Algorithmic Democracy by Domingo García-Marzá & Patrici Calvo

Author:Domingo García-Marzá & Patrici Calvo
Language: eng
Format: epub
ISBN: 9783031530159
Publisher: Springer International Publishing

7.2 Cryptoeconomics: Ethical Aspects of the NFT Revolution

The irruption of blockchain technology has led to a revolution for the art world, the consequences of its unprecedented disruptive process are being strongly felt across all its areas and dimensions: economic, artistic, theoretical, aesthetic, reflective, sustainable, moral, etc. The emergence of so-called crypto-art or cryptographic digital art is of particular relevance. It is based on NFTs, smart contracts and cryptocurrencies which, according to their advocates, guarantees the ownership, authenticity, scarcity, exclusivity, immutability, verifiability and traceability of digital works.

Although there are precedents for this development, crypto-art was consolidated in 2017 through the trade in digital artworks. Until then, the problem with digital artworks was their high and rapid rate of replication across the network, which hindered the possibility of giving them a market value. Scarcity as a dominant value of economics was extensively discussed by Carl Menger—founder of the Austrian School and one of the fathers of the marginalist revolution along with William Stanley Jevons and Leon Walras—in his seminal book Principles of Economics (1871). For Menger, economic goods are the source of individuals’ personal progress in a society, as their consumption allows for optimal states of individual well-being. However, unlike non-economic goods, they are scarce and their appropriation is limited. Therefore, as they can never meet the existing demand—if they did, they would not be economic—agents must compete with each other to appropriate these goods and thereby satisfy their needs and desires, which is what underpins the development of these commodities. By focusing his study on the analysis of the scarcity of consumer goods, the appropriation of the best mechanisms to satisfy them, and the underlying competitiveness, Menger laid the foundations of the modern concept of economics, as “(…) the science which studies human behaviour as a relationship between given ends and scarce means which have alternative uses” (Robbins 1932, 15).

Using the blockchain technology that supports the Ethereum cryptocurrency—fungible, exchangeable tokens—digital artists were able to endow their works with an aura of scarcity, authenticity and proprietary control through tokenization; that is, by converting them into NFTs, which are non-exchangeable resources recognized, encrypted and protected by this cryptographic platform.

Tokenization is the process of turning anything into a scarce digital asset through the “(…) encapsulation of value in tradeable units of account, called tokens” (Freni et al. 2020). Thus, through the “(…) creation of a self-governed (tok)economic system, whose rules are programmed by the token designer” (Freni et al. 2020), tokenization offers the possibility of creating digital scarcity and, at the same time, eliminating the commercial intermediation that makes works of art more expensive, saving time and money in transactions and, therefore, lowering costs and improving profits.

From then on, the market value of digital works began to be established, and rose exponentially; on 11 March 2021 Mike Winkelmann, aka Beeple, sold his digital work Everydays: The First 5000 Days for 57 million euros (Fairfield and Trautman 2021; Joselit 2021; Dean 2021).

With the sale of Beeple’s work, the trade in crypto-art or cryptographic digital art

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