The Reason for the Decline of NFTs

In 2021, it was difficult for me to park a car, call a repairman, or even go to dinner with anyone without being asked how to interact with (to buy and resell) NFT works. As a gallerist and computer scientist, I certainly should have known, but in reality, I didn't. I observed and limited myself to offering my audience two or three formal considerations, which in my opinion could have undermined the survival of that type of product, value chain, and go-to-market (i.e., how to sell it). I saw three types of problems: philosophical, legal, and systemic.

The first philosophical problem was divisible into two parts. First of all, it was not true that digital works coincided with the world of NFTs; in fact, digital artists have existed for many decades in many collections, museums, and even art fairs: I have appreciated them for years at both minor and renowned fairs. I personally have a good collection of them, without them being NFTs. Hack the border, Hackatao Second, it was not true that NFTs were, or even just represented, works of art of any kind. As I extensively explained in an ironic pamphlet I circulated in March 2021 (NFT for the Stranded), NFTs encode a contract related to an asset, but they are not the asset. It is not true that they will last forever, and even if NFTs last a long time, some server that contains the work (or image or asset, whatever you want to call it) will almost certainly turn off sooner or later. There are small exceptions (on-chain works), but they are related to more conceptual projects than actual works. “On-chain” means that the supposed work of art is encoded inside the NFT, which would presuppose that no servers are needed to store it, so there would be no danger of it being lost by stopping payment on the server bill. But “on-chain” works can only be a few bytes in size, in short, no more articulated than an emoticon or a stylized smiley face. Philosophically speaking, NFTs are contract certificates, not works of art.

Today, this problem is not solved: there are remedies, patches, that involve creating distributed, peer-to-peer systems (on users' computers) that do not imply bills to pay (systems like Universal File System), but it remains a substantial I-hope-I-can-get-by. Right click and Save As guy XCopy The legal problem, which largely still persists today. What would be the promise of blockchains, bitcoins, and ultimately NFTs? Answer: the certainty of ownership, authenticity, and ease of exchange. Well, only the last of these is true. The blockchain system provides a record of which wallet (which is a digital address) issued a certain contract and which wallets have exchanged that contract over time.

The legal problem is that the wallets are spontaneously self-declared. In the business registries of gallerists, artists, or operators, go and see, you will find a VAT number, a REA number, a tax code... but... no trace of codes related to blockchain or web3 wallets. What does this mean? That the coercive and legal system of police forces is not connected to this system.

If we buy a floppy disk with a digital work (oops... a boomer typo, maybe I should just say “file”) and a commercial invoice from a company registered with the chamber of commerce is attached, indicating “unique work by the artist Totankamen,” and then you should discover that it is not so, the tax code on the invoice allows you to file a complaint with the financial police. Antoni Tudisco China NFT for Moncler In the case of a blockchain certification, the financial police would not give you much attention; in fact, they might start investigating you. Why? Simple, to punish and block wrongdoers, you need trained people, with guns that shoot and prisons, which cost a lot of money, so the system of chambers of commerce and taxes linked with invoices are used to protect us, to beat up the bad guys. In the blockchain, on the other hand, the gas fees you pay (money used to exchange NFTs) do not go to the states but to the private individuals who run the servers; these private individuals are not interested in what is being exchanged or if someone is ripping you off, they don't care at all, to be clear. So legally, the crypto system has been substantially disconnected from the protection system.

This is changing; the future will not be like this, because, it should be understood, the technology is excellent, it is the states that are a bit slow to regulate and implement it. This opens up another small philosophical problem. Blockchains, bitcoins, the Joker movie, Rambo, the TV series Money Heist, and other representations of rebellion against systems are fascinating, but let's be clear, they are for tough people who accept living in what most people call “illegality” (or which philosophically and anarchically could only be called “freedom”), however it is defined, it involves living by fighting and accepting to remain unprotected in case of a problem. You can choose not to pay taxes, but are you willing to machete your way through the forest instead of taking highway 11 to visit a friend? Ringers 879 Dmitri Cherniak Now for the biggest problem, the systemic one, because the previous problems are being resolved. Works of art are not bought to be resold; if you buy them to resell them, they will not be revalued and will cause you emotional depression. You don't get married to have children, and you don't buy art to make money. You get married for love, and you buy art for love.

The lack of this requirement caused the value of NFTs to collapse. Contemporary art constantly increases in value, but it does not increase in value because Merlin the wizard is making it rise; rather, it increases in value because those who buy it receive an emotional dividend so strong that they will not want to part with it, despite the increased value. The problem with NFTs is that they had a very weak emotional dividend; not being able to actually enjoy them (except with more or less horrible dust-catching monitors), the only advantages were the talking-opportunity (the fact of being an early-adopter) and the supposed economic added value. Both of these dividends were destined to collapse, the first because “early” then becomes “late”, and the second because if we are all smart, by the formal law of information theory, it is equivalent to saying: we are all fools. All Time High in the City XCopy The responsibilities. The responsibilities are widespread, but in my opinion, the major operators in the art world should be put in the dock, who, as a ruling class, should have awakened consciences, not exploited them. Some auction houses, for example, let's remember the million-dollar bids. The responsibilities are widespread, but they are as great as the transactions carried out. Many artists, curators, and gallerists who the very unpleasant art system had, perhaps snobbishly, kept out of the system, took the opportunity for a comeback. There is nothing to say about this, and how can you blame someone who seeks to redeem themselves? However, most of these operators operated from tax havens, or moved there immediately after, despite transacting in high-tax countries, such as Italy and the Schengen area in general. In these cases, and only in these cases, I see a blundering responsibility even on the part of these operators, who from a final fortune of redemption did not aim to support, even by paying taxes, the weak points of the system. Instead of, like heroes, getting on stage and helping the new system grow, they ran away with the loot, betraying their own customers to death. And so, the snobbish art system, unfortunately, had seen well in many of these cases. If the artists themselves did not believe in the system, how could new investors enter? CryptoPunk 4156 For these reasons, NFTs have remained a terrible and shameful chapter of a part of the art world. But it should be understood that NFTs are not digital art; let's not get confused about this. The present has returned to more normal channels; today, projects are more mature and, above all, have economic values appropriate to the problems; the prices have, rightly, in my opinion, dropped. Governments are working to include wallets in business registries, and new operators will enter. The future of art is largely digital, and blockchains are an exceptionally well-structured mathematical formalism; the wild west will become a trading square, with the protections everyone deserves.