Damien Hirst’s NFT Experiment Will Test Perceptions About Money, Not Just Art
Proving that value is shaped by collective agreement (or should that be delusion)
Beeple’s "Everydays: The First 5000 Days" NFT - Image from Shutterstock
British artist Damien Hirst is best known for art that features preserved animals. His piece entitled “The Physical Impossibility of Death in the Mind of Someone Living” created in 1991 features a Tiger Shark carcass suspended in a tank of formaldehyde. It has been displayed in London’s leading contemporary art galleries and was reportedly sold for at least $8 million in 2004.
Hirst’s creations demonstrate two key principles of art:
Art becomes art through an implicit agreement reached between its creator and those who consume it.
What gives art value is a collective understanding between the creator and those willing to exchange something of equivalent value to own it or experience it.
Those two principles apply to the concept of money too — Hirst’s latest project will prove that theory. I’m particularly excited that in doing so he’s going to demonstrate that the same principles apply to NFTs as to conventional art, and to cryptocurrency as well as conventional money.
Hirst’s latest project The Currency is his first true foray into Non Fungible Tokens (NFTs) — tokenised and unique artistic creations that exist using blockchain technology. In March 2021 — hot on the heels of artist Beeple who sold his NFT via auction for $69 million — Hirst offered a series of limited edition prints that could be bought using cryptocurrencies Ether or Bitcoin.
In his new project Hirst is offering 10,000 NFTs for sale, each corresponding to a physical artwork that he created in 2016. Each NFT and physical print combination will be sold once, but here’s the twist — the buyer must decide whether they wish to receive the physical artwork or the NFT (a unique digital ‘token’ that exists on the blockchain and will be held digitally via the owner’s encrypted wallet).
Each buyer has 12 months to decide whether to trade-in the token for the physical artwork or not. At the end of 2022 any physical prints not claimed and exchanged for the NFT, will be burned.
The experiment will tease out whether art collectors believe the value exists in the physical artwork, or the digital token corresponding to it. A certain amount of this is made possible by the emergence of NFT technology and the indisputable fact that a market now exists for digital collectibles that wasn’t there previously.
Conceptually though the experiment is about more than what makes something art, and what gives that artwork an innate value. The same questions exist about money and the same answers apply to money too.
This parallel isn’t lost on Hirst — the project was launched on July 14th and promoted in a video in which he discussed The Currency with former Governor of the Bank of England Mark Carney and journalists from The Financial Times.
What denotes art ?
We’ve all likely looked at works of art and secretly believed we could do better. Many parents have expressed that their 4-year-old child could reproduce some of the world’s most revered pieces of modern art — some have conducted experiments to prove the point.
The documentary My Kid Could Paint That probed whether artistic merit resides in the creation itself, or whether it needs to have been created by a particular type of person to have genuine merit or value.
The kid in that documentary allegedly made hundreds of thousands of dollars from their paintings — which proves the point:
It doesn’t matter what the thing is, be that a painting, a sculpture or a physical or virtual token; It doesn’t matter where it originated from or who created it or is responsible for it; If we collectively agree it has a value, then it has value.
Image from Shutterstock
The same goes for money
Just like art, our system of money has value because we collectively agree it does.
The $5 bill in your pocket equates in your mind with $5 of purchasing power.
The supermarket will allow you to exchange it for $5 worth of groceries.
Their supplier will provide them with $5 worth of stock in exchange for it.
The supplier’s bank will recognise that $5 of value when they pay it into their account.
The same goes for the numbers we see on the screen of an ATM, or on our banking app on our smartphone — the figures 5.00 denote $5 of value to us. We don’t need to withdraw it in physical cash to confirm that belief. When a bank run occurs and people rush to withdraw their money it gives them a sense of security that they can hold the money in their hands — but that comfort is hollow and baseless as we move towards a world where cash is less prevalent and money isn’t backed by gold any longer (not that it has been for decades). The collective agreement of value is all that matters.
The point? Our system of money only works because we collectively agree to take part in in it and subscribe to the notion of value being represented by numbers on the screen and non-precious metal, paper or polymer tokens that we treat as valuable. Our currency happens to be dollars, pounds, euros or yen as these are the accepted vehicles through which we store and exchange value. It could just as easily be Bitcoin, Damien Hirst prints or gummy bears.
Hirst’s experiment in this sense, is a barometer of public opinion amongst collectors of his art. It will establish the collective mood and we’ll learn how many of his customers are content to be able to prove that they own a Hirst via a digital token versus those that only allow themselves to believe it through being able to point to and touch a physical print.
Hirst’s project demonstrates another significant factor in deriving value — scarcity and finite supply. The collective agreement regarding money is that value is (in part) due to there being a finite supply of it in our economic systems. This makes the money we possess scarce and precious to us.
We cannot legitimately create more out of thin air, and have instead to work to earn more or sell something we earn in exchanges of value. The collective delusion is that we continue to ignore that our governments are printing more and more money and injecting it into our economies, without questioning that this could be weakening the value of the money we already possess.
Hirst’s project illustrates the importance of scarcity, amply. His NFTs are being sold for a fixed price of $2000 each, and the physical artwork features various protective measures to prevent counterfeiting. The NFTs that exist on the Palm blockchain employ technology that ensures each token is unique, immutable and cryptographically protected against duplication. Like the Bitcoin network, The Currency is a protected and closed ‘network’ with an in-built finite supply. The value associated with each NFT is protected against inflation of the supply which could notionally dilute the value of each original token.
Hirst understands that the value of his artwork is in part derived from scarcity and control of supply in the same way as Bitcoin owners understand that the value of their holding cannot be diluted by a future mass issue of additional Bitcoin. There will only ever be a maximum of 21 million Bitcoin mined and issued and this is built into the protocol, just as Hirst has built in the finite supply in The Currency.
Value goes up (and down)
The value of works of art, just like the relative value of currencies goes up and down based on a variety of factors.
Perception is once again a significant factor. I may feel more comfortable holding US Dollars than Argentinian Pesos right now, since the former is widely accepted as the global reserve currency and relatively stable whereas the latter is experiencing devaluation at an alarming rate. I may be more inclined to purchase a print from a renowned artist than an original artwork from my favourite local artist since there’s a larger market for the print and I stand more chance of the artwork retaining its value. Risk and market forces play a part in the value of both art and money.
In the same way, many speculate on the value of artwork and currency that they hold increasing too. Those who view Bitcoin as a speculative investment are hoping their investments may yield life-changing returns but are also mindful that another of its characteristic price crashes could wipe out their investment. Those buying Hirst’s NFTs will presumably hope that they increase in value too.
What will be most interesting to note in July 2022, is how many buyers have kept their NFT and how many have exchanged these for physical prints. The corresponding changes in price of each will also be interesting to observe.
Those who opted for the physical print may expect the value of it to appreciate over time, particularly when some are destroyed and scarcity increases. But the same market forces will presumably take hold over the remaining NFTs. Most interesting will be to see which appreciates (or depreciates) more — the digital NFT or the physical print.
As a barometer of public opinion it will be quite fascinating to see which commands a higher price and may well offer insight into the degree to which the public is accepting of a purely digital asset as a store of value relative to one that has physical form.
It could be reasonably supposed that the same acceptance would apply to money that exists in digital form only too (like Bitcoin) compared to that which can have a physical representation too (like US Dollars for example).
In this way, the real world could be seen to mimic the world of art (and vice versa)
Why does it matter?
Some might question why any of this matters?
Many will view paying $2000 for a digital token, or even for a physical artwork as nothing but frivolous.
Others will view the burning of the remaining prints at the conclusion of the experiment as wanton destruction.
Some will believe that experimentation with art and money is a privilege of the first world, and in many ways they’re probably right.
But this experiment isn’t just a self-indulgent project or an artistic gesture intended to offend or provoke discussion or thought — unlike preserving an animal in formaldehyde and presenting it in an art gallery to stimulate discussion over life and death. It’s an exploration of the concept of value and what we feel as individuals about what has value and what doesn’t. It’s about money as a concept and our collective perception of what gives money value in the modern, digital age.
Money may be considered the root of all evil. It may be what makes the world go round. But it affects us all, no matter who we are and how much we each have of it.
With so much about money being a matter of perception, delusion or collective agreement it seems important that we each understand it a little better.
I’ll be watching Hirst’s experiment with interest.
Note: This article is for informational purposes only. It should not be considered Financial or
Legal Advice. Consult a financial professional before making any major financial decisions.
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This article was originally published here on Medium. Toby Hazlewood can also be found on Twitter or at tobyhazlewood.com/.