Trends, challenges, and predictions for the blockchain industry The year 2020 made waves in the world of blockchain and digital currencies. While Bitcoin took phenomenal leaps in price, blockchain kept economies moving by facilitating cash-flow management (World Economic Forum). According to [...]
Cryptoart has intriguing potential, but not without cost.
Cryptoart is an exciting development in the digital art space. It promises to bring rarity and value to digital art that could previously only be achieved by creating traditional art. Digital artists making tens of millions of dollars for their art is unheard of, yet stories like these are quickly becoming commonplace. Sites like SuperRare are one of many new locations where artists are making thousands per piece with the help of Ether, a cryptocurrency similar to Bitcoin.
To better understand how all this works we need to understand Ethereum, the blockchain that Ether runs on. In essence, blockchain is a system that records information. It is a digital record book of transactions that is stored and updated across a network of computers, creating a decentralized database. Miners work to verify ‘blocks’ of transactions – whenever a new block is mined, a chunk of transactions are added to the ‘chain,’ and the new data is updated across the entire blockchain network of computers in that digital record book. This ensures that no one can tamper with the blockchain, assuring authenticity, safety, and trust.
This technology makes it possible to introduce a new model of owning and selling artwork globally, and by creating an indelible record of authenticity and ownership, legitimizes digital artwork. It’s what has allowed artists like Beeple to sell works for upwards of US$6 million, and for many other artists to earn thousands from selling art to audiences across the globe.
Unlike Bitcoin, which was designed to act as a currency, Ether hold its value a little differently. Its blockchain, known as Etherum, is better suited to facilitating immutable smart contracts. Ether itself is the corresponding currency that is meant to be used to facilitate smart contracts. This has made Ethereum ideal for the creation of Non-Fungible Tokens (NFTs), digital tokens which each have a unique value. Apart from digital art, NFTs also come in the form of collectibles, video game assets, and even virtual furniture.
The explosion in interest in NFTs begs the question of why it is necessary to sell or auction a piece of digital art in the first place. Digital art already exists, and continues to be sold through traditional transactions. The answer lies in the authenticity that blockchain offers.
Similar to an artist signing a limited-edition canvas painting and auctioning it off, digital authenticity acts as a signature guaranteeing the value of a piece. Websites that host NFT transactions, like SuperRare and MakersPlace, are allowing artists to buy, sell, and even trade their artworks, while retaining a record of ownership that cannot be changed.
SuperRare even has a system in place which allows artists to earn 10% of any future sales and transactions, thanks to the record-keeping functionality Ethereum offers. Secondary market sales can only be traced like this due to blockchain technology – it offers an unprecedented new stream of income for artists, who can continue to earn income from a piece indefinitely rather than relying solely on its initial sale.
With that in mind, it’s no secret that there is a lot of money floating around the cryptoart space, and many artists are trying to capitalize on this. Tracing the number of transactions using Ethereum, a brief 2018 spike has now been topped by this recent spike of over 1.2 million transactions in a day. While cryptoart may still be in its infancy, the hard technology behind it indicates its potential.
The most interesting part of cryptoart is how it challenges the idea of scarcity often found in fine art. Museums and collections of fine art are almost synonymous with exclusivity, but the promise of NFT art could introduce premium quality into new spaces, making fine art accessible and yet still rare and exclusive.
The environmental cost of NFTs
Unfortunately, there is one significant drawback to this type of digital art that makes it unsustainable in the long-term. The ecological impact of cryptoart is astounding. Similar to Bitcoin mining, the process of verifying the legitimacy of an NFT transaction has a huge energy cost. Ethereum, and its blockchain security system, is estimated to use over 56 kWh of electrical energy per transaction. Every time someone bids, cancels, buys, or trades a piece of artwork it produces the equivalent carbon footprint of over 59,000 Visa transactions.
The reason these numbers are so incredibly high is Ethereum’s Proof-of-Work (POW) verification. The very system that makes Ethereum secure – verifying transactions by programming computers to solve incredibly complex mathematical problems – is also what consumes an enormous amount of energy. Using a reference of 56 kWh per transaction, each one could convert to anywhere from 14 to 30 kg of CO2.
The energy consumption required to verify these transactions is only going to get more and more egregious, as computation becomes increasingly complex. Ethereum developers have made promises to solve many of the sustainability concerns, along with other security and scalability considerations, with the release of Ethereum 2, though these plans have no deadline.
Cryptoart and NFTs are part of an exciting new landscape that offers up the potential to revolutionize digital art. However, in its current form, the ecological impact is far too immense for many artists to join the bandwagon, and has even prompted some NFT creators to abandon their plans due to negative commentary on NFTs’ negative impact. Hopefully once the technology matures over time, there will be a sustainable place for cryptoart in digital spaces.
Header image by Scott Webb on Pexels.