The non-fungible tokens for art and culture that have been making waves in recent weeks are economic peculiarities. They offer ownership – cryptographic, certain, secure ownership – but none of the exclusive rights we usually associate with ownership. You can freely stare at my two miserable CryptoKitties as easily as I can explore Beeple’s $69 million “EVERYDAYS.”
There’s an obvious question here: What are people actually buying when they buy an NFT? The slightly counterintuitive answer suggests that what we’re seeing with NFTs is the emergence of a new type of cultural economy built around one of the oldest forms of cultural production: patronage.
Let’s begin with the theory of property rights. Economists tend to talk about property rights as not a single thing but a bundle of distinct rights governed by law, contract and even custom.
For example, you can own something without possessing it. You can possess something without having the right to transfer it. You can control something without having the right to exclude others from enjoying it.
Property rights are highly divisible. I can write a contract to transfer my property to you but at the same time specify that I retain physical access or a revenue stream. Resale royalty frameworks for art are a tangible instance of building the idea of these divisible rights into law.
See also: What Are NFTs and How Do They Work?
To buy an NFT of a piece of art is to own something without having the means of excluding others from enjoying it – or at least enjoying looking at it, watching it or listening to it. The pleasure a buyer gets from owning something is the experience of ownership itself. How much is that experience worth? The wild prices we’re seeing in NFTs right now is the process of price discovery for the value of this pure ownership.
Ownership-as-consumption only sounds weird if you don’t think about it for very long. There’s a long tradition in the art world of owning art and lending it to a museum – appropriately acknowledged – for the public to enjoy. Some of the world’s private collections of art are held in free port storage facilities where they are seen rarely if at all.
To be fair, high-cost ownership-as-consumption is a niche pastime. But here’s where NFTs are potentially very interesting: They don’t have to be more than niche to have a big impact on the economics of art.
An artist who receives one payment from a wealthy NFT investor is no worse off than an artist who receives a large number of smaller payments from cultural consumers. In fact, they’re probably better off. The NFT-funded artist can continue to work in the open cultural space to gain fans, sell tickets, market merchandise or just get his or her art out to as wide a public as possible.
This is why one of the main criticisms from the cultural community – that NFTs look like a step towards a digital rights management dystopia, a creation of walled gardens that narrows who can access cultural artifacts – is so off the mark. NFTs allow us to financialize culture, but at the same time leave it open access for anyone to view, watch or listen to.
This is a lot like the traditional patronage model of art funding. But it’s much better.
Historically, patronage involved wealthy patrons directly supporting individual artists. As Tyler Cowen points out in his "In Praise of Commercial Culture," patronage funding meant the artist’s fortunes were hostage to patrons’ whims. Artists had to flatter and pander to the tastes of a narrow elite few. And while some patrons supported the construction of public monuments in their honor, a lot of patron-funded art was kept in private homes and behind locked doors.
NFTs offer the benefits of patronage without the well-understood costs. Wealthy individuals can continue to support art and enjoy the experience of ownership. Rather than relying on a small community of the rich in, say, Venice, digital artists can immediately reach a global supply of patrons. The ownership of art can be demonstrated (cryptographically proven, if really necessary) to all who the patron seeks to impress with her impeccable taste. But at the same time the art itself remains free for the public to enjoy. This looks like the old patronage economy but without the exclusion we normally associate with patronage.
There’s some infrastructure missing to fully realize the vision outlined here. For instance, artists and platforms need to better empower conspicuous ownership. Owners need mechanisms and tools and even norms to display the art they have purchased to others that isn’t just a link to an OpenSea or Rarible page.
Cultures of sharing and frameworks of what constitutes legitimate sharing need to be developed. We need a widely accepted Creative Commons-style framework to establish standard practices and expectations around use and reuse.
But these will come. For now, the NFT standards that have suddenly launched into mainstream consciousness provide the basis of exciting innovation in the funding and production of culture.