Posted by <Jak Ritger> on 2021-03-19
Part of a series on The MLM Project
After the removal of Former President Donald J. Trump from public office and public life, a narrative vacuum opened up. Into the attention sinkhole flooded counter-narratives that had been boiling over for years propagated through memetic narratives. The first was the Chairman Bernie Sanders meme, illustrating how popular the Democratic Socialist politician had become as well as how frustrating it was to see his plans sidelined by D.C. think tank sloganeering. Following this populist surge was another populist meme: The r/WallStreetBets Gamestop $GME short squeeze. In the media’s telling, internet trolls from reddit.com performed a flashmob attack on hedge funds, rallying a stock that had been massively bet against by the monied class. As the story went super-nova-viral, hitting local nightly news broadcasts, thousands joined in. As a massive amount of attention flooded into the space, the swarm led newcomers into waves of pump and dumps. Stocks AMC and BBBY rocketed up and down. Cryptocurrencies: Bitcoin, Dogecoin, and Etherum experienced an influx of transactions and a growth in valuation.
Unlike Gamestop stocks, and NYSE holdings in general, cryptocurrency does not currently have any real world links outside of its position as a financial tool. This lack of practicality, as well as a high barrier of entry (tech savvy and capital required) have limited cryptocurrency’s mass adoption, which in turn has limited the value of cryptocurrency. As MLM Projects Logs #1-4 have shown, imaginary market structures need to have an emotional hook in order to transcend into self-propagating financial viruses. For crypto, this moment has come. NFTs (Non-Fungible-Tokens) have ushered in emotional hooks creating a use value for cryptocurrency beyond it’s role as a tool for capital speculation. In this short essay, I will analyze the “NFT Art” boom through the lens of Multi-level Marketing by looking at historical precedents, possible outcomes and impacts for artists, political thinkers and activists today. But first, let’s define some key terms:
Blockchain is a protocol for organizing information in which packets of new data are compiled into “blocks” and added to a “chain” or ledger containing all of the information. The work of compiling and adding the information can be done anonymously by anyone with enough computing power. Because of its design, Blockchain protocol allows for the decentralized public access of information or it can be used to secure private networks.
Ledgers are records of transactions between individuals, states or companies. Historically, states formed around ledgers: recording debts, settling disputes and collecting taxes are the central functions of the state. Controlling the ledger meant controlling the system of power in the society. Early ledgers were kept in a place of worship. Ledgers can also record identities, histories, landscapes and environmental events.
Distributed Ledgers or “Public Ledgers” are created by Blockchain protocol. Rather than a single entity controlling the ledger, a Distributed Ledger is controlled by the ruleset of the blockchain itself and is immutable after new entries are added. Because no human is in control of the Distributed Ledger, cooperation between adversarial groups is possible, as well as anonymous access. It can be difficult to conceptualize the Distributed Ledger, as we do not have a historical reference point for this type of arrangement.
A Decentralized Network creates space for the transmission of information from person to person (or node to node.) Rather than relying on hierarchical modes of organizing (Representative Democracy, News media, The Academy,) Decentralized Networks work through horizontal dissemination. Contemporary examples are: Occupy General Assembly, Internet Forums and SneakerNet / El Paquete Semanal. Decentralized Networks have existed throughout history as news spreads word of mouth and stories through oral tradition. Decentralized Networks of trade spread information along the Silk Road in the 2nd Century BCE.
Cryptocurrency combines the horizontal structure of Decentralized Networks with Blockchain’s Distributed Ledger to create a monetary system supported by the cryptographic work of processing transactions. New “coins” are released to “miners” that complete the work of updating the ledger. As it requires (sometimes massive amounts of) energy to complete the work, cryptocurrency is tied to legacies of resource extraction and capture.
Proof of Work is a method of securing cryptocurrency by requiring miners to solve difficult math puzzles in order to win the contract of updating the blockchain and unlocking new coins. The extensive computational energy required to solve the puzzle make Proof of Work (PoW) very energy inefficient as well as very slow in processing transactions. But, PoW is very secure. By requiring high amounts of energy PoW disincentives manipulating the ledger (as the wasted energy would out price any gains from a manipulated record.) Bitcoin uses PoW.
Proof of Stake is a newer method for securing cryptocurrency that releases new coins and work contracts based on a lottery system. By allotting contracts to owners based on the amount of value and age of holdings, Proof of Stake (PoS) relies on a theory of mutual stake in the continuity of the ledger. This means that those who hold “stake” in the success of the system will not try to manipulate the record. PoS is much more energy efficient and transactions are processed much faster than PoW.
Tokens are non-unique units of cryptocurrency, such as 1 Bitcoin. Tokens can be exchanged one to one with any other token of the same currency (same as Dollars or Euros.) Thus, Tokens are by fungible by default.
Non-Fungible-Tokens (NFTs) are unique units of cryptocurrency. NFTs are often long hash codes that are added to the public ledger of a certain blockchain protocol (Etherum for instance.) NFT creators “mint” NFTs by paying for the hash code to be added to the ledger. Then, the creator can sell ownership of the hash as an NFT. Ownership of NFTs are recorded publicly in the blockchain.
Art NFTs (or crypto-art) is a genre of art that uses digitally propagated systems as a point of departure. The majority of digital art known as Art NFTs are not actually stored on the blockchain, rather the NFT hash code that is sold simply points to publicly accessible storage of a digital artwork. The Art NFT collector does not legally buy the artwork through the NFT sale, the exchange of legal ownership documents would be required for that, similar to how you do not actually “own” the items your videogame avatar might have in their possession. Rather, the Art NFT collector owns the hash address that links to artwork, similar to how one can own a domain name for a website, but not the material hosted on the site.
Social Tokens are an emerging experimental usage of NFTs to grant access or stake in a discreet community. So, instead of paying a cover charge to enter a club or a subscription fee to enter a private chat room, a new signup would buy a Social Token in order to gain entrance. Theoretically, Social Tokens could provide members value as well as creating a stable currency base for future investment. Other uses could be the leveraging of community engagement to increase the value of a Social Token.
Smart Contracts extend the logic of Decentralized Networks and Public Ledgers into the realm of legal agreements. Although a Smart Contract has not been successfully backed up legally yet, the promise is that two anonymous (or semi-anonymous) parties can enter into an agreement which is added to the blockchain.
Open Platforms create decentralized data sharing networks that rely on an external regulatory body to authorize entries. For example, sustainability company, Nori uses a blockchain Open Platform to market carbon credits that have been certified by COMET-Farm, a United States Department of Agriculture program. Another use is requiring manufacturers to include Open Platform access to diagnostic and telematic data, thus limiting the abilities of corporations to implant Digital Rights Management (DRM) into consumer products (cars, tractors, mobile phones.) Massachusetts voted for such a program in 2020.
Digital Rights Management (DRM) are tools to stop viewers of digital media from possessing the data file of the digital media. This can range from restricting access to plugin media players to limiting one’s ability to record a screenshot. In 2018, a new HTML5 Standard: Encrypted Media Extensions (EME) was introduced that uses blockchain to lock streaming content in browsers. Whereas previously, DRM would operate at the access point level (an encrypted plugin) EME brought DRM to the browser level.
Decentralized Autonomous Organization (DAO) are open source corporate structures. Participants buy tokens and voting rights to join the DAO. This model for collective management can be applied to companies, social clubs, music venues, or even a forest, as with Terra0.
51% Attack a theoretical threat to any decentralized system. If one actor or conspiring actors control 51% of tokens then they can completely control the network. A 51% attack is the decentralized cryptocurrency version of a board-room “bearhug” where over half of a company's board of directors gang up to overtake the CEO’s control of the company.
Gas Prices are paid to server farms that perform the work of conforming blocks into the chain. Hydropower, which fluctuates in volume of supply but produces very high powered output, has been able to be leveraged by the gas price market as a way to convert unused energy into value. (Unused electricity created by Hydropower cannot be stored longterm by current batteries.) Iceland previously forged aluminum to perform this energy-to-value conversion but now mines Bitcoin.
Hyperobjects are computer programs that are completely stored on a decentralized network. A new network of Hyperobjects is forming, it is being referred to as “The Permaweb” by those who believe it will last for hundreds of years as it is not reliant on central web hosting clients like Amazon.
As the Art NFT bubble exploded more and more big name artists and art adjacent celebrities got in on the meme. Beeple at Christie’s, David Rudnick on Foundation, Grimes on Clubhouse. A formula emerged: grow hype on your massive public Twitter account, move over to gated conversation platforms like Clubhouse, Telegram, and Discord, promote the dream of the new digital world that we are entering, then drop the Art NFT like a new sneaker collab. Auction prices skyrocket and you set a new record. As word spread of the brand new way for digital artists to sell work, many smaller art accounts started to get in on the act. Gas prices soared making it riskier to pay $20-$1k in gas per work only to have a work languish unsold on an Art NFT marketplace. Just as with MLMs, it seemed the real money was in running the platform that facilitated Art NFT minting and trading. Eternal questions of taste, value and aura met the saturation of hype around new digital artwork sales. Many questioned the ecological cost of minting and selling Art NFTs and if these new platforms that are tied to capture and extraction of resources are ethical. While these conversations are important and will no doubt continue to shape the development of crypto-markets, I want to push past these issues in order to assess the way that Art NFTs are evolving cryptocurrency.
After the market crash of 2008, an alternative currency felt very necessary. The value of Bitcoin, as it was pitched in the beginning, was anonymity. In the years that followed, this promise of secrecy was shown to be false. Bitcoin is in fact less anonymous than cash transactions because every transaction is public and hash codes for wallet addresses can be triangulated and traced. The second legitimation narrative for Bitcoin and the cryptocurrency that followed was as a savvy investment. Crypto-capital’s power as a financial instrument became the central focus of crypto coin “believers.” The market moved from DarkWeb drug deals to Wall Street bros mobile wallets. This second legitimation narrative had a problem though. Just like the speculative stacked debt that led to the housing crash and the zombie capital of MLMs (see Log 3,) crypto needed continued growth to survive. Just like MLMs, the participants turned to recruitment. Rap songs were made, T-shirts were printed, gaudy jewelry was flaunted. As an extension of this crypto-evangelizing the crypto-art market was born. “Rare Pepe” trading cards were among the first collectables to be sold as assets secured on the blockchain. The digital collectivity of memes was captured and extracted into discrete value by this early NFT market.
In a similar way to the birth of capitalism itself, the role of fashion and popular art was to stimulate the circulation of capital. Wherein, the workers received wages for labor but were still stuck in a pre-Industrial Revolution state of mind: clothing was something that had a functional use value, so people only needed to have one outfit. Fashion introduced that idea of seasons and taste, concerns previously reserved for the aristocracy, became instituted throughout society via advertising. Now people needed to buy new outfits every season in order to stay current: capital started to circulate through the system. The Christmas holiday, as we know it today, was invented; a pastiche of religious and cultural symbols designed to necessitate the yearly purchase of commodities. Today, Art NFTs are carrying out this process of stimulating the new crypto-capital with new “drops” or seasons of collectable fashion items. Indeed most of the successful NFT sales are an extension of the hypebeast sneakerhead culture which is centered around displays of wealth and following incredible fast moving trends and current styles. Whereas, the previous fashion-stimulation of capital was precipitated by the need to create markets for an already dominant currency, the Art NFT-stimulation is working in reverse: the circulation of capital within cryptocurrency works legitimizes a currency that is unsubstantiated by tangible modes of value. While coins can skyrocket and plummet in value, Art NFTs hold the promise of being a stable, long-term investment. If this thesis holds, then the underlying network that supports these digital assets would also be stable and legitimate. The operation, $WHALE makes this dynamic explicit by positioning a collection of “tangible and rare” Art NFTs as the backing for a social currency called $WHALE.
The fact that the structure of $WHALE closely resembles that of Multi-level Marketing is no accident. In this third legitimation narrative for cryptocurrency, the artwork is a placeholder for value that is stored elsewhere, stored in the very belief in the system itself. Just like with Multi-level marketing, it is belief in the success of the overall scheme that is for sale. Buying into the system means that you must wear the robe of ideology and defend the morality of your decision. Just like with MLMs, the entire system can come crashing down once you realize that the pyramid is a house of cards. NFTs are, in some ways, an attempt to bolster the system against the possibility of collapse, an attempt to continue growth past saturation and potentially to lock in gains from the Gamestock surge. This is why I feel that focusing on the environmental impacts (while important) are in some ways eliding larger epistemological shifts happening beneath our feet.
Post 08’ financial crash, profit margins for corporations dropped to the floor, with the addition of low or no interest government loans, a new speculative capital bubble was created. Speculators levitated value out of stacked layers of debt. The Art NFT boom is a continuation of this logic, levitating value out of celebrity sign value. In many ways this phenomenon has its roots in Western Fine Art, where during the period of Feudalism, lords would commission paintings of themselves posing in front of the land that they owned. The art served as a way to make the enclosure of the commons real. Artistic representation of ownership was as important, or perhaps even more important than a legal document (in a time when most people could not read.) The artist role was to create symbols of wealth and ownership that would then flywheel into legitimation narratives that the lords had a supernatural claim to the land. The bloodline served as the encryption code: the blood that flowed through their veins was the Proof of Stake. This connection of body to the land sublimated into popular imagination post-Feudalism with fairy tales about vampires. For example, Nosferatu was shipped to England in a coffin filled with dirt from his home in Transylvania, and needed to return to the coffin to regenerate his power. Today, in our period of regression from a democratic society into a pseudo-capitalist state of tech-feudalism, the crypto-capital is held in a digital commons: the blockchain. NFT artwork is serving the same role, of carving segments of the blockchain and enclosing them for ownership in perpetuity by the vampires of capital. In the same way that paintings of lords in their land where powerful symbolic gestures underpinned by no legitimate stake, so do NFTs represent powerful symbolic gestures underpinned by nothing but collective belief in a superstitious value. In this way, Art NFTs are serving a potent role in the construction of new systems of power.
While this moment of wild speculation and massive movements of capital may give us a feeling of agency panic, we must not turn away from the complexity of these evolving systems. In Walter Benjamin’s foundational essay, The Work of Art in the age of Mechanical Reproduction, he argued that the Industrial Revolution brought about a shift in the meaning of art from ritual to political. Rather than retreating into the past and trying to reclaim the perceived lost aura of unreproducible works (a fascistic impulse as he describes,) artists should instead push past, into the new world of mass media images. The artist’s role now was as an interpreter and communicator, relaying the desires of the populous throughout the system of power. A century later, Jean Baudrillard updated this thesis by marking another shift in capitalist relations, one from exchange value to sign value. In his meta-ironic book, The Perfect Crime, Baudrillard identifies this shift through the work of Andy Warhol. Warhol’s "Death and Disaster” series reproduced horrific images in the mode of mass media advertising using screen-printing and loud colors. For Baudrillard, this work is the death of the real. Reality is annihilated by the production of reality itself. We are no longer able to push through the veil of capitalist advertising visual language and present The Real, because Warhol had fused the two together. Thus, he eliminated the potential of art to represent the world. Instead, we now create Hyperreality, a condition where observation and representation destroy the world and recreate in symbolic form. With the rise of digital scarcity through blockchain secured Non-Fungible-Tokens, it seems that the promise of a digital post-scarcity condition is being averted in favor of DRM. Infinitely replicate-able digital images that seemed impossible to own are being turned into scarce commodities for auction. The lost aura of a digital commons haunts the NFT Art sales, both buyers and sellers knowing that no history of pictures underpins the transaction. But, instead of a regressing to the fascistic impulse of recapturing this lost aura we must over-extend the logic of scarcity and in doing so, destroy the possibility of Capital to reproduce a method of capture in a new world of decentralized society.
We have a responsibility to wade into this new ocean of levitated values. If all that is solid melts into air, then this new system is thin air freezing into something solid. Rather than more simulation, the coming shift is really a devirtualization of digital relations. While Tech-feudalism is on the horizon, this process also holds the promise of a post-capitalist future. I believe that we can and should harness Art NFT’s new role as a legitimation narrative and reroute the process towards a human future. We can have Tech-Feudalism: A very few powerful elites controlling all of the resources and all of the capital in order to rent out what people need to survive. Or, we can use Open Platforms to frustrate the goals of Renterism, use DAOs to launch 51% attacks on entire platforms and reroute towards climate repair. Multi-level Marketing has shown us that the emotional hooks of scam logic can be powerful but the possibilities of meta-scam are potentially even more so. The Situationst called for the hijacking of symbols of capital and turning these symbols against the system itself: détournement. Now in this moment, we must update the call: operate at the level of systems to intervene, to not just reroute the symbols of capital, but to reroute entire systems of capital: Crypétournement.
Associated with ReportsDistributed Ledgers