How are cryptoeconomics and art connected? Do artistic approaches to the characteristics of bitcoin, blockchain and other forms of tokenization hold the potential to decentralize cryptoeconomic systems? Examining these questions, researcher Laura Lotti finds important impulses in a self-organizing forest and an emergent religion based on a collectively curated set of beliefs – examples of projects that may provide new conceptual and practical tools to rearticulate some of the main questions afflicting the field of art production.
As Bitcoin is approaching its tenth anniversary, blockchain is eating the art world – with an increasing number of startups, galleries, institutions and more or less independent initiatives exploring second generation blockchains, such as Ethereum, and the emergent practice of tokenization as a means to actively and variously intervene in the structures and processes underlying the rampant financialization of art. Tokenization refers to the issuance of smart contracts tokens, conventionally (but not necessarily) through the ritualized event of an Initial Coin Offering (ICO), that allow access to the existing or prospective value generated by a specific asset – such as gold, computing power, artworks or more generally, an alluring value proposition for a decentralized ecosystem. Initially heralded as a new tool for autonomy, foreshadowing the disintermediation of the processes of value generation and transfer from mainstream financial-institutional channels and the creation of network effects around independent projects, in the art world tokenization has brought some discontents too, as Rob Myers bitter-sweetly notes. 
As a matter of fact, one of blockchain’s groundbreaking features is the capability to enforce digital scarcity by providing each tokenized representation of an asset (e.g. an artwork) with a unique ID that is immutably recorded on a decentralized ledger. This enables the tracking of provenance, ownership and authenticity of such asset, promising to overcome some of the major issues currently plaguing the art market – namely, the opaqueness and asymmetries of information, illiquidity and high transaction costs, and high barriers of entry to new collectors/investors – but ultimately, in most cases, merely reinscribing and reinforcing incumbent property and financialization forms into this new space.
»…one is left wondering what the affordances of crypto-tokens and distributed ledger technologies actually afford to artists and cultural producers seeking autonomy from current institutional-financial forms.«
This is evident with regards to the issue of collectability in the age of networked markets and digital reproduction. On the one hand, the tokenization of physical art objects reproduces the rent model characteristic of financial capitalism and current Internet platforms.  This is exemplified by Maecenas, a self-defined »decentralized art gallery.« Maecenas tokenizes artworks into tradable, fractional ownership certificates that are auctioned on the open market and can be acquired through Maecenas’ ART token – while the artworks themselves are safely kept in freeports and never exhibited,thereby making contemporary art literally disappear, as J.J. Charlesworth quips.  On the other hand, the tokenization of digital assets – epitomized by the recent trend of cryptocollectibles (from RarePepe to the infamous CryptoKittles)  imports the logic of scarcity inherited from the industrial paradigm to the informational domain, in direct antithesis with the fluidity, capability and mutability of the digital medium and against the ethos of open source production.  These approaches, it is argued, merely treat art as currency  a universal numeraire for the circulation of cultural capital, which is abstract, transactional and that, in virtue of its detachment from its underlying reality, can be exchanged for anything else, including status, political influence, tax evasion and money laundering.
With the majority of the projects in the space (the art market-milieu being a limit case in a broader landscape) descending at various speeds from the peak of inflated expectations into the trough of disillusionment  due to forks, scamcoins, ransomware, technical challenges, not-so-interesting applications and schizophrenic politics all around, and increasingly confirming the fact that decentralized software architectures do not necessarily decentralize power  one is left wondering what the affordances of crypto-tokens and distributed ledger technologies actually afford to artists and cultural producers seeking autonomy from current institutional-financial forms.
From this standpoint, perhaps an interesting question to pose is not so much what blockchain can do for (the) art (market) but what art can do for blockchain to begin unveiling and making felt such affordances; to identify, to say it with J.J. Gibson, the properties of these new digital objects taken with reference to the agents in the system (but importantly, not dependent on their subjective values or perceived experience).  In this context, a new breed of art-tech startups and initiatives is emerging that, by availing itself of the standards and best practices in the ecosystem, leverages the transactionalization of interactions afforded by the blockchain data structure toward the design of new forms of value generation and distribution– specifically, exploring the possibility to create distributed autonomous organizations (DAOs). This is where things can still get weird, exciting, bewildering.
»Perhaps an interesting question to pose is not so much what blockchain can do for (the) art (market) but what art can do for blockchain to begin unveiling and making felt such affordances…«
Ambitious projects such as terra0, a scalable framework for augmented ecosystems, and 0xΩ, a blockchain-based religion, are examples of how artistic engagements with smart contracts and distributed ecosystems can generate new imaginaries capable to answer some of the most pressing issues of our times (e.g. environmental management, coordination of beliefs systems) rooted, however, in the concrete possibilities of the technology, and in so doing, shine new light on the »real affordances«  of these new tools. terra0 aims to provide the infrastructure for the self-management of natural resources (forests, woodlands) through a combination of smart contracts, sensors, open-data oracles, and AI bots. terra0’s recently minted Flowertokens, an experimental test-case in this direction, take the concept of cryptocollectibles offline, extending the notion of decentralized verification to physical assets — in this case, live assets, dahlias. While CryptoKitties derive their rarity from their provably unique genetic makeup – which affects the »cattributes« of each kitty –the uniqueness of each Flowertoken is provided by the metadata (growth rate and height) of each plant, which is captured by an image processing software and transmitted to an Oracle. The project consists in an installation and website from which users and visitors are able to buy and sell tokens, in addition to monitoring the history and status of the plants. Anyone can participate in the experiments through a Metamask browser extension and Ethereum wallet in order to be able to interact with the decentralized application. Flowertokens were launched on 23 July at the price of 0.09 ETH each (approximately the equivalent of 40 USD at the time) in a limited number of 100 tokens corresponding to the dahlias available. In spite (or because of) the experimental nature of the project, at the time of this writing, all available tokens have been purchased at least once with some being offered for resale by the current owners at prices between 0.3 and 12000 ETH – in a sense, validating the market for this innovative approach. 
0xΩ instead presents itself as a »consensus-driven hyperstitional engine for the creation of sacred objects«  a blockchain-based religion. Launched at the last edition of Rhizome’s Seven on Seven, it makes use of both non-fungible tokens and token-curated registries (a design pattern for tokenized economies that enables the decentralized curation of the content of a list or registry)  to allow token holders to collectively curate shared beliefs and sacred artefacts. The initial proposal for a sacred object is auctioned off in the form of a non-fungible token. The proceeds of the auction are used by a DAO to realise the idea and artefact that the proposal is describing, by spreading it through various channels and hiring artists tasked with the goal of building the object. Proselytes speculate on the yet-to-be-created objects through the circulation of their tokens (aptly called prayers, that represent shares in the initial idea); the more the circulation of prayers, the more the transactions fees (that are returned to the DAO), the more robust the economic engine of 0xΩ becomes. Here speculation and beliefs drive the system to grow the religion more, leveraging distributed consensus and revisable governance as a way to cultivate and express a collective consciousness.
» … a tokenized economy is not necessarily a cryptosystem. A cryptosystem, whichever the kind, is not owned by anyone, largely self-sufficient, and usable by any agent (human and non-human) in a public context. A self-organizing forest, an emergent religion based on a collectively curated set of beliefs, are apt examples of cryptosystems.«
In contrast with the previously mentioned approaches to the tokenization of physical and digital art, these experiments couple the affordances of crypto-tokens with the nascent discipline of cryptoeconomics, foreshadowing its potential to unlock the imagination and ideation of new ecosystems of value through a combination of cryptography, economic incentives and interaction design. Ethereum’s founder Vitalik Buterin defines cryptoeconomics as a subset of economics that »uses cryptography to prove properties about messages that happened in the past [and] economic incentives defined inside the system to encourage desired properties to hold into the future,« entwining code and economics in unprecedented ways.  Bitcoin wove cryptoeconomic mechanisms at the core of its consensus protocol; smart contracts tokens extend this novelty to the application layer, opening up a whole new field of design focused on the realization of cryptosystems – that is, systems in which the token »must work as a necessary element of a self-sustaining system which is a public utility.«  While cryptosystems rely on the decentralized holding and circulation of their native tokens as an intrinsic aspect of their success and long-term sustainability, a tokenized economy (case in point: Maecenas) is not necessarily a cryptosystem. A cryptosystem, whichever the kind, is not owned by anyone, largely self-sufficient, and usable by any agent (human and non-human) in a public context. A self-organizing forest, an emergent religion based on a collectively curated set of beliefs, are apt examples of cryptosystems.
Cryptosystems are uniquely enabled by the affordances of the blockchain data structure, which for the first time combines the immutability of a shared past, cryptographically recorded on a distributed ledger, with the programmability of a shared future through economic incentives, essentially encoding »skin-in-the« game at the protocol level for each and every self-interested actor – whether humans or machines – toward a common goal. From this standpoint, the affordances of tokenization in terms of digital scarcity and pseudonymous unique transactions can only be understood as a means toward the possibility to create cryptosystems through the design of cryptoeconomic, i.e. tokenized games – protocols for economic, but also social and cultural interaction – aimed at tightly aligning incentives between »investors«, »producers«, »consumers« and ultimately blurring the boundaries among them as mutual stakeholders in the long-term success and sustainability of a common project.
The nature of the above-mentioned experiments remains propositional, since the underlying technology is still in early stages of development. Yet, through the concreteness of their designs and visions, they point to a whole spectrum of new futures that could spring from their offers as emergent plotlines for new social science fiction.  In this sense, they may have more to do with R&D in cryptoeconomic design than with art galleries and collectors as such. And that’s part of my point. They are proofs of concept of new ways of articulating processes of value generation and distribution according to new organizational patterns that put the sacred object, the forest, the art asset/practice in the foreground – leveraging speculation and distributed consensus as a means to operationalize the resources needed for the realization of said common project (i.e. the management of natural assets, the collective composition of new sets of beliefs).
Yuk Hui and Harry Halpin’s observation in the context of social networks design resonates with the potentials for the new interactive-transactive forms afforded by this new space: »A project is also a projection, that is, the anticipation of a common future of the collective individuation of groups. …By projecting a common will to a project, it is the project itself that produces a co-individuation of groups and individuals.«  Cryptosystems make explicit the sets of economic relationships and hypothetical incentives that contribute to the scattered holding of a common will for the concretization of a projection (Nature 2.0,  distributed revisable gods) into a viable project. These new projections – imaginaries – for common futures are uniquely made possible by bridging – through an artful blend of design, computation and economics – the affordances of these technologies with specific use cases, being forestry management or ideological convictions, towards the articulation and experience of (not-only-)human values. Of course, blockchains and cryptosystems don’t make any of these systemic issues easy to solve, but they make them possible to think about and reason about in entirely new ways.
Thus if tokenization is merely an accelerated form of transactionalization, these projects illustrate some of the ways in which tokenization, coupled with cryptoeconomic mechanisms, may provide new conceptual and practical tools to reproblematize and rearticulate some of the main questions currently afflicting the field of art production – the valuation, funding and collecting of art in light of the increasing financialization of the field – gesturing to some of the ways in which the structural and transactional affordances of smart contracts tokens have the potential to recode and transcode fundamental mechanisms of how finance works.
As the regulatory debates about the status of these new financial assets continue, experts’ opinion on the valuation of cryptoassets is divided between considering them either as a financial security or a store of value, confirming the ambiguous nature of smart contracts tokens and performing the difficulty to frame them according to any pre-existing category. On the one extreme of the spectrum, tokens are seen as new kinds of derivatives contracts with no underlying, or more precisely, contracts in which the underlying is constituted as a claim to the uncertain value creation by the platform of which the token is native  pure, self-fulfilling speculation. At the other extreme, the view of cryptoassets as stores of value, which emphasizes decentralization and security in a cryptosystem, points to the synergistic relation between the function of store of value with the utility of each token – to what the token gives access, for what it is possible to exchange it.  Thus, while crypto-tokens’ underlying value, at the time of issuance and until realization, remains unbounded – structurally, it cannot be known in advance – in these cases each token is fully backed by the speculative value of an artistic proposition, which becomes realized through the market process by being acknowledged, valued, by a network of peers, according to a synthetic temporality that short-circuits the loop between production, exchange and sheer speculation, and collapses their differences on the computational plane of the blockchain.
»Thus if tokenization is merely an accelerated form of transactionalization, these projects illustrate some of the ways in which tokenization, coupled with cryptoeconomic mechanisms, may provide new conceptual and practical tools to reproblematize and rearticulate some of the main questions currently afflicting the field of art production…«
In this sense, Flowertokens’ and 0xΩ’s native tokens prefigure new kinds of financial instruments capable of accounting in a non-reductive way for the economic status of non-standard assets that, while being traded as discrete »commodities,« are constantly generative of value – not only in the moment in which they are transacted on the market as a finite product but from the moment in which they are produced  – which is characteristic of art but also environment, education, and any kind of speculative, propositional and necessarily networked project. Furthermore, they unlock new possibilities for new funding models and revenue streams for the arts: Flowertokens take the art world as a test bed and launch pad from which to generate new human-computational hybrids – that really exist through the crowdfunding of information and capital. 0xΩ instead, takes religion as a vehicle for art patronage (each idea for a sacred object being a unique proposition for an artwork, represented by a non-fungible token) and leverages distributed consensus as a way to collectively curate registries of artefacts and associated beliefs.
In so doing, both projects also redefine the question of digital rarity and collectability through the design choices of their economic games and their engagement with smart contracts – turning forms of collecting based on private property into forms of staking based on common access, curation into a collective gamified form of speculation, and viewership into participation – blurring the boundaries between art project and business model and, in the process, gesturing to how art can operate differently through the encounter with this new technological infrastructure. Extending on this, they can be seen as new kinds of financial instrument offered by the artists to the art community at large, turning collectors and audience into investors and players, that are at once a stake in the future success of each art project (as a collective endeavour made possible by heterogeneous agencies) and a way to hedge against the potential disruption of the current art ecosystem, while actually performing it.
In so doing, they suggest that the financialization of art (and financialization in general) is not an inherently financial problem. It is inextricably woven with the specific affordances of the digital objects and computational systems that enable the all too familiar practices of abstraction, quantification, recombination and extraction of information as value in digital environments. That is to say, financialization can be leveraged in generative and propositional ways through new technological affordances; affordances that cannot be suggested through interface design and wireframes, but only through the engagement with new interactive protocols, based on tokens as conduits to the experience of a decentralized ecosystem. 
Since the times of New Tendencies (1961-1973) and Cybernetic Serendipity (1968), artists have played a crucial role in pushing the boundaries of technological research by exploring, and at times, »misapplying,« the affordances of new technologies.  My wager is that cryptoeconomic systems – and their native tokens, as a new asset class endowed with entirely new affordances – introduce a difference in kind (i.e. formally and structurally) in the ways in which value generation and distribution are expressed and accounted for in digital environments. And artistic approaches to the design of cryptosystems – as a new, yet little studied, economic, but also social and cultural, practice – can shine new light on the »real affordances« of these computational objects and data structures, and therefore need to be taken seriously.
While the success of these endeavors heavily hinges upon the capacity of the ecosystem to overcome its own hype – including technical challenges of scalability and interoperability, and the duplicitous hostility of the legacy apparati – here the art and experimentation lies in the expansiveness of the imaginary designs of the social-economic-aesthetic games that are afforded, almost exclusively, by the underlying technological infrastructure. What would it mean to conceive of design patterns that would incentivize coordination and allocation of capital to support the arts – through new funding streams and models for self-sustainable organizations that anyone can adopt? And what would that art be capable of? While the answer lies in one (or several) of the many futures that are simmering and bubbling in cryptospace, at least now we have some tools to begin playing with these questions.
- R. Myers, Tokenization and Its Discontents, Furtherfield, 2017. https://www.furtherfield.org/tokenization-and-its-discontents/
- As Tim Schneider aptly puts it in his discussion of Maecenas« highly anticipated first auction of Warhol’s 14 Small Electric Chairs: »›platform‹ is a synonym for ›middleman,‹ and middlemen are inherently contradictory to any sincere effort to decentralize anything—at least, if they’re charging a fee for their presence at the crossroads.« T. Schneider, »The Gray Market: How One Warhol Auction Embodies the Blind Spots of Many Blockchain Art Startups and Other Insights,«ArtNet News, 2018. https://news.artnet.com/opinion/gray-market-maecenas-blockchain-auction-1308482.See also: R. O’Dwyer, Tokenization and the Art of Rent: Part One, 2018. http://www.rachelodwyer.com/blog.html
- J.J. Charlesworth, »Will the Blockchain make art disappear?« ArtReview,October 2017. https://artreview.com/opinion/ar_october_2017_opinion_will_the_blockchain_will_make_art_disappear/
- The phenomenon of cryptocollectibles has exploded with the introduction of non-fungible tokens – NFT- of which CryptoKitties is the most well known example. NFT are ERC721 tokens – a new Ethereum standard proposal for »provably unique« digital assets, that embed uniqueness in the contract itself, allowing one to store a metadata – such as an HTTPS link or IPFS hash – to each token’s attributes on-chain, bringing digital rarity to online space for the first time. While ERC20 tokens, such as Maecenas’ ART, function well as settlement mechanism due to their interchangeability and divisibility, NFT are indivisible and non-interchangeable.
- The emblematic Rare Digital Art Festival, which took place in NYC in March 2018 greatly encapsulated this new tendency:»Rare digital art is a movement to take internet assets that have previously been infinitely copyable e.g. songs, memes, etc. and turn them into provably rare, tradable blockchain assets.« At: https://raredigitalartfestival.splashthat.com/. See also: M. Zeilinger, »Digital Art as ›Monetised Graphics‹: Enforcing Intellectual Property on the Blockchain,« in: Philosophy and Technology Journal 30.1, 2016.
- See: R. Arcand, »Unlimited Editions,« Real Life Magazine, 2018. http://reallifemag.com/unlimited-editions/.
- See: C. Burniske and Tatar, J. Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond, New York: McGraw-Hill Education, 2017.
- R. Bartlett, »Blockchain Doesn’t Decentralise Power,« Enspiral Tales, 2017. https://medium.com/enspiral-tales/blockchain-doesnt-decentralise-power-5918c168e6f6
- J.J. Gibson defines affordances as those »properties of things taken with reference to an observerbut not properties of the experiences of the observer.« In this sense »they are not subjective values,« and further admits that »it is not always easy to perceive which will be provided.« J.J. Gibson, »The Theory of Affordances,« in: The Ecological Approach to Visual Perception, Boston: Houghton Mifflin, 1979, p. 137
- Design guru Don Norman makes an important distinction between perceived affordances and real affordances, defining the latter as those that »do not always have to have a visible presence and in some cases, it is best to hide« but that, even more so than »perceived affordances« on the screen, »reflect the possible relationships among actors and objects« in a new computational system. Against the CHI community of the times, Norman argued that in the field of digital design there is little place for and room to experiment with perceived affordances: »The affordance exists independently of what is visible on the screen. Those displays are not affordances: they are visual feedback that advertise the affordances.« This is where blockchains may open up new fields for digital design that we are only beginning to explore. D. Norman, »Affordance, Conventions and Design, Part 2,« Interactions, May 1999, pp. 38-43. https://www.jnd.org/dn.mss/affordance_conv.html.
- See: https://flowertokens.terra0.org/.
- Quote from the recorded presentation of 0xΩ launch event. Matt Liston and Avery Singer, »Seven on Seven 2018,« Rhizome. http://rhizome.org/editorial/2018/may/23/seven-on-seven-2018-the-10th-edition/.
- »Token-curated registries are decentrally-curated lists with intrinsic economic incentives for token holders to curate the list’s contents judiciously.« M. Goldin, »Token-Curated Registries 1.0,« 2017. https://medium.com/@ilovebagels/token-curated-registries-1-0-61a232f8dac7. One example of TCR is adChain, which applies the pattern to the creation of reputable lists of publishers, aiming to solve some of the problems of the online advertising business. See also: S. de la Rouviere, »City Walls & Bo-Taoshi: Exploring the Power of Token-Curated Registries,« 2017. https://medium.com/@simondlr/city-walls-bo-taoshi-exploring-the-power-of-token-curated-registries-588f208c17d5.
- V. Buterin, Introduction to Cryptoeconomics,2017. https://www.youtube.com/watch?v=pKqdjaH1dRo
- M. Goldin, Mike’s Cryptosystems Manifesto, December 2017. https://docs.google.com/document/d/1TcceAsBlAoFLWSQWYyhjmTsZCp0XqRhNdGMb6JbASxc/edit
- Vitalik Buterin on cryptoeconomics: »I’d be more interested in seeing social science fiction, […] that explores also all of these complex ideas about how people can interact and how political systems can work, how economic systems can work, how they can fail. Particularly, how they can fail in ways that create interesting stories without anyone being literally Hitler« V. Buterin and Cower, T. »Vitalik Buterin on Cryptoeconomics and Markets in Everything, Ep. 45,« Conversations with Tyler, 2018. https://medium.com/conversations-with-tyler/vitalik-buterin-tyler-cowen-cryptocurrency-blockchain-tech-3a2b20c12c97.
- Y. Hui and Halpin, H. »Collective Individuation: The Future of the Social Web,« in: Unlike Us Reader: Social Media Monopolies and Their Alternatives. Edited by G. Lovink and M. Rasch, Amsterdam, 2013, p. 115.
- See: T. McConaghy, »Nature 2.0,« 2018. https://medium.com/@trentmc0/nature-2-0-27bdf8238071
- For an analysis of cryptoassets« valuation within the framework of the infamous Black-Scholes for the pricing of options see: J. Antos and McCreanor, R. »An Efficient-Markets Valuation Framework for Cryptoassets using Black-Scholes Option Theory,« 2018. https://medium.com/therationalcrypto/an-efficient-markets-valuation-framework-for-cryptoassets-using-black-scholes-option-theory-a6a8a480e18a – against the view of cryptoassets as merely an »innovative form of equity« the authors argue that »the purchase of a cryptoasset is essentially a claim on uncertain value creation, as opposed to a claim on an underlying asset whose value by definition has an upper bound«.
- For a discussion on these theses, see: J. Kilroe, »Velocity of Tokens,« 2017. https://medium.com/newtown-partners/velocity-of-tokens-26b313303b77; Q. Wang, »The False Dichotomy of Utility and Store of Value,« 2018. https://medium.com/@QwQiao/the-false-dichotomy-of-utility-and-store-of-value-27fe12bf3bdb.
- »Art is produced as a commodity, it doesn’t become one when it is sold«.J. Enxuto and Love, E. »Institute for Southern Contemporary Art,« 2016, http://theoriginalcopy.net/isca/.
- Don Norman’s differentiation between perceived affordances and real affordances becomes again relevant here. see note 10.
- See: Ashley Scarlett, »Realizing Affordance in the Techno-Industrial Artist Residency,« Schloss-Post, 2018, this issue.