The Uncanny Token

Abstract

Art is a good that consumers don’t understand. Consumers know what they like and like what they know. Everyone thinks they like art, except for those who think they dislike art. But most people don’t actually care about art. In fact, they can’t even see it. Consumers like things they understand. So consumers usually don’t like art, because they don’t understand it. But that can change, when art becomes a brand. Consumers like brands, because everyone knows what they mean. Prices also help, because consumers understand prices. The higher the price, the better the art. The art market is strange. For some reason, eggheads and billionaires agree that dirty canvases and lumpy rocks are worth millions of dollars because they were created by name brand artists. This makes no sense. They’re just decorations. It’s cheap and easy to make a copy that’s identical to the original. Not so fast. When art collectors buy artworks, what are they buying? The obvious answer is that they’re buying objects. But that’s obviously wrong. What they’re really buying is an investment in an artist’s career. Artworks are valuable in the art market only because they represent ownership of an entry on an artist’s catalogue raisonneé. When art collectors buy artworks, what they’re really buying is ledger entries. The artwork is just a physical token that represents ownership of a ledger entry. Along came NFTs. Some people love them, more people hate them, but no one understands them. Don’t worry, they’re actually easy to understand. But you might not like what they teach you about art and creativity. NFTs are blockchain entries that represent “ownership” of an artwork, typically a digital image. A lot of people seem to think NFTs are weird and nonsensical, because NFT owners don’t actually own anything other than their NFT. I don’t get it. The art market and the NFT market are identical. Art collectors were never buying objects, they were buying ledger entries. The NFT market just enables them to buy and sell ledger entries without having to bother with physical tokens. What a relief. Why do people hate NFTs? Because they are “uncanny.” Freud observed that the uncanny makes the familiar seem unfamiliar, by showing what is supposed to be hidden. Or rather, the uncanny forces us to recognize that the familiar was always unfamiliar, because we chose not to understand the truth of it. The art market seems familiar only because it uses objects to obscure its economic reality. The NFT market is uncanny because it dispenses with the physical tokens that make the art market seem familiar, and thereby reveals an unspeakable truth. What does it reveal? The art market has always been a securities market, and the NFT market is also a securities market, in exactly the same way. When you buy an artwork in the art market, you aren’t really buying an object, you’re buying a fractional interest in an artist’s career, represented by an object. In other words, artworks are just physical tokens that represent ownership of a ledger entry. NFTs are the same, they just eliminate the physical tokens and enable collectors to trade ledger entries directly. The art market is implicitly a securities market, but the NFT market makes it explicit. That’s why NFTs make people upset. They say the quiet part out loud. Understandably, many people find the NFT market repellant. We love art and tolerate the art market because we love art. The NFT market dispenses with all of the things people think they’re supposed to love about art, or at least most of them. No more objects, no more craft, no more galleries, no more museums. An NFT represents the price of an artwork, nothing more and nothing less. The thrill is gone when you turn the magic ticket into a claim check. But the venality of the NFT market is also its promise. Nothing has changed. We just opened our eyes. The art market has always promised access to the capital markets, but only to a precious few. For better or worse, the NFT market opens the floodgates.