on social media vented about on social media. And unfortunately unfortunately that's when the platforms have acted unless you can afford or no you've got a friend as a copyright lawyer who can afford to fling out notices all day. And it's a lot of overhead with, even if even if you are wealthy, it's um it's it would be pretty hard to keep up with. So yeah, that's um I think the promise of of you know of eternal
receipt or whatever. I think I really think it's it's kind of overblown. The main interest for me was whether seeing artists could kind of hitch their hitch there, their artwork to this trendy new bandwagon and make a killing off it. And some definitely did like people is the obvious use case who is now richer than God before N. F. T. S were a thing the digital artist known as people, Mike Winkelmann to his friends hadn't
sold a print for anything over $100. However, since he turned some of his work into N. F. T. S, he's made some serious money. How serious. Well one of his N. F. T. S. A collage of his work sold at auction for almost $90 million yep, 90 million.
So for that price, the buyer of people's work gets a digital file and the artist himself as josh Drummond just said, becomes richer than God, But is the artwork any good or is this just a fundamental never ending question we seem to ask every time something new happens in the art world, if
you look at the famous FT works like the people work if you know about this, people was an artist who he was well known but not super well known and he famously auctioned off this work that sold for millions and millions of dollars, huge amounts of money, massive amounts of money, but anyone can have a copy of that work, the same copy that the person who paid all that money has, there's no difference. So I have the full resolution image, is it great art?
It doesn't, not, to me it's not, it's not worth anywhere near the amount of money that was paid for. If you compare it to actual works that you think throughout history of sort of earned a reputation as being significant human works of art. This is not in that league,
in my opinion. Um, so there is this, this tainted aspect that this has, that, I think it's sort of typical of the tech world at the moment when as soon as something, there's a scheme to make money, this sort of human greed takes over and it just seems to be the vehicle that provided that money making mechanism and it was largely peripheral.
I suppose in the end, people will buy whatever art they like, whether it's good or rubbish or, you know, if you look at it as a talented artist and that's a piece of crap, but I might go, but it's lovely, like that's always existed, hasn't it? Like, you know, people,
yeah, you know, I've thought about this quite a line, I wrote an essay recently about it and I think it's more complicated than that. I think a lot of it was to do with because there's money involved and eye watering amounts of money in some cases. I think people lost sight of the fact that it might just have artistic value for its own sake and looked at it more as a kind of investment thing. I think it's also the kind of fear of missing out.
Like if all of your friends are saying I bought an N. F. T. I own this, Look at what I bought for $20,000. You think I've got to get into that too? I don't want to be left out. And so issues of aesthetics or taste or meaning or you know, any of those things that you might traditionally think of as being qualities that you might cause you to like not kind of thrown out the window. You know that's the power of ownership is really important because that's the only thing that really did. They didn't
change the art itself. I mean people were always making digital. I they just had this weird way of saying you own this in some very nebulous, unleash Ghaly, verifiable sense.
That's really interesting. I wonder if it tapped into this part of the human psyche uh you know this very animalistic part of human psyche which is I want the rare thing I want the thing that other people can't have because it makes it valuable and so n. F. T. S. We're putting something that's very rare in the hands of every day. Most of us can't will never be in a position to buy the $5 million.01 of a kind sports car or you know the Picasso.
But N. F. T. S. Were saying actually you you can do this now you can have a thing no one else can have and it will give you the bragging rights and I wonder if there's a very human inclination to want those things.
There's a whole lot of psychology around conspicuous consumption and people you know why why do people have an art collection that they want to show off to show that they have wealth power and status and so on. Um And then there's sort of more probably more fundamental evolutionary biological reasons why you might want to do that to just to just to sort of show the quality of genetically that you've that you've managed to achieve this ability to buy something that no one else can can have.
So I think there was a lot of it was that a lot of it is also that you could own a Porsche if you traded in N. F. T. S at the right time. So if you bought in low and sold hi you could basically take your crypto money that you paid for the N. F. T. Or that you received for it when you sold it on to someone else and turn that into real money and then actually be able to spend that real money on something.
It turns out there are also environmental impacts associated with Professor john McCormack explains
when I first took off and cryptocurrencies became a mainstream thing, there was a lot of discussion about the environmental impact. So you were seeing for example large bit mining of Bitcoin mining factories, I guess you could call them in china for example that were using coal fired power plants to power their their crypto mining that they were doing.
And so there was a reaction against this. It gets more complicated technically because there's two different kinds of crypto mining mechanisms they're called and one of them is far
less environmentally damaging than the other. But the major platforms like ethereum Bitcoin still use the old method which is environmentally quite, you know, I mean also you know there's lots of industries that are environmentally bad in terms of their power consumption but this just seems to be an added thing that's purely largely for human folly and the environmental impacts have been really high and now that when the market drops out it's also not
just the power consumption, it's all the e waste. So people were this big shortage of computer chips partially arose because of this rise in crypto and 50 people were buying hundreds of thousands or hundreds of thousands of Gpus or Cpus putting them in big racks running them with from coal fired power for example and that caused a chip shortage that caused a whole lot of people that might be using these for other perhaps you might argue more
well ethically interesting or ethically valid reasons we're not able to access it because the crypto miners have brought them all up. So I think there is this huge issue with it. It still exists today. The theory have said they're going to change to a more environmentally friendly scheme but they haven't yet.
Um and you know so and I think there was a lot of pressure on artists to to think carefully about the environmental impact of selling their work on N. F. T. S. And so a lot of platforms arose that were supposedly green. I mean any N. F. C. Or any computer system uses power. You can't get around that. So there is an additional cost in terms of the
power consumption and that's largely opaque to the user. Where does the crypto get its power from and who's doing the mining and because it's all distributed it's very difficult to chase all that up. So
has the bubble already burst on?
I think a lot of interest. And again I think this is due to sort of hesitated at the end of the pandemic. But at least a change in the way we're no longer in lockdown. We're no longer galleries are open again. You can go to museums. People are getting out digital works great if you're sitting in front of a computer. But as you said, I mean you can print them out and hanging on the wall if you want to. But most of them I think people might look back and say really I paid that much money for that.
I'm glad I can finally get my head around what an N. F. T. Actually is. R. N. F. T. Is all that bad? Is there potential for artists to get paid and consumers to make a good investment? What does the future look like for N. F. T. S. In our next episode, experts in the field of business and law discuss some of the ways they are helping both artists and consumers navigate the tricky legal world of N. F. T. S. We'll also find out about the world's first self proclaimed
anti TNF T project. Thanks to all our guests. Dr Ben Hayward, Professor john McCormack, Alana Kushnir and josh Drummond for more information about their work, visit our show notes. If you're enjoying what happens next, don't forget to give us a five star rating on Apple podcast or Spotify and share the show with your friends. Thanks for joining us. See you next week