Tag: cryptocurrencies

The Frida Kahlo NFT

Like a Phoenix rising from its ashes, Art is reborn into Eternity.

fridanft.org

In July this year, a Mexican businessman named Martin Mobarak allegedly destroyed a painting by Frida Kahlo in order to liberate it from its physical shackles and unto its “eternal” existence henceforth as an NFT that he is selling for $4,000 apiece. He has said the money will go to charity, but it’s hard to understand how that is relevant considering what has (allegedly) been lost. Art these days is not entirely art: at least a part of its purpose has been subverted by cryptocurrencies into an object for proponents of this technology to con. Also, a fundamental tenet of the NFTs market is that scarcity is always better. Put these things together and you realise Mobarak’s actions were a matter of when, not if. However, the intersection of NFT-centric thinking with the art world has been and continues to be complicated.

In 2021, an artist named Beeple sold a collage of images he’d crafted and pieced together to a cryptocurrency entrepreneur named Metakovan for tokens worth $69 million. Metakovan, and his partner Twobadour, had said at the time that they were democratising art by enabling the cryptocurrency-based public ownership of works of art and by taking advantage of cryptocurrencies’ opportunities to allow non-white, non-western people to acquire high-valued art. It was a poorly conceived proposition in many ways – starting from the fact that the acquisition was a façade for Metakovan to inflate the value of the tokens he owned and going up to the fact that the $69-million moment did everything to uphold the links between art and modern capitalism instead of critiquing them (forget tearing them down).

Fast-forward to Martin Mobarak’s (alleged) destruction of ‘Fantasmones Siniestros’ and the contradictions abound. Contrary to Metakovan’s aspiration to democratise anything, even in principle, Mobarak’s (alleged) action epitomises the private ownership of art – outside history itself, isolated in one’s personal collection and thus – by the premium American logic of private ownership – at the unquestionable mercy of its proprietor, who may even choose to burn it without regard for its thingness as a historical-cultural-political object. In both cases, and the thousands of other instances in which NFT-makers have either championed the cause of paying artists or conceived art of their own, this human endeavour has been far removed from its telos of critiquing capitalist society and has become a commodity per se.

But while this is the long- and well-known effect of capitalism on art, the (alleged) destruction of ‘Fantasmones Siniestros’ also confronts us with a tense three-way contest. On vertex 1: The painting is Kahlo’s and is as such an important part of Mexico’s past, heritage and the aspirations of its people through the ages. On vertex 2: The headlines of most news reports, if not all, make sure to mention that the painting was worth $10 million, in a reminder of its monetary value de facto and the place of art by influential artists as an important bourgeois value-store de jure. And on vertex 3: No matter the legerdemain of businesspeople, NFTs will always and eventually ensure the complete commodification of art, thanks to their foundational premise.

The only thing worth prizing here is that on vertex 1: Kahlo’s work, inasmuch as it captures her spirit and anima and is a reminder of what she did, when and amidst whom. But vertices 2 and 3 seem to hold the means by which this preservation has been achieved before and will be achieved in future, and together prompt us to pay more attention to the delicate strands by which the memories of our pasts dangle. We still await the public ownership of the work of important artists, and many others, but anyone who says cryptocurrencies or blockchains are the way to get there is lying.

A similar problem has assailed the world of scientific knowledge and publishing for many years now, with more scientists becoming more aware today of their actual role in society: not to create new knowledge and improve lives as much as to widen the margins of scientific journals, overlook their glaring flaws and the incentives they have set up to the detriment of good science, and comply unquestioningly with their inexplicable price hikes. And even as many scientists have invented notions like “prestige” and “status” to make their allegiance to journals make sense, Mobarak et al. tell us, and themselves, that they’re doing everyone a favour.

The Merge

Earlier this month, a major event happened in the cryptocurrency space called the ‘Merge’. In this event, the ethereum blockchain changed the way it achieves consensus – from using a proof-of-work mechanism to a proof-of-stake mechanism.

A blockchain is a spreadsheet that maintains a record of all the transactions between users using the same blockchain. Every user on a blockchain basically possesses an up-to-date copy of that spreadsheet and helps validate others’ transactions on the blockchain. The rewards that the blockchain produces for desirable user behaviour are called its tokens. For example, tokens on the ethereum blockchain are called ether and those on the bitcoin blockchain are called… well, bitcoins. This is what the users also transact with on the blockchain.

(See here for a more thorough yet accessible intro to blockchains and NFTs.)

As a result of the ‘Merge’, according to the foundation that manages the cryptocurrency, the blockchain’s energy consumption dropped by 99.95%.

The blockchain on which users transact ethereum tokens plus the network is called the ethereum mainnet. During the ‘Merge’, the existing mainnet was replaced with another called the Beacon Chain.

Imagine the blockchain to be a bridge that moves traffic across a river. Ahead of the ‘Merge’, operators erected a parallel bridge and allowed traffic over it as well. Then, on September 15, 2022, they merged traffic from the first bridge with the traffic on the new one. Once all the vehicles were off the old bridge, it was destroyed.

Source: ethereum.org

Each of the vehicles here was an ethereum transaction. During the ‘Merge’, the operators had to ensure that all the vehicles continued to move, none got hijacked and none of them broke down.

(Sharding – which is expected to roll out in 2023 – is the act of splitting the blockchain up into multiple pieces that different parts of the network use. This way, each part will require fewer resources to use the blockchain even as the network as a whole will be using the blockchain as a whole.)

Blockchains like those of bitcoin and ethereum need a ‘proof of x’ because they are decentralised: they have no central authority that decides whether a transaction is legitimate. Instead, the validation mechanisms are baked into the processes by which users mine and exchange the coins. Proof-of-work and proof-of-stake are two flavours of one such mechanism. To understand what it does, let’s consider one of the problems it protects a blockchain against: double-spending.

Say Selvi wants to send 100 rupees to Gokul. Double-spending is the threat of sending the same 100 rupees to Gokul twice, thus converting 100 rupees to 200 rupees. When Selvi uses a bank: she logs into her netbanking account and transfers the funds or she withdraws some cash from the ATM and gives Gokul the notes. Either way, once she’s withdrawn the money from her account, the bank records it and she can’t withdraw the same funds again.

When she takes the cryptocurrency route: Selvi transfers some ethereum tokens to Gokul over the blockchain. Here, the blockchain requires some way to verify and record the transaction so that it doesn’t recur. If it used proof-of-work, it would require users on the network to share their computing power to solve a complex mathematical problem. The operation produces a numeric result that uniquely identifies the transaction as well as appends the transaction’s details to the blockchain. A copy of the updated blockchain is shared with all the users so that they are all on the same page. If Selvi tries to spend the same coins again – to transfer it to someone else, say – she won’t be able to: the blockchain ‘knows’ now that Selvi no longer has the funds in her wallet.

The demand for computing power to acknowledge a transaction and add it to the blockchain constitutes proof-of-work: when you supply that power, which is used to do work, you have provided that proof. In exchange, the blockchain rewards you with a coin. (If many people provided computing power, they split the coins released by the blockchain.)

The reason the Ethereum folks claim their post-Merge blockchain consumes 99.95% less energy is because it doesn’t use proof-of-work to verify transactions. Instead, it uses proof-of-stake: users stake their ethereum tokens for each transaction. Put another way, proof-of-work requires users to prove they have computing power to lose; proof-of-stake requires users to prove they have coins – or wealth – to lose.

Before each transaction, a validator places some coins as collateral in a ‘smart contract’. This is essentially an algorithm that will not return the coins to the validator if they don’t perform their task properly. Right now, aspiring validators need to deposit 32 ethereum tokens to qualify and join a queue. The network limits the rate at which new validators are added to the network.

Once a validator is admitted, they are allotted blocks (transactions to be verified) at regular intervals. If a block checks out, the validator casts a vote in favour of that block that is transmitted across the network. Once every 12 seconds, the network randomly chooses a group of validators whose votes are used to make a final determination on whether a block is valid.

Proof-of-stake is less energy-intensive than proof-of-work but it keeps the ethereum blockchain tethered to the same requirement: the proof of preexisting wealth. In the new paradigm, the blockchain releases new coins as reward when transactions are verified, and those who have staked more stand to gain more – i.e. the rich get richer.

Note that when the blockchain used the proof-of-work consensus mechanism, a big problem was that a very small number of users provided a very large fraction of the computing power (contrary to cryptocurrencies’ promise to decentralise finance). Proof-of-stake is expected to increase this centralisation of validatory power because the blockchain now favours validators who have more to stake, and rewards them more. Over time, as richer validators stake more, the cost of validating a transaction will also go up – and the ‘poorer’ validators will be forced to drop out.

Second, the proof-of-stake system requires problematic transactions to be flagged when the validators have staked their ethereum. Once they have withdrawn their stakes, they can’t be penalised. This in turn revives the risk of the double-spending problem, as set out in some detail here.

The energy consumption of cryptocurrency transactions was and remains a major bit of criticism against this newfangled technological solution to a problem that the world doesn’t have – and that’s the point that sticks with me. The ‘Merge’ was laudable to the extent that it reduced the consumption of energy and mining hardware in a time when the wealthy desperately need to reduce all forms of consumption, but while the ‘cons’ column is one row shorter, the ‘pros’ column remains just as empty.

The problem that ‘crypto’ actually solves

From ‘Cryptocurrency Titan Coinbase Providing “Geo Tracking Data” to ICE’, The Intercept, June 30, 2022:

Coinbase, the largest cryptocurrency exchange in the United States, is selling Immigrations and Customs Enforcement a suite of features used to track and identify cryptocurrency users, according to contract documents shared with The Intercept. … a new contract document obtained by Jack Poulson, director of the watchdog group Tech Inquiry, and shared with The Intercept, shows ICE now has access to a variety of forensic features provided through Coinbase Tracer, the company’s intelligence-gathering tool (formerly known as Coinbase Analytics).

Coinbase Tracer allows clients, in both government and the private sector, to trace transactions through the blockchain, a distributed ledger of transactions integral to cryptocurrency use. While blockchain ledgers are typically public, the enormous volume of data stored therein can make following the money from spender to recipient beyond difficult, if not impossible, without the aid of software tools. Coinbase markets Tracer for use in both corporate compliance and law enforcement investigations, touting its ability to “investigate illicit activities including money laundering and terrorist financing” and “connect [cryptocurrency] addresses to real world entities.”

Every “cryptocurrency is broken” story these days has a predictable theme: the real world caught up because the real world never went away. The fundamental impetus for cryptocurrencies is the belief of a bunch of people that they can’t trust their money with governments and banks – imagined as authoritarian entities that have centralised decision-making power over private property, including money – and who thus invented a technological alternative that would execute the same solutions the governments and banks did, but sans centralisation, sans trust.

Even more fundamentally, cryptocurrencies embody neither the pursuit to ensure the people’s control of money nor to liberate art-trading from the clutch of racism. Instead, they symbolise the abdication of the responsibility to reform banking and finance – a far more arduous process that is also more constitutive and equitable. They symbolise the thin line between democracy and majoritarianism: they claimed to have placed the tools to validate financial transactions in the hands of the ‘people’ but fail to grasp that these tools will still be used in the same world that apparently created the need for cryptocurrencies. In this context, I highly recommend this essay on the history of the socio-financial forces that inevitably led to the popularity of cryptocurrencies.

These (pseudo)currencies have often been rightly described as a solution looking for a problem, because the fact remains that the ‘problem’ they do solve is public non-participation in governance. Its proponents just don’t like to admit it. Who would?

The identity of cryptocurrencies may once have been limited to technological marvels and the play-things of mathematicians and financial analysts, but their foundational premise bears a deeper, more dispiriting implication. As the value of one virtual currency after the next comes crashing down, after cryptocurrency-based trading and financing schemes come a cropper, and after their promises to be untraceable, decentralised and uncontrollable have been successively falsified, the whole idea ought to be revealed for what it is: a cynical social engineering exercise to pump even more money from the ‘bottom’ of the pyramid to the ‘top’. Yet, the implication: cryptocurrencies will persist because they are vehicles of the libertarian ideologies of their proponents. To attempt to ‘stop’ them is to attempt to stop the ideologues themselves.

To be better at being anti-crypto

Molly White has a difficult read, one that I’m forced to agree with in spite of my vehemently anti-cryptocurrency position. Three representative paragraphs from her post:

I … think that [cryptocurrency-based financial solutions] are enormously attractive to people who see them as a tangible option in a world where these problems are not being solved—where we are being failed by our political establishments in so, so many ways. I don’t think they are a feasible solution, and in fact I think they will worsen many of the problems they ostensibly aim to solve, but they are certainly being sold as the solution, and a solution that people desperately need.

And I really can’t fault someone for deciding to hitch their wagon to crypto and web3 because they are hopeful that those salesmen might be on to something. I can disagree with them, I can explain my point of view, I can think that their engagement is in some small way enabling something I fundamentally disagree with and believe to be harmful—but I can’t believe that buying some crypto, collecting an NFT, or joining a DAO automatically make someone a bad person.

…

If you feel the urge to “cyberbully” someone in crypto, direct it at the powerful players behind crypto projects that are actively taking advantage of the vulnerable. Or, just as reasonably, direct it at the powerful tech executives, venture capitalists, elected representatives, and lobbyists who have contributed to the untenable situation we find ourselves in. Or the policymakers and governmental agencies who have failed to uphold their duty in regulating crypto and enforcing existing regulation that would protect people from rampant fraud. But not the artist who hoped to earn a few bucks selling their digital art in what is otherwise an extremely difficult field, or the person who hoped that maybe a lucky crypto buy could help them dig out of crushing debt just a tiny bit faster.

This is a sensible position – and one that’s hard to remember in the heat of an argument when the other side defends a choice to invest in or deepen one’s position on cryptocurrencies. But to this picture of two sides I’d add two more (in fact, it may well be a continuous spectrum of positions):

  1. Those who back cryptocurrencies knowing the harm it causes, to the environment as much as social justice, while also not exploring other financial options well enough.
  2. Those who invest in cryptocurrencies in ignorance of its nature, technological sophistry and ontological vacuity, and later claim they “didn’t know” but also don’t/can’t exist because they have sunk costs.

These people are certainly less in the wrong than those who are outright evil – the people deserving of our vitriol, in White’s estimation. And even between these two ‘new’ groups, I think those who are lazy are wronger than those who are ignorant. I was prompted to think of these two gradations to White’s spectrum because they describe some of my friends. In fact, I think I have at least one friend belonging to each of the four groups before us:

  • “Those without another solution available to problem at hand”,
  • “Those who trip into it even though they’re educated well-enough to not”,
  • “Those reaching for cryptocurrencies without sufficiently exploring other options”, and
  • “Those aware of the bad outcomes but doing it anyway to become richer”.

I should of course clarify that these two additional groups exist principally because of privilege. That is, they become visible when you look at White’s first group through the prism of privileges that accrue to different social groups in India, particularly among the upper class, upper caste lot: they have, without exception, passively but automatically foregone ignorance or another similar excuse for their actions. And it’s because of their privileges, and not particularly because its wanton exercise has been directed at cryptocurrencies on this occasion, that they don’t deserve to be spared our scorn.

NFTs aren’t thriving – they’re often in the hospital

This is not a real anniversary but it’s worth commemorating, if only to remember the pseudo-events propping up the NFT business-culture. One month and one year ago, a cryptocurrency user named Metakovan purchased an NFT associated with a piece of art from its creator, a fellow named Beeple, in an auction at Christie’s. (Here’s a beginner’s guide to NFTs.) Even at the time this incident took place, its absurdity was clear: as I wrote at the time, Metakovan’s plan – an ostensible effort to democratise and to fight racism in art ownership – was riddled with problems: it was one big red herring of excuses supplied to mask the Ponzi super-scheme that cryptocurrencies and NFTs need to survive. Since then, as NFTs have ‘matured’, especially by revealing what they truly are to the world, we have become better at understanding what that moment in time has meant for the industry. Today, cryptocurrencies and NFTs are investment options whose prices climb up (and down) purely through speculation, so they must remain constantly in demand, thus the Ponzi. Other than that, they serve no purpose whatsoever. While the $69.3 million that Metakovan paid for Beeple’s NFT bleached our vision, we realise today that it had to; there’s nothing underneath. Similarly, there is today a near-constant drone of faux optimism emanating from cryptocurrency evangelists founded on nothing more than greed and stupidity – one that we must constantly look past to remind ourselves that NFTs are ailing, as they should be. Here are some useful articles I would recommend on the topic.

“It isn’t just charities that are finding cryptocurrencies less popular than the media would have you believe. Game publishers were salivating at the prospect of selling NFTs purporting to represent in-game items. Their customer’s reactions led to headlines such as ‘Roller derby community resoundingly rejects NFT project’, ‘MeUndies cancels its NFT underwear plans and sells its Bored Ape after community backlash’, ‘S.T.A.L.K.E.R. 2 developer quickly cancels NFT plans after fan outcry’, ‘Sega cites fan backlash in surprisingly cautious take on gaming NFTs’, ‘Ubisoft’s first NFT experiment was a dumpster fire’, and so on.”

“For cryptocurrency investors and tech workers, they represent financial opportunities and the ground on which to create an art world all of their own. They are deeply naive about art and often disarmingly sincere in their excitement about it. … Is there any potential in this new art market, which seems poised to edge out the old as it is integrated into art fairs, galleries, and auction houses? Is capital, even in its present decrepit form, more progressive than art theory? … Blockchain may be decentralized, but Sotheby’s and Christie’s, where NFT stars like Beeple have been taking their work direct to market, certainly are not. Art-for-NFT may eschew elite curation from MFAs and PhDs but relies instead on other hierarchies that have more to do with celebrity and straightforward access to money than visual quality, let alone conceptual positioning. It has already proven itself not to be the very thing its digital art proponents hoped it would be: an equitable market (as if such a thing exists) cleared of undesirable barriers. To the contrary, the majority of transactions are concentrated in the top 10% of market actors and the average artist has nearly no shot at making a buck…”

“Kelani Nichole, who first priced and sold artworks in bitcoin in 2013 as the owner of the new-media-centric Transfer Gallery, … reached an unequivocal conclusion about Christie’s proclamation that it had made NFT history. … First, multiple users [of cryptocurrencies expressed] confusion over why, as one member put it, they saw “none of the usual stuff you’d expect to see” for an NFT sale through Etherscan, an established portal for viewing verified data on the Ethereum blockchain. … the second point of disagreement is even more existential. On one hand, Christie’s role in facilitating the sale of Beeple’s work was seen as a powerful validation of NFTs by (very) late adopters in the traditional art world. On the other hand, true believers in blockchain’s revolutionary potential aim to eliminate gatekeepers of all types. They saw Christie’s very presence in the sale as a betrayal of crypto’s core values…”

“Forms of self-dealing among an elite are also baked into the market and the history of how it got so big in the first place. Take Vignesh Sundaresan, a collector known as “MetaKovan” who purchased the $69 million Beeple NFT that touched off one of the earliest hype cycles around the digital assets. MetaKovan is the financier of Metapurse, a Singapore-based investment firm that earlier this year listed its mission as to “democratize access and ownership to artwork.” Metapurse has bought 20 Beeple NFTs, four virtual museums, a soundtrack, and consolidated it all into an “NFT bundle” that offers fractionalized ownership through 10 million B20 tokens. Beeple, as it turns out, happens to be a business partner of MetaKovan and owns 2 percent of all B20 tokens, while MetaKovan owns another 59 percent.”

“… Lemercier’s sale of six crypto artworks of Platonic solids late last year consumed more electricity within ten seconds than the entirety of his studio in the last two years. Worse still, with every resale, their footprint will grow: one estimate indicates the mere act of selling an edition of one hundred NFTs consumes more energy than an individual living in the European Union for a year—and there are already more than six hundred thousand NFTs in existence. Though the hype of NFTs will likely burn off, the noxious fumes produced by these ostensibly ethereal works will linger in the atmosphere for decades, if not centuries, to come.”

“Time’s cover story by Andrew R. Chow, The Man Behind Ethereum Is Worried About Crypto’s Future, is supplemented by his I Spent 80 Minutes Inside Vitalik Buterin’s Brain. Here’s What I Learned. What I learned from these two pieces of hagiography was that Buterin is having a lot of difficulty dealing with the failure of Ethereum to live up to the goals he had for it. … The entire story is shot through with the normal cryptocurrency gaslighting, claiming that the benefits Ethereum will bring to the world are because it is decentralized, even though it isn’t. At the fundamental level it isn’t — last November two mining pools controlled the majority of Ethereum mining. At the API level it isn’t, as Moxie Marlinspike describes in ‘My first impressions of web3’. But the detachment from reality goes much further. … The quote “Crypto itself has a lot of dystopian potential if implemented wrong” reveals two of Buterin’s delusions. First, the idea that the dystopian effects of cryptocurrencies are a future potential, not a current reality. And second, that the dystopian effects are merely a symptom of improper implementation, rather than fundamental attributes. Chow reports Buterin’s ideas for cryptocurrencies implemented right: … These utopian dreams fuel the gaslighting that covers up the real-life casino and “wretched hive of scum and villany” that cryptocurrencies have become. The idea that, at some time in the future, the Ethereum ecosystem is “at risk of being overtaken by greed” is laughable to everyone outside the cult.”

Intro to NFTs

First

I wrote this piece for a friend who wanted to understand what NFTs were. I have considerably simplified many points and omitted many others to keep the explanation below (relatively) short. If you’re interested, you can read the following articles/sites as well as find links to more discussion on this topic from there.

  1. https://digiconomist.net/bitcoin-versus-gold
  2. https://rpr2.wordpress.com/tag/nft/
  3. https://blog.dshr.org/2022/02/ee380-talk.html (I left out talking about scammers – this post has great explanations and additional learning resources on this front)
  4. https://caesuramag.org/posts/laurie-rojas-why-no-good-nft-yet

Background info

What is an NFT?

To understand NFTs, we need to understand the ‘T’ first: tokens.

And to understand the Ts, we need to understand the reason they exist: the blockchain.

The blockchain is widely touted to be a ledger of transactions. But I – a person who has struggled to understand banking and finance terminologies – have found it more useful to understand this technology in terms of the fundamentally new thing it facilitates.

In ‘conventional’ banking, banks – state-owned and otherwise – validate financial transactions. If I transfer money from my wallet to yours online, the bank knows a) whether money has been deducted from my wallet, b) whether money has been credited to your wallet, and c) whether I, the wallet’s owner, performed the transaction in question.

The blockchain is a database that, together with a bunch of algorithms, offers a way to perform these tasks without requiring a centralised authority. Instead, it helps the people who are transacting with each other to ensure the security and integrity of their transactions.

Say 10 people have already been using a blockchain to validate their transactions. Each row in this database is called a block. When one of the 10 performs a new transaction, it is added as a new block in the database along with some data pertaining to the previous block. This bit of data is called a cryptographic hash. Using the hash, all the blocks in the database are linked together: every new block contains a cryptographic hash of the previous block, all the way back to the very first block. This chain of blocks is called the blockchain.

Every time a new transaction is performed, and a new block has to be added to the blockchain, some algorithms kick in to validate the transaction. Once it has been validated, the block is added, a timestamp is affixed to the operation, and a copy of the blockchain in that instance is shared with all the 10 people using it.

This validation process doesn’t happen in a vacuum. You need computing power to perform it, drawn from the machines owned and operated by some or all of the 10 people. To incentivise these people to donate their computing power, the blockchain releases some files at periodic intervals. These files denote value on the blockchain, and the people who get them can use them gainfully. These files are called tokens.

Different blockchains have different validation incentives. For example, the bitcoin blockchain releases its tokens, the bitcoins, as rewards to those who have provided computing power to validate new transactions.

The bitcoin protocol states that the number of bitcoins released drops by half for every 210,000 blocks added. In May 2020, this reward stood at 6.25 bitcoins per block. The blockchain will also stop releasing new bitcoins once it has released 21 million of them.

Technically speaking, both centralised and decentralised validation systems use blockchains. The one that uses a central authority is called a permissioned blockchain. The one without a centralised authority is called a permissionless blockchain.

This is useful to know if only to understand two things:

  1. The concept of blockchains has existed since the early 1980s in the form of permissioned systems, and
  2. Permissionless blockchains need tokens to incentivise users to share computing power whereas permissioned blockchains don’t need tokens

The demand for bitcoins has caused the price of each such token to rise to $43,925, or Rs 33.47 lakh, today (March 25, 2022, 9:06 am).

The tokens on a blockchain can be fungible or non-fungible. An example of a fungible token is bona fide currency: one one-rupee note can be replaced by another (equally legitimate) one-rupee note and not make any difference to a transaction. Bitcoins are also fungible tokens for the same reason. On the other hand, NFTs are tokens that can’t be interchanged. Each NFT is unique – it has to be because this characteristic defines NFTs. They are non-fungible tokens.

Bitcoins are basically files. You write an article and store it as a docx file. This file contains text. A bitcoin is a file that contains alphanumeric data and is stored in a certain way. You can save a docx file on your laptop’s hard-disk or on Google Drive, and you can only open it with software that can read docx files. Similarly, you can store bitcoins in wallets on the internet, and they can be ‘read’ only by special software that work with blockchains.

Similarly, NFTs are also files. The alphanumeric code they contain are linked in a unique way to another file. These other files can be pictures, videos, docx files, bits of text, anything at all that can be stored as digital data.

When one person transfers an NFT to another person over a blockchain, they are basically transferring ownsership of the file to which the NFT is linked. Put another way, NFTs facilitate the trade of goods and value that can’t directly be traded over blockchains by tokenising these goods/value. This is what NFTs fundamentally offer.

Emergent facts

This background info leads to some implications:

  • Bitcoins have been exploding in value because a) their supply is limited, b) investors in bitcoins and/or blockchain technology have built hype around this technology, and c) taken together, the rising value of each bitcoin has encouraged the rise of many Ponzi schemes that require more people to get in on cryptocurrencies, forcing demand to rise, which further pushes up the coin value, allowing investors to buy low and sell high.
  • The demand for bitcoins, and other cryptocurrencies more broadly, has obscured the fact that a) permissionless blockchains need tokens to exist, b) these tokens in turn need to be convertable to bona fide currencies, and c) there needs to be speculative valuation of these tokens in order for their value over time to increase. Otherwise, the tokens hold no value – especially to pay for the real-world costs of computing power.
  • This computing power is very costly. It is highly energy-intensive – if it weren’t, anybody could validate any transaction and add it to the blockchain. In fact, one of the purposes of the compute cost is to prevent a hack called the Sybil attack. A copy of the blockchain is shared with all members participating in the chain. Say my copy gets corrupted for some reason; when the system encounters it, it will check it against the copy that exists on the majority of computers on the network. When it doesn’t match, I will have forked out of the blockchain and no longer be a part of it. A Sybil attack happens when multiple users work together to modify their copies of the blockchain (to, say, give themselves more money), confusing the system into believing the corrupted version is the actual version. A high computing power demand would ensure that the cost of mounting a Sybil attack is higher than the benefits it will reap. This power is also what leads to the cryptocurrencies’ enormous carbon footprint.
  • If you provide more computing power to the pool of power available to validate transactions, you have provided the system with proof of work. Another way to validate transactions is through proof of stake: the more value you have transacted using the blockchain, the more stake you are said to have in its proper operation, and therefore the likelier it will be for your transactions to be validated. Proof of stake is less energy-intensive, but its flaw is that it’s a ‘rich get richer’ paradigm. From a social justice point of view, both proof of work and proof of stake have the same outcome: wealth inequality. Indeed, a principal failing of the ethereum and bitcoin blockchains today is that a very small number of individuals around the world own more than half of all the computing power available to these networks – a fact that directly undermines the existential purpose of these networks: decentralisation.
  • NFTs differ in their uniqueness, but other than that, they also require the use of blockchains and thus inherit all of the problems of permissionless blockchains.
  • NFTs also have two problems that are specific to their character: a) they have to be scarce in order to be valuable, and this scarcity is artificially imposed – by investors but more broadly by tech-bros and their capitalist culture, in order to keep NFTs exclusive and valuable; b) the items that NFTs currently tokenise are simple crap made with conventional software. For example, the user named Metakovan purchased last year an NFT associated with a big collage by an artist named Tweeple for 500 ether ($69 million). This collage was just a collage, nothing special, made with Photoshop (or similar). Now, if I uploaded an image on a server and linked it to an NFT, and one day the server goes down, the NFT will exist but it will point to nothing, and thus be useless. This vacuity at the heart of NFTs – that they contain no value of their own and that whatever value they contain is often rooted in conventional systems – is emblematic of a bigger issue with cryptocurrencies: they have no known application. They are a solution in search of a problem.
  • For example, Metakovan said last year that using cryptocurrencies to trade in art was a way to use the anonymity afforded by cryptocurrencies to evade the gatekeepers of the art world, who, in his words, had thus far kept out the non-white, non-rich from owning the masters’ paintings. But many, many art critics have ridiculed this. I like to quote Laurie Rojas: “Even with all the financial speculation around NFTs, the point that Art’s value is determined within the parameters of a society in which commodification is the dominant form of social relations (i.e., capitalism) has too easily been abandoned for poorly defined neologisms. … NFTs are the latest phenomenon to express this.”
  • NFTs’ newfound association with artistic works is something for NFTs to do, otherwise they have no purpose. In addition, small-time and/or indie artists have criticised NFTs because they don’t solve the more fundamental problem of people not funding artists like them or protecting their work from copyright violations in the first place – much less because potential funders don’t have the requisite technologies. This criticism also speaks to the criticism of the bitcoin network itself: to quote Alex De Vries, “One bitcoin transaction requires … several thousands of times more than what’s required by traditional payment systems” to perform a transaction of the same value. Therefore it can’t be a functional substitute for the world’s existing banking system either. And we’ve seen in a previous point that they’re not decentralised either.

Two last issues – one about a new way in which blockchain tech is trying to find relevance and one about a pernicious justification to allow this technology to persist.

  • The first is what has come to be called “web3”. The current iteration of our web is known as web2, supposed to have begun around the mid-2000s. Web1 was the first iteration, when the web was full of websites that offered content for us to consume. Web2 was about content production – social media, blogs, news sites, etc. Web3 is supposed to be about participation – based on Metakovan’s logic. In this paradigm, web3 is to be powered by blockchains. This is a stupid idea for all the reasons permissionless blockchains and NFTs are stupid ideas, and others besides.
  • Second, some entrepreneurs have started to buy carbon credits from various parts of the world and offer them for a price to blockchain entrepreneurs, to help ‘neutralise’ the carbon footprint of the latter’s efforts. This is wrong and evil because it’s a wasteful use of carbon credits that diverts them away from more socially responsible uses. It’s also evil because, in this paradigm, cryptocurrencies and NFTs foster two paths towards greater inequality. First, as mentioned before, they impose a prohibitive energy cost to use them. Second, developed countries need to cut down on their carbon emissions right away – but many developing countries and most under-developed countries (in the economic sense) still have room to emit some more before they can peak. Carbon credits, the demand for which cryptocurrencies are increasing, reverse these outcomes – allowing the former to keep emitting while purchasing ‘room to emit’ from less developed nations, and thus lowering the latter’s emissions ceiling.
  • Finally, a fundamental flaw of the carbon credits system is that it assumes that emissions over one part of the world can be compensated by supporting forests in another. So carbon credits may in fact make the problem worse by allowing cryptocurrency folks to keep kicking the can down the road.

Art is something for cryptocurrencies to con

Joe Dunthorne penned an amusing article in London Review earlier this month about encountering a fake account of him on Instagram, whose user promoted the real Dunthorne’s poems and book. Dunthorne begins by citing Fyodor Dostoevsky’s The Double, in which a doppelgänger usurps the life of a nondescript young man named Yakov Golyadkin by taking over his life and social circles. The original is eventually confined to an asylum because everyone in his life, such as it was, prefers the new fellow.

Dunthorne himself quests for the identity of the person impersonating him, only to find, through many twists and turns, that it is a guy who constantly changes his identity as he goes about scamming people to invest in cryptocurrencies by posing as someone whose work doesn’t directly involve these digital entities in the first place.

It’s a fascinating con – although not the one Dunthorne may believe it is, as he writes: “Then there was the one where scammers tricked people into investing $2.7 million in cartoons of apes. In fact, this was a double scam, convincing buyers first that the images were timeless works of digital art and then that they should pay huge amounts of money to an organisation that didn’t exist.” Dismissing these investments because they’re directed at companies that “don’t exist” in the physical realm is naïve. Nonetheless, while Dunthorne ponders if a random stranger has done a Yakov Golyadkin on him, there is a con here – one that brings to mind a post by a user named kevbrinx on Tumblr:

Tumblr is known for being a place where creativity happens because it’s cool, it’s fun, it’s different and difficult! “I will make it because I can”.

The majority of NFT artists I’ve seen don’t share the same mentality. And that is worrying.

I’m sure out there are many works of art that aren’t made by a computer and have been created with the intention to inspire. However, just like it has been demonstrated on Twitter, who buys wouldn’t do it just to showcase their precious possessions?

Where is the value in that?

It might be not what NFTs have been created for originally, but right now they represent vanity and greed to many. Expecially when there are other safer ways to support artists economically.

…

“The focus of NFTs is not actually the art”.

The post is addressed to Matt Mullenweg, the cofounder of WordPress. Mullenweg’s response is ambiguous, noncomittal:

The list of things to do before we got to anything NFT-related is super-duper long. I don’t share all your worries about NFTs, but I am not fanboying them. The only NFTs I hold myself right now are Wapuu related: https://web3wp.com/

If Mullenweg doesn’t see the problem that already exists, he’s not going to solve it.

Cryptocurrencies have emerged as a (disagreeable) way to fund art, and therefore supposedly support artists, using the Trojan horse of NFTs. (For a detailed yet accessible detailed explanation of this concept, see here.) Dunthorne’s story illustrates that cryptocurrency evangelists – including scammers – are looking for ways to promote it without letting their prospects be tainted by the conflict of interest of how much they have to gain: lots of money, and the advantage of being invisible to law enforcement – in exchange for allowing struggling artists to enter the cool cryptocurrencies circuit.

But what Dunthorne leaves unsaid is that the modus operandus of his scammer is indistinguishable from those who claim they’re legitimately supporting artists by trading their work using cryptocurrencies and NFTs.

Separating the item in question from the value of it that’s being traded may seem virtuous, but it’s really the essence of the scam: art becomes another financial asset, one that the rich and the powerful are already familiar with. Art here is being used to give cryptocurrencies something to do, and to look any bit respectable while doing it. But breaking into this art-trading system only legitimises the rituals of the moneyed and renders art, and its makers, inseparable from their limited representation in the plutosphere.

The purpose is money, and profiteering, not the art itself or the issues embedded therein. The antics of the cryptocurrency-proponent Metakovan last year, buying an NFT of a collage of pictures for $69 million, popularised the concept and set this ship sailing, but in his case itself, as I wrote:

Metakovan’s move was ostensibly about getting the world’s attention and making it think about racism in, for some reason, art patronage. And it seems opportunistic more than anything else, a “shot fired” to be able to improve one’s own opportunities for profit in the crypto space instead of undermining the structural racism and bigotry embedded in the whole enterprise. This is a system which owes part of its current success to the existence of social and economic inequalities, which has laboured over the last few decades to exploit cheap labour and poor governance in other, historically beleaguered parts of the world to entrench technocracy and scientism over democracy and public accountability.

To quote Rosanna McLaughlin of The White Review:

The most shocking aspect of the NFT to the art intelligentsia is its brazen entanglement with finance. Trading art has always been a pastime of the wealthy. Much of what counts for art history consists of flattering portrayals of the rich and powerful, and artists have long been expected to perform what Tom Wolfe called the Art Mating Ritual – attracting the interest of wealthy patrons and conservative institutions, while simultaneously presenting as Bohemians and renegades. Yet with the NFT, the distinction between art and asset seems to have disappeared. In place of the curated exhibition is the auction website; symbols of the market have seeped into the aesthetic language of the art itself. Prices, not ideas, dominate.

Despite the promise of “art for everyone”, the final destination of the NFT might not actually be art. Art may simply be a useful way to advertise the possibilities of a new technology. “I’ve done everything from fashion, fragrances to endorsements,” Paris Hilton says, adding that NFTs are another way for “fans to have a piece of me”. As well as working with the rapper Ice Cube, Jones recently made an NFT for the whisky company Macallan, to be auctioned alongside a very expensive cask of scotch. This, it seems, is a taste of where NFTs may be heading: not a radical new model for trading art, but a digital marketing bauble.

Anil Dash, the CEO of Glitch:

Meanwhile, most of the start-ups and platforms used to sell NFTs today are no more innovative than any random website selling posters. Many of the works being sold as NFTs aren’t digital artworks at all; they’re just digital pictures of works created in conventional media.

…

There’s only one exception to the lack of interest in blockchain apps today: apps for trading cryptocurrencies themselves. What results is an almost hermetically sealed economy, whose currencies exist only to be traded and become derivatives of themselves. If you squint, it looks like an absurd art project.

After a decade of whiplash-inducing changes in valuation, billions of dollars are now invested in cryptocurrencies, and the people who have made those bets can’t cash in their chips anywhere. They can’t buy real estate with cryptocurrency. They can’t buy yachts with it. So the only rich-person hobby they can partake in with their cryptowealth is buying art. And in this art market, no one is obligated to have any taste or judgment about art itself. If NFT prices suddenly plunge, these investors will try buying polo horses or Davos tickets with cryptocurrencies instead. Think of a kid who’s spent the day playing Skee-Ball and now has a whole lot of tickets to spend. Every toy looks enticing. NFTs have become just such a plaything.

Finally, Laurie Rojas, cofounding editor of Caesura, on the inevitability of NFTs because of art’s foregone relationship with capitalism:

Commentators, however, actively neglect the lesson learned since the late ’60s that trying to escape art’s commodification is futile, or merely a pretense, and rarely reflect on the artwork’s connection to capitalist social relations. The connection between these two tendencies — that art’s value is determined/critiqued by commodity “fetishism” or that art’s value is determined/critiqued by socio-political position-taking — is deeper than it appears at first glance. These “critical” tendencies express how much Art has become caught between being an end in itself and a means to an end. NFTs are the latest phenomenon to express this.

Even with all the financial speculation around NFTs, the point that Art’s value is determined within the parameters of a society in which commodification is the dominant form of social relations (i.e., capitalism) has too easily been abandoned for poorly defined neologisms. Rarely is there a reflection on the relation of the artwork — its form, technique, beauty, contemplativeness, incomprehensibility, and what have you — to the increasingly barbaric commodity form.

Has the art world gone mad? No. This is business as usual.

Featured image credit: Karolina Grabowska/Pexels.

If WordPress supports NFTs, should I boycott it?

I’m a blogger, an amateur coder and an employee at a nonprofit organisation. My experience in these realms of endeavour is such that, taken together, keeping my blog online means a) using a trustworthy web host, b) using a simple as well as moderately featureful content management system, c) achieving this at a reasonable monthly cost, and d) not having to spend any time whatsoever thinking about the setup’s availability or security. Currently WordPress.com is fulfilling (a), (b), (c) and (d).

The next best alternative is a shared host offering WordPress hosting followed by a VPS managed through a control panel and with WordPress. If I drop WordPress, the options available to me dwindle rapidly. There’s Ghost, of course, but not much else. There are very many content management systems out there but the vast majority don’t have an option to import WordPress posts and also have either fewer features or too many for my limited programming chops to handle.

(I should stress here the extent to which I’m out of sorts in this area. I don’t understand all the differences between cloud hosting and VPS hosting. I kinda know what shared hosting is but I don’t know why its problems don’t assail other forms of hosting. It took me years to get the hang of static-site generators and what web-servers really do. I barely get Docker now and have no frigging idea what Kubernetes is or does. My sense of what is good is simply some better-informed people’s sense of good.)

In this scenario, can I afford to boycott all platforms and services that are interested in, or whose leaders are interested in, incorporating NFTs into their products?

The answer I think is a distinct and discomfiting ‘no’. WordPress cofounder Matt Mullenweg is pro-NFTs, as are Ghost’s John O’Nolan, Twitter’s Jack Dorsey, Reddit’s Alexis Ohanian, Salesforce’s Marc Benioff, Twitch’s Justin Kan, as well as Microsoft, Google, Amazon Web Services, Akamai (for blockchain in finance) and many, many others. Hosting companies like Amazon Web Services and Digital Ocean ban the use of their services to mine cryptocurrencies, but I doubt they will assume a similarly hardline position against the storage of NFTs.

When you’re interested in boycotting the work of people who favour the use of a technology you distrust and dislike, but then find yourself having boycotted every platform, service and/or product you’ve needed and/or admired thus far, what do you do?

This conundrum is largely already real. Many of our internet-based tools today are the brainchildren of people and companies operating primarily out of that American white Democratic libertarian tech space (although I’m bearing in mind only the worst of this group here, principally Zuckerberg). I really like my smartphone but I have many problems with the practices of the company that made it. The same thing goes for my laptop, Kindle, debit card, WhatsApp account, Fire Stick, a vision-impaired aunt’s voice-activated phone, my neighbour’s electric scooter, etc.

My (first) point is that a certain geographically restricted demographic has monopolised innovation in the information technology sector worldwide. As a result, the best tools we have available to use (in this category) to do the work we’d like to do are often made by people and companies doing other technological things with which we’re often likely to disagree yet from which we can’t ever fully divest ourselves, and whose products we can’t readily replace with those of alternative provenance either.

At the same time the builders of these tools have accrued more decision-making power than the tools’ users, the result of which is that – for one example – we’re all contemplating the possibility of a “web3” erected on blockchain technology even though the population of people interested in that future is eminently minuscule. Another is that WordPress powers 43% of all websites on the web while Mullenweg has the single-most say on whether this mass will one day became NFT-friendly.

The second point is that of quality and scale, which taken together ensure a good user experience at a relatively low (monetary) cost. For example, if the best American cloud-hosting companies today start to offer pro-NFT services, my hosting options will suddenly be limited to Asian competitors with shady business practices and pricier European ones that, while being better with user privacy and such, also charge more as a result. (I’m neither aware of nor know how to evaluate hosting companies in other parts of the world). I get the philosophy of “either pay or be the product”, but here’s the thing: I work in journalism in India and don’t have much money to spare, not to mention neither the time nor the inclination to spend becoming a better technologist.

The third and final point is about the act of boycotting itself. Why has it been meaningful? It has been meaningful because it has had the power to force managers to change their minds in favour of consumers’ demands. Would it be as meaningful as it has been before to boycott WordPress or Twitter or Google? No, because boycotting does not have that power against companies whose breadth of innovation is so diverse that they build the tools with which to organise protests against tree-cutting as well as – to slip into a metaphor here – manufacture the axes with which they will be cut.

At this point, a quote from Elementary (2:21), the TV show on Amazon Prime – another behemoth, wouldn’t you say? – comes to mind: “Piffle. They want an army of drones keeping tabs on all of us.” Since when do you care about other people’s privacy? someone else asks. “I make use of the tools available to me. That doesn’t mean to say I have to applaud every advance in the field.”

I suppose this is my conclusion… for now. I think this will allow me to continue to use WordPress while retaining the moral authority to criticise Mullenweg’s support for, or even his equivocation on, NFTs… for now.

Crypto: Climate change means new tech has less time today to prove itself

I spent this weekend reading about permissioned and permissionless blockchain systems. If you want to get in on it, I can’t recommend this post by David Rosenthal enough. Much of the complexity of executing transactions of the major extant cryptocurrencies, including bitcoin and ether, arises from the need for these systems to ensure they are permissionless from start to finish, i.e. to maintain their integrity and reliability without deferring to a centralised authority entity.

This simple fact is more important than it seems at first because it challenges in a significant way the reality that most bitcoin and ether mining pools are highly concentrated in the hands of a very small number of people. Put another way, everything from the verbal sophistry to the speculative fundraising to the enormous power consumption that sustain the major cryptocurrencies have failed to do the one thing that cryptocurrencies were invented to do: decentralise.

Most other cryptocurrencies likely operate with the same problems; I say ‘major’ only to limit myself to what I’m familiar with. Second, don’t underestimate the value of simple facts in an ecosystem in which jargon and verbiage are core components of defending against criticism. One such bit of verbiage is the oft-repeated claim that “it’s still the early days” – in the face of questions about how much more time cryptocurrencies will need to become stable and, importantly, socially useful. Software engineer Molly White has written about how this is simply not true:

… a lot has changed in the technology world in the past six to twelve years. One only needs to look at Moore’s law to see how this is pretty much built in to the technology world, as once-impossible ideas are rapidly made possible by exponentially more processing power. And yet, we are to believe that as technology soared forward over the past decade, blockchain technologies spent that time tripping over their own feet?

Something I see missing from this already expansive discussion (i.e. I might have missed it) is how climate change alters the picture.

The biggest criticism facing bitcoin and ether is that their power consumption, based on the method they use to protect against fraud in a decentralised way – called ‘proof of work’ – is colossal. Rosenthal defers to the Cambridge Bitcoin Energy Consumption Index, according to which the annualised bitcoin network power consumption (at 6:47 pm on February 13, 2022) was 125.13 TWh – roughly equal to that of the Netherlands.

Others, like Molly White, have written about the fact that 13-14 years after the advent of the web, there was much more adoption and innovation than there has been in the 13-14 years since the birth of the idea of using permissionless blockchains to execute financial transactions. This can be interpreted to imply that the proponents of cryptocurrencies have been expending energy – both literal and otherwise – fighting against the system’s indefatigable tendency to centralise. And by failing, they have kept this energy out of reach of its “more socially valuable uses,” to use Rosenthal’s words.

I think both these arguments – the straightforward carbon footprint and the social disempowerment – are significant and legitimate but often lead people to ignore a third implication specific to technology: the time a technology has available to prove that its adoption is desirable is falling rapidly, perhaps as fast as the atmospheric concentration of carbon dioxide (CO2) is increasing.

The creation and implementation of the web – technically, web1 from the early 1990s and web2 from the mid-2000s – happened at a time when the atmospheric CO2 concentration was 354.45 ppm (1990) and then 379.98 ppm (2005). In 2021, the concentration was 416.45 ppm.

Tech folks may find this arbitrary, but for an observer at infinity (which I consider myself and anyone outside of the cryptocurrency as well as IT/software spaces and located in an economically developing or ‘under-developed’ country to be), it seems eminently reasonable. Climate change has broken the symmetry between our past and our future vis-à-vis our ability to tolerate energy-intensive technologies, and constantly breaks it.

Roughly 16 years lapsed between the advent of web1 and the birth of Twitter, but in the era of manifest climate change, the fuller statement has to be: “Roughly 16 years lapsed between the advent of web1 and the birth of Twitter, as the atmospheric CO2 concetration increased by 27.64 ppm.” Obviously there may be no generally accepted way to compare levels or even types of innovation, so saying “innovating something in the cryptocurrency space comparable to Twitter” doesn’t make sense. Let’s flip it to a marginally more meaningful statement, one that I hope will also illustrate my point better: how much innovation did technologists achieve in the cryptocurrency-space in the time in which atmospheric CO2 concentrations increased by 27.64 ppm?

Note here that web3 – a web based on storing, transporting and validating information using blockchains – seeks to depart from the incumbent web2 by decentralising, and liberating, user experience from the silos of ‘Big Tech’, a group of companies that includes Twitter. So there may be a way to compare the carbon emissions vis-à-vis efforts to achieve web3 versus efforts to achieve web2. Proponents of cryptocurrencies and NFTs may contend in turn that the social consequences of web2 and web3 would be apples and oranges, but I think I’m comfortable ‘cancelling’ that difference with the opportunities for social welfare squandered by wasteful energy consumption.

Second note: the concentration of atmospheric CO2 is distributed like this. But in our calculations, we need to adopt the global average for reasons both obvious (it’s climate change, not weather change) and subtle. Some entities have created (permissionless) “carbon-negative” blockchains; the negativity is attained through carbon offsets, which is a stupid idea. To quote from a previous post:

Trees planted today to offset carbon emitted today will only sequester that carbon at optimum efficiencies many years later – when carbon emissions from the same project, if not the rest of the world, are likely to be higher. Second, organisations promising to offset carbon often do so in a part of the world significantly removed from where the carbon was originally released. Arguments against the ‘Miyawaki method’ suggest that you can only plant plants up to a certain density in a given ecosystem, and that planting them even closer together won’t have better or even a stagnating level of effects – but will in fact denigrate the local ecology. Scaled up to the level of countries, this means … emitting many tonnes of carbon dioxide over North America and Europe and attempting to have all of that sequestered in the rainforests of South America, Central Africa and Southeast Asia won’t work, at least not without imposing limitations on the latter countries’ room to emit carbon for their own growth as well as on how these newly created ‘green areas’ should be used.

To conclude: Global warming is accelerating, so I’m comfortable comparing two events – such as two bits of innovation – only if they occurred in a period of the same atmospheric CO2 concentration (give or take 10%). Perhaps more fundamentally, clock-time is a less useful way today to measure the passage of time than the value of this number, including vis-à-vis the tolerability of innovation.

On crypto-art, racism and outcome fantasies

If you want to find mistakes with something, you’ll be able to find them if you tried long enough. That doesn’t inherently make the thing worthless. The only exception I’ve encountered to this truism is the prevailing world-system – which is both fault-ridden and, by virtue of its great size and entrenchment, almost certainly unsalvageable.

I was bewitched by cryptocurrencies when I first discovered them, in 2008. I wrote an op-ed in The Hindu in 2014 advocating for the greater use of blockchain technology. But between then and 2016 or so, I drifted away as I found how the technology was also drifting away from what I thought it was to what it was becoming, and as I learnt more about politics, social systems and the peopled world, as it were — particularly through the BJP’s rise to power in 2014 and subsequent events that illustrated how the proper deployment of an idea is more important than the idea itself.

I still have a soft spot for cryptocurrencies and related tokens, although it’s been edging into pity. I used to understand how they could be a clever way for artists to ensure they get paid every time someone, somewhere downloads one of their creations. I liked that tokens could fractionate ownership of all kinds of things – even objects in the real world. I was open to being persuaded that fighting racism in the crypto-art space could have a top-down reformatory effect. But at the same time, I was – and remain – keenly aware that fantasies of outcomes are cheap. Today, I believe cryptocurrencies need to go; their underlying blockchains may have more redeeming value but they need to go, too, because more than being a match for real-world cynicism, they often enable it.

§

Non-fungible tokens (NFTs) are units of data that exist on the blockchain. According to Harvard Business Review:

The technology at the heart of bitcoin and other virtual currencies, blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically.

NFTs have been in the news because the auction house Christie’s recently sold a (literal) work of art secured as an NFT for a stunning $69.3 million (Rs 501.37 crore). The NFT here is a certificate of sorts attesting to the painting’s provenance, ownership and other attributes; it exists as a token that can be bought or sold in transactions performed over the blockchain – just like bitcoins can be, with the difference that while there are millions of bitcoins, each NFT is permanently associated with the artwork and is necessarily one of its kind. In this post, I’m going to address an NFT and its associated piece of art as a single, inseparable entity. If you read about NFTs in other contexts, they’re probably just referring to units of data.

The reason a combined view of the two is fruitful here is that AFP has called crypto user Metakovan’s winning bid “a shot fired for racial equality”, presumably in the crypto and/or crypto-art spaces. (Disclaimer: I went to college with Metakovan but we haven’t been in touch for many years. If I know something, it’s by Googling.) He and his collaborator also wrote on Substack:

Imagine an investor, a financier, a patron of the arts. Ten times out of nine, your palette is monochrome. By winning the Christie’s auction of Beeple’s Everydays: The First 5000 Days, we added a dash of mahogany to that color scheme. … The point was to show Indians and people of color that they too could be patrons, that crypto was an equalizing power between the West and the Rest, and that the global south was rising.

This is a curious proposition that’s also tied to the NFT as an idea. The ‘non-fungible’ of an NFT means the token cannot be replaced by another of its kind; it’s absolutely unique and can only be duplicated by forging it – which is very difficult. So the supply of NFTs is by definition limited and can be priced through speculation in the millions, if need be. NFTs are thus “ownership certificates for digital art that imbue” their owners “with demonstrable scarcity,” as one writer put it. This is also where the picture gets confusing.

First, the Christie’s auction was really one wealth-accumulator purchasing a cultural product created by consuming X watts of power, paid for using a new form of money that the buyer is promoting, and whose value the buyer is stewarding, in a quantity determined by the social priorities of other wealth-accumulators, to an artist who admits he’s cashing in on a bubble, plus allegations of some other shady stuff – although legal experts have also said that there appear to be no “apparent” signs of wrongdoing. What is really going on here?

Minting an NFT is an energy-intensive process. For example, you can acquire bitcoin, which is an example of a fungible token, by submitting verifiable proof of work to a network of users transacting via a blockchain. This work is in the form of solving a complex mathematical problem. Every time you solve a problem to unlock some bitcoins, the next problem automatically becomes harder. So in time, acquiring new bitcoins becomes progressively more difficult, and requires progressively more computing power. Once some proof of work is verified, the blockchain – being the distributed ledger – logs the token’s existence and the facts of its current ownership.

‘NFTs are anti-climatic’ is a simple point, but this argument becomes stronger with some numbers. According to one estimate, the carbon footprint of one ether transaction (ether is another fungible token, transacted via the Ethereum blockchain) is 29.5 kg CO2; that of bitcoin is 359.04 kg CO2. The annual power consumption of the international bitcoin mining and trading enterprise is comparable to that of small countries. Consider what Memo Atken said here, connecting NFTs, fungible tokens and the “crypto-art” in between: “Artists should be able to release hundreds of digital artworks” – but “there is absolutely no reason that releasing hundreds of digital artworks should have footprints of hundreds of MWh.”

Of course, it’s important to properly contextualise the energy argument due to nuances in how and why bitcoin is traded. In February this year, Coindesk, a news outlet focusing on cryptocurrencies, rebutted an article in Bloomberg that claimed bitcoin was a “dirty business”, alluding to its energy consumption. Coindesk claimed instead that bitcoins and the blockchain do more than just what dollars stand for, so saying bitcoin is “dirty” based on Visa’s lower energy consumption is less useful than comparing it to the energy, social and financial costs of mining, processing, transporting and securing gold. (Visa secures credit and debit card transactions just like, but not in the same way, the blockchain secures transactions using consensus algorithms.)

However, the point about energy consumption still stands because comparing bitcoins and the blockchain to the Fedwire RTGS system plus banks, which together do a lot more than what Visa does and could be a fairer counterpart in the realm of bona fide money, really shows up bitcoin’s disproportionate demands. Fintech analyst Tim Swanson has a deep dive on this topic, please read it; for those who’d rather not, let me quote two points. First:

“The participating computing infrastructure for Fedwire involves between ten and twenty thousand computers, none of which need to generate [power-guzzling cryptographic safeguards]. Its participants securely transfer trillions of dollars in real value each day. And most importantly: Fedwire does not take the energy footprint of Egypt or the Netherlands to do so. … the more than 2 million machines used in bitcoin mining alone consume as much energy as Egypt or the Netherlands consumes each year. And they do so while simultaneously only securing a relatively small amount of payments, less than $4 billion last year.”

The energy consumption, and the second point, shows up when users need to protect against a vulnerability of consensus-based transactions, called the Sybil attack (a.k.a. pseudospoofing). Consider the following reductively simple consensus-generating scenario. If there is a group of 10 members and most of them agree that K is true, then K is said to be true. But one day, another member joins the group and also signs on 14 of his friends. When the group meets again, the 15 new people say K is false while the original 10 say K is true, so finally K is said to be false. The first 10 members later find out that the 15 who joined were all in cahoots, and by manufacturing a majority opinion despite not being independent actors, they compromised the group’s function. This is the Sybil attack.

Because the blockchain secures transactions by recursively applying a similar but more complicated logic, it’s susceptible to being ‘hacked’ by people who can deceptively conjure evidence of new but actually non-existent transactions and walk away with millions. To avoid this loophole without losing the blockchain’s decentralised nature, its inventor(s) forced all participants in the network to show proof of work – which is the mathematical problem they need to solve and the computing power and related costs they need to incur.

Proof of work here is fundamentally an insurance against scammers and spammers, achieved by demanding the ability to convert electrical energy into verifiable digital information – and this issue is in turn closer to the real world than the abstracted concepts of NFTs and blockchain. The problem in the real world is that access to crypto assets is highly unequal, being limited by access to energy, digital literacy, infrastructure and capital.* The flow of all of these resources is to this day controlled by trading powers that have profited from racism in the past and still perpetuate the resulting inequality by enforcing patents, trade agreements, import/export restrictions – broadly, through protectionism.

* Ethereum’s plan to transition from a proof-of-work to a proof-of-stake system could lower energy consumption, but this is an outcome fantasy and also still leaves the other considerations.

So even when Black people talk about cryptocurrencies’ liberating potential for their community, I look at my wider South and Southeast Asian neighbourhood and feel like I’m in a whole other world. Here, replacing banks’ or credit-card companies’ centralised transaction verification services with a blockchain on every person’s computer is more of the same because most people left out by existing financial systems will also be left behind by blockchain technology.

Metakovan’s move was ostensibly about getting the world’s attention and making it think about racism in, for some reason, art patronage. And it seems opportunistic more than anything else, a “shot fired” to be able to improve one’s own opportunities for profit in the crypto space instead of undermining the structural racism and bigotry embedded in the whole enterprise. This is a system which owes part of its current success to the existence of social and economic inequalities, which has laboured over the last few decades to exploit cheap labour and poor governance in other, historically beleaguered parts of the world to entrench technocracy and scientism over democracy and public accountability.

I’m talking about Silicon Valley and Big Tech whereas Metakovan labours in the cryptocurrency space, but they are not separate. Even if cryptocurrencies are relatively younger compared to the decades of policy that shaped Silicon Valley’s ascendancy, it has benefited immensely from the tech space’s involvement and money: $20 billion in “initial coin offerings” since 2017 plus a “wave of financial speculation”, for starters. In addition, cryptocurrencies have also helped hate groups raise money – although I’m also inclined to blame subpar regulation for such a thing being possible.

I’ll get on board a good cryptocurrency value proposition – but one is yet to show itself. The particular case of ‘Everydays’ and the racism angle is what rankles most. “Depending on your point of view, crypto art could be the ultimate manifestation of conceptual art’s separation of the work of art from any physical object,” computer scientist Aaron Hertzmann wrote. “On the other hand, crypto art could be seen as reducing art to the purest form of buying and selling for conspicuous consumption.” Metakovan’s “shot” is the latter – a gesture closer to a dog-whistle about making art-trading an equal-opportunity affair in which anyone, including Metakovan himself, can participate and profit from.

If you really don’t want racism, the last thing you should do is participate in an opaque and unregulated enterprise using obfuscated financial instruments. Or at least be prepared to pursue a more radical course of action than to buy digital tosh and call it “the most valuable piece of art for this generation”.

This brings me to the second issue: what can the energy cost of culture be? For example, Tamil-Brahmin weddings in Chennai, my home-city, are a gala affair – each one an elaborate wealth-signalling exercise that consumes thousands of fresh-cut banana leaves, a few quintals of wood, hundreds of units of power for air-conditioning and lots of new wedding clothes that are often worn only once or a few times – among many other things. Is such an exercise really necessary? My folks would say ‘yes’ in a heartbeat because they believe it’s what we need to do, that we can’t forego any of these rituals because they’re part of our culture, or at least how we’ve come to perform it.

To me, this is excessive – but then I have a dilemma. As I wrote about a similar issue last year, vis-à-vis Netflix:

Binge-watching is bad – in terms of consuming enough energy to “power 40,000 average US homes for a year” and in other ways – but book-keepers seem content to insulate the act of watching itself from what is being watched, perhaps in an effort to determine the worst case scenario or because it is very hard to understand, leave alone discern or even predict, the causal relationships between how we feel, how we think and how we act. However, this is also what we need: to accommodate, but at the same time without being compelled to quantify, the potential energy that arises from being entertained.

At this juncture, consider: at what point does art itself become untenable because it paid an energy cost deemed too high? And was the thing that Metakovan purchased from Beeple, ‘Everydays’, really worth it? While I don’t see that it could be easy to answer the first question, the second one makes it easy for us: ‘Everydays’ doesn’t appear to deserve the context it’s currently luxuriating in.

Aside from its creator Beeple’s admission of its mediocrity, writer Andrew Paul took a closer look at its dense collage for Input Magazine and found “juvenile, trollish bigoted artwork including racist Asian caricatures, homophobic language, and Hillary Clinton wearing a grill”. (Metakovan said in one interview that he felt a “soul connection” with Beeple’s work.) ‘Everydays’, Paul continues, “appears to say more about the worst aspects of the art world and capitalism than any one … of Beeple’s doodles: gatekeeping, exploitative, bigoted, and very, very tiresome.”