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NFTs: Museums Can Build Other, Better Digital Stuff

Category: Center for the Future Of Museums Blog
A person browsing from a large digital screen with images of objects
Museums have collectively invested millions in systems to digitize, organize, store and, in many cases share, their own collections. How might they use that infrastructure to support trusted, stable digital collectibles? Image: Cleveland Museum of Art. CC BY-SA 2.0 Flickr Credit Museums and the Web

 


 

“When I was a congressional aide, we had an expression, ‘No idea was too stupid to say out loud,’ so here it is, hear me out. Instead of buying these ships? Don’t buy these ships. Buy other ships. Better ships. That’s my idea.”

–Sam Seaborn, The West Wing (Aaron Sorkin)

Like me, you may be following the NFT craze with interest, some puzzlement, and a bit of skepticism. Are NFTs here to stay, or are they a fad, like the Dutch tulip mania of the 1630s, or the mid-nineteenth century “hen fever,” fated to peak and crash over the course of a few years? Do NFTs afford museums a legitimate opportunity to turn a profit, even if only while the fad lasts, or a long-term way to expand their mission-related outreach? Do the risks (environmental, financial, reputational) outweigh the potential advantages?

The more I think about these questions, the more I wonder if the current debate about NFTs is missing a major point. The strengths and weaknesses of these digital assets are tied directly to blockchain. Blockchain, and the cryptocurrency world it supports, is a gigantic experiment in generating wealth based on finding new ways to exploit existing infrastructure. Skeptics might well tag it as a classic example of the “tragedy of the commons,” in which individuals or companies exploit a shared resource (in this case the internet, and national and state power generation and distribution grids), while offloading the costs (environmental impact, energy scarcity) on society. And this window of entrepreneurial profitability may close when legislation catches up with the technology. However, for the moment cryptocurrency speculation is a de facto digital gold rush in which fortunes are being made while many, many other people lose out. One facet of the blockchain rush is the demand for digital assets as collectible and tradable items. Perhaps museums can meet that demand in ways that are actually better than blockchain using traditional infrastructure.

(For a primer on blockchain, revisit this chapter from TrendsWatch 2019.)

So, here’s today’s provocation for museums. Instead of minting NFTs? Don’t mint NFTs. Create other digital assets. Better assets. That’s my idea. Hear me out.

In the episode of the TV series The West Wing I quoted above, an oil company hires the (fictional) prestigious law firm Gage Whitney Pace to structure the purchase of some old oil tankers while protecting the company from any potential liability. As Sam Seaborn—the young, idealistic attorney assigned to the case—notes, the company needs that protection because the ships are “twenty-year-old single-hulled VLCCs that nobody wants. When they hit things, they will break. And they will hit things, because they don’t have state-of-the-art navigation systems. They don’t have G3 tank gauging, or EM-5000 engine monitoring, the recommended staletronic, or electopneumotronic ballast.” Sam proposes that instead of evading liability, the company simply “buy better ships.” Instead of buying a flawed asset, and paying the costs of cleanup and reputational damage control, buy something better-designed.

Many NFTs are the digital equivalent of aging oil tankers. In time they will break, because most don’t have the protections that would help ensure they are stable in the long term. Jason Bailey (@artnome on Twitter) recently published a compelling, data-based post explaining why more than half of all NFTs are likely to break (i.e., disappear) in the next five years. And as I’ve written about on this blog, even when designed correctly, NFTs consume wads of energy that could be devoted to essential needs, at a time when people are increasingly aware that we need to carefully ration our energy use to combat climate change. As Sam said in making the business case for buying better ships, “there’s a broader liability to think about. People drove past Exxon stations after the Valdez [oil spill].”

Bailey offers advice on how collectors can select and maintain NFTs for stability. (Which I highly recommend you read.) But even the best NFTs, managed with the best state-of-the art practices, inherit the growing skepticism about blockchain itself, including challenges to the underlying premises that:

  • Blockchain is trustworthy in large part because the blockchain record is immutable. However, as sixteen hundred leading technologists and data scientists recently pointed out in a letter addressed to key members of Congress and Chairs of the Senate Banking and House Financial Services Committee, “Financial technologies that serve the public must always have mechanisms for fraud mitigation and allow a human-in-the-loop to reverse transactions; blockchain permits neither.” In other words, immutability is a bug, not a feature, when it means you can’t correct errors in the record. (An important point when so many NFTs have been shown to be forgeries or to violate copyright from their inception.) What if the attribution of an NFT artwork turns out to be incorrect, or to have misrepresented the associated rights? Are these inaccuracies then baked into the provenance recorded on the blockchain?
  • Blockchain is stable because the data it hosts lives on the distributed network of servers that undergirds web3. But per Bailey’s critique, this stability is often illusory. Only 10 percent of NFTs actually live on the blockchain— storing the amount of data associated with a complex digital asset would be prohibitively expensive. Most often, what a collector owns is a link to the stored image. The link lives on the blockchain, while the actual data that constitutes the asset is stored elsewhere. Forty percent of that NFT data lives on private servers, and as Bailey points out, these NFTs are vulnerable because most of these servers are managed by tech startups, and “90% of tech startups fail, 50% in the first five years.” “When these marketplaces do fail,” he notes, “they also shut down their private servers, at which point your images disappear and your NFT permanently points to nothing.” Fifty percent of NFTs follow best practices by relying on open source, peer-to-peer protocols called IPFS, which create an immutable content-based link independent of the original location. But as cryptography researcher Moxie Marlinspike points out (in a scathing, if geeky, critique), even if an NFT exists indelibly on the blockchain, it can still disappear from an owner’s digital wallet, if it is removed by the marketplace that manages access to the asset, or the marketplace fails, or stops paying the IPFS fees.
  • Blockchain’s distributed nature is lauded as putting power in the hands of creators and users, buffering it from control by major third-party technology companies (like Microsoft and Google). This positions the technology as sticking it to the man, empowering digital Davids to operate independent of tech Goliaths. But in practice, virtually all users who want to access the blockchain do so through one of a few centralized platforms that provide access to create or add to transaction records. So, not so decentralized. (For that matter, it has not so far resulted in democratization of wealth, a related claim. Cryptocurrency is, for the most part, controlled by a relatively small number of wealthy individuals.)

Can museums achieve these goals through creating, marketing, and managing digital assets that don’t live on the blockchain? My proposal is that yes, they can, for the following reasons:

  • Stability: Museums are already experts in the long-term stewardship of physical assets, and have expanded that remit to include digital collections as well. Having collectively invested millions of dollars in systems to digitize, organize, store, and in many cases share their own collections, museums dedicate time, attention, and money to creating and maintaining their digital infrastructure. And museums have, on average, a much, much longer lifespan than for-profit companies (certainly better than the 10 percent survival rate Bailey cites for tech startups.) All this being so, museums can provide collectors with credible assurance that digital assets issued by museums and stored on servers the museum owns or manages will be safe and secure.
  • Trust: I’ve cited AAM’s data on public trust in museums so often you may be tired of hearing it. Often it prompts rich discussion about “trust about what,” but the data clearly indicates that trust encompasses content—people believe museums know what they are talking about. That trustworthiness is built on the resources and expertise they bring to the verification of authenticity, research, and commitment to accuracy, maintained by dedicated professional staff, including registrars, curators, and provenance researchers. Do we always get it right? No, but (apropos of the drawbacks of immutability), museums are generally good about correcting the record when we get it wrong. Collectors can trust museums when it comes to authenticity, and transparency about what, exactly is being sold. (Which is often murky in the commercial marketplace.)
  • Distributed nature: let’s start by asking why “distribution” is a desirable attribute. A short, layperson’s recap of the premise: distributing the work of maintaining the blockchain across a huge number of servers is integral to the blockchain economy (incentivizing individuals and companies to devote computing power to maintaining the system), function (verifying transactions through consensus of a majority of “nodes” on the system), and the nature of the transactions it is designed to support (between an unlimited number of individuals and organizations). I would argue none of these attributes are essential to creating, selling, and tracking the provenance of digital collectibles. That being so, the fact that the registration and sale of its digital collectables are maintained solely by the museum would be a moot point.

If not NFTs, then what?

“NFT” stands for non-fungible token. Tokens are digital items tracked and traded on a blockchain. Cryptocurrencies consist of fungible tokens—just like dollar bills, every Bitcoin is equivalent to any other Bitcoin. While one could create an unlimited number of identical copies of a digital collectible (whether that’s a work of art, a digital image of an historic document, or a scan of a scientific specimen), their monetary value lies in their intentionally engineered scarcity. NFTs are valuable because they are created as limited editions that are recorded, tracked, and traded on the blockchain, which serves as a convenient digital platform to record sales, transfer the link to the asset, and process payments in the form of cryptocurrency.

But digital collectibles don’t have to be NFTs. Museums can and do create and sell digital assets independent of the blockchain while, as argued above, meeting or exceeding most of the benefits afforded by NFTs. A 2021 study of NFT buyers found that potential buyers were split equally between collectors (having no expectation of selling it later at a higher value) and investors (expecting to sell the asset for a profit). Collectors might be the best fit for museums’ audience and mission, and for collectors, museums can provide better assurance of stability and authenticity than NFT marketplaces. And collectors, with no expectation of profit, presumably don’t base their purchasing decision on the future ability to use the blockchain as a platform for resale.

If museums want to take advantage of the hype around NFTs to court new audiences, they might focus on redirecting prospective collectors to trusted, stable, museum-certified digital collectibles. To use the current fad as a point of entry, they might brand these assets as “non-blockchain NFTs.” (Ok, that’s an oxymoron, but…marketing, right?)

Just before he quits, Sam defends his proposal to his boss, saying, “Maybe they want to buy safer boats, but we never gave them the option.” Maybe collectors want to buy better digital collectibles. Museums can give them the option. And, (final Sam quote), “Maybe they’re really going to thank us for this suggestion.”


End note:

I have not yet addressed one aspect of NFTs that I find intriguing: by embedding “smart contracts” on the blockchain, artists can ensure that a portion of every resale is automatically transferred to their crypto-wallet. This practice could theoretically help redress some of the structural inequities in the art market that result in the majority of profits going to dealers and collectors, rather than creators. I’m still thinking about how museums might replicate that function, without creating an unrealistic burden for tracking and enforcement. Please let me know if you have thoughts…

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Comments

1 Comment

  1. The basic premise of collectible NFTs is to bring scarcity to a digital object which has no inherent scarcity because it can be perfectly duplicated in perpetuity. Most collectible NFTs are reasonably close to the software licenses that we accept all the time — you don’t actually own the software, you’re purchasing a right to use the software.

    But, the notion of collectibles which *does* feel pretty speculative, why not think about the components of experiences as things that can be collected and stored in a digital wallet. When I was involved in helping create the DMA Friends program some years back at the Dallas Museum of Art, we shifted the benefits of membership to a model akin to the rewards of a loyalty program. As you engaged with the museum, you earned points, and you could trade points for free parking, a discount, access to a private event, etc. We wanted visitors to reward themselves with things that they wanted.

    The infrastructure, at the time, was tricky, but the premise of customization is a good one. Fast forward to now, and you can store multiple NFTs in a digital wallet. And you can create NFTs that contain other NFTs, essentially an envelope… And then the assorted things that a museum offers — admission tickets, registration for a summer camp, the exclusive invitation to a gala, guest passes, etc. — can be available as NFTs. And instead of calling them NFTs, rebrand them as ‘digital benefits’. All of my passes, discounts, tickets, and benefits are then bundled in my digital membership card — NFTs inside an NFT. And the NFTs are linked to me as the owner.

    So, at the end of the day, I can have my digital museum membership card that sits in my wallet. In it, I have all the services that I’ve added throughout the year. At admissions, I’m just scanning (or tapping) a QR code on my phone. When a new event comes up, I can just buy it online and update my wallet. The experience is simple for the visitor (yes, I’m wildly glossing over setting up a wallet and integration issues, these are early days).

    And there’s huge flexibility. My guest pass NFT can have three uses built into it. When they expire, I can buy more from the museum and refuel the benefit. If I move away three months into my membership year, I can transfer (or sell or refund) my membership NFT to another patron or the museum. Maybe a group of museums create a broad access NFT, and I can get ten free admissions to museum all across the city. Heck, I can even have language preferences as an NFT that update content as I approach.

    This is the sort of flexibility and use-case scenarios that start to get interesting. Things that directly benefit the visitor, allow for deeper customization, and offer a framework for potential long-term engagement. Let’s shift the discussion away from collectibles and distance ourselves from simple speculation scenarios.

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