Cryptoart is any unique, digital creation authenticated on a distributed ledger. For most, this definition isn’t sufficient in explaining the origins of this art form and how its value is determined.
As the 21st century marches on, new generations are placing greater value on digitised products and economies, including artwork. Social networks and cryptocurrencies are booming, making it simpler and more attractive than ever to transact online.
The definition of what is considered art is constantly evolving and cryptoart is at the forefront of the latest wave, challenging the perceptions of novelty, value and authenticity.
It’s difficult to establish exactly when the first piece of cryptoart was created but the consensus seems to be that Mike Caldwell’s Casascius Coins were some of the earliest examples. These physical metal coins were minted in 2011 and each contains a private key on an embedded slip of paper which holds digital Bitcoin value. Once redeemed on the blockchain the cryptocurrency value associated with the physical coin is transferred to that user’s account.
The Rare Pepe crypto project was created by global artists between 2016 and 2018, based on the "Pepe the Frog" internet meme, and traded as NFTs on the CounterParty blockchain. In October 2021, a Rare Pepe - PEPENOPOULOS - sold at a Sotheby's auction for US$3.6 million.
The popularity of cryptoart exploded in 2020 when artist Beeple sold a collection of illustrations and animations entitled Everydays: the First 5,000 Days. The sale made him the third most valuable living artist in history, netting him a whopping US$69.3 million at the time of purchase.
Fast forward to 2022 and cryptoart has assumed a primarily digital presence. Contemporary examples include .jpeg files, internet memes, GIFs, 3D virtual renderings, video clips and music.
The value of these artworks is tied to non-fungible tokens (NFTs), verified and secured by distributed ledger technology (the blockchain). Given the digital nature of these pieces replication is simple. However, as with physical art, there can only be one original composition.
NFTs authenticate cryptoart, providing an immutable digital footprint of ownership. To better comprehend what this means, think of NFTs as unique identifiers tethered to individual works of art. When cryptoart is bought, sold or gifted an NFT transaction is recorded and validated across the entire blockchain network.
This method of certification is perhaps more definitive than practices used to verify physical artwork, such as paintings and sculptures. In these instances historians and experts establish legitimacy by analysing tangible elements of the art. As time goes on the means of confirming authenticity naturally diminish.
Conversely, blockchains are designed to be decentralised, perpetual registers that exist on peer-to-peer networks.
Cryptoart is also attractive as an investment opportunity because you can divide ownership rights among a number of people. Essentially, shares in the value of the artwork can be split among a network of individuals. These token shares can be traded on the blockchain.
There's also an element of artistic evolution that can be instilled within cryptoart, such as seamlessly selling entire collections - including those that may be unfinished at the point of sale but completed over time. Digitisation allows cryptoartists the ability to retain a presence in their work, potential adding futher value and innovation. Think of it as being similar to when Kanye West makes updates and alterations to his digital albums.
After its official streaming debut, West made changes to his 2016 album The Life of Pablo. The updated versions, including alternate mixes and instrumental adjustments, were made available on streaming services and for digital purchase on the musician's website. Changes like these are far less feasible when considering tangible pieces.
Easily the most problematic issue threatening the longevity of this innovative artform are its environmental implications. Validating transactions on the blockchain is known as crypto mining.
This process involves solving complex mathematical equations to unlock encryptions. Due to the profitable incentives (cryptocurrency rewards) offered for these mining tasks, people employ significant volumes of computing power which expends enormous amounts of electricity.
There’s a few different approaches that are attempting to change the way transactions are validated in an attempt to be less damaging ecologically. Instead of a proof-of-work concept that drives competition between miners to solve the cryptographic algorithms, a proof-of-stake mechanism randomly selects validators to verify trades. This process substantially reduces the quantity of wasted electricity resources.
Other solutions include trading carbon credits - although these are validated on the blockchain - and real-world environmental acts such as planting trees and waste management initiatives.
Despite significant falls in value across the board, digital currency markets remain popular and continue to attract new investors. Intense volatility, reluctant real-world adoption and accessibility issues have emboldened consumer advocates to petition governments to regulate cryptocurrency markets.
If you're interested in investing or simply trying to understand how it works check out our handy guide to cryptocurrency.