Should a crypto artist know anything about cryptocurrency itself? I was chatting with an artist not long ago, and it struck me that their plans and vision for their work in the crypto space generally didn’t take any account of the bigger picture of what was going on. I dropped some names and was met with (virtual) blank stares. That’s no crime, of course, and you don’t even really need to know that much about crypto to be an artist in tokenized art media. What was more concerning was that many artists make their plans without having any idea who affects their chances at success, they don’t know why there might be no collectors in this place or that. That is, I think crypto-art is still one of the most exciting places to be making art right now. There’s lots of opportunity for the dedicated creator — but a few things happened in the last year that mean it behooves artists to know about. For example, it couldn’t hurt to have an idea of at least a few people and what their contributions have done to the broader crypto ecosystem. Bay Fragile and myself (sgt_slaughtermelon)* have created some portraits dashed with quotes from these people alongside observations about what the influence of these “beloved people” may mean for artists entering the crypto space. Maybe nothing will come of it, but maybe some artists and insular collectors in corners of web3 will take just a minute to read these hastily assembled summaries and it will help contextualize their work in the crypto ecosystem.
Depending on how successful the series is, maybe it will evolve. It feels like it would be helpful to have an ongoing artistic series of short profiles of the movers and shakers to be wary of for artists entering this world a little overwhelmed.
*Disclaimer: sgt_slaughtermelon is a crypto enthusiast with reservations. He is not an expert, and these attempts at explaining various people and events in crypto may be inaccurate. In the event of a gross error, please do let him know because he’s trying his best.
Sam Bankman-Fried
“Some of this decade’s greatest heroes will never be known, and some of its most beloved people are basically shams.” - SBF
His name is everywhere right now, you practically can’t get away from it.
Why should artists care about Sam Bankman-Fried? If you want someone to actually buy your art, be warned that he essentially deleted $40 billion in assets from the ecosystem. Of course not all of that was ever real money - a lot was hyper-pumped tokens that couldn’t be swapped for any meaningful currency at scale. As a result, lots of potential collectors find that they suddenly have no FTX account from which to withdraw if they wanted to buy some art - their FTT tokens turned out to be even more illiquid than some of rug-pulled PFP acquisitions. Add to that FTX’s aggressive media and promotional campaigns targeted at the outside world, and one can confidently assume they are predatory ponzi operators. If you read the statement by Mr. Ray (the lawyer from Enron who has taken over their accounts in bankruptcy) you’ll find that FTX was also ridiculously irresponsible with their book-keeping and their users’ money, using their exchange as a piggy bank for their trading entity Alameda Research. If all this weren’t bad enough in terms of making all crypto (and by extension your art tokens) look shady - they cast aspersion on their competitors at the same time that SBF was schmoozing with politicians and the SEC and trying to push forward his own vision of US federal regulation of crypto. Compounding all these insanely destructive events is one more that matters for artists: all NFTs created through FTX are essentially stuck there in perpetuity (as far as we know). Since they managed those assets instead of the users, many so-called “utility NFTs” including Formula One, Tomorrowland, and FTX’s own Coachella NFTs are all lost to a frozen exchange. Moreover, FTX’s importance to the overall Solana ecosystem has caused significant damage to the price of $SOL and the general market sentiment about the overall chain.
Consider for a moment what all these factors mean for artists: the narrative of NFTs being owned by users and immutable was damaged when FTX kept control and then froze these assets. Popular art markets like Exchange.art and Formfunction.xyz on Solana can keep selling art for $SOL but FTX’s partial responsibility for Solana’s current decline means artists are having to constantly relist their items for higher $SOL prices. Given the token continues to decrease in price, artists are making increasingly less money for each sale. It’s like trying to sell furniture out of a house on fire. Because of this, at least a few of our collectors are probably reeling and trying to figure out what to do now that their stacks have been decimated. Opportunistic politicians will use the collapse of FTX and the bad optics of SBF colluding with the Securities and Exchanges Commission (SEC) as an excuse to push through anti-crypto regulation as fast and recklessly as they can. Crypto-savvy collectors are now keeping an eye on the newsfeed for announcements that might freeze assets or select tokens to be labeled as securities or who-knows-what, exacerbating the ambient rot of “fear, uncertainty, doubt” that makes collecting art feel like maybe an endeavor for calmer waters.
Sure, you can still make it as an artist in this space - but SBF has made it a lot harder for a while.
Gary Gensler
Even artists who have been trying their hand at tokenized art and crypto for several years now may be unaware of the power games going on around cryptocurrency and how it affects them. An idea of when the tides are going out or coming in can help artists set realistic expectations of what the near future holds, what their potential is, and what issues they might want to be in touch with that profoundly affects their future (at least, their future as cyberpunk artist-types).
Gary Gensler, the head of the SEC, has drawn a lot of criticism from crypto enthusiasts. On the one hand, he’s been scorned for seeming out of touch with the economic situation of young people. The SEC published a PSA video where Gensler advises students to save a few dollars a week and does some fast math suggesting they make 8% Annual Percentage Yield on their savings. This video drew outright mockery from crypto circles that pointed out that “high-interest savings” at most banks are below 1% APY. Add to this the recent action wherein the SEC threatened Coinbase over offering even 4% APY to users for their savings. High inflation means that those estimates about the relative worth of your savings may be grossly inaccurate as well. To his credit, however, savings on centralized exchanges have proven to be a bad idea in the last year. Keeping any significant amount of money in centralized exchanges - even supposedly reputable ones like Gemini and Blockfi - has proven to be a risky endeavor.
The other aspect of Gensler’s leadership that is currently drawing criticism is his regulatory vision for crypto - specifically, its inconsistency and self-serving nature. He doesn’t seem ignorant of how cryptocurrencies work, despite what a lot of the first and most popular comments on Reddit may tell you. His statements on his vision suggest he understands and believes that Bitcoin functions more like a commodity than a security, something bought and sold without any centralized ownership or control. He keeps hinting that anything associated with Ethereum (and by implication, any smart contract focused currency) may be considered a security, but thus far the strategy seems to be to suggest entities register as securities and only enforce and penalize particular ones when it suits the SEC to do so. The case against XRP, the random and weirdly publicized case against Kim Kardashian over some promotional nonsense, and the vague suggestion from Gensler that we need to think about how commodities and securities intermingle in marketplaces and who should regulate them and how… It all seems like he is angling for the SEC to be in charge of a broader sphere of economic policy than their charter indicates. Not only that, but enforcement by lawsuit style leadership can appear capricious: it looks like you’re trying to be the de facto kingmaker of the financial Wild West, and having meetings with Sam Bankman-Fried about just that kind of issue (whether or not Gensler actually had any intention of favoring SBF’s schemes) looks awfully bad.
What does any of this mean for artists? Gary Gensler seems to be posturing as the expert policymaker for US crypto regulation. He is the head of the SEC, but art - and by extension art as NFTs - is legally a commodity. That is, ideas and creativity as digital goods without centralized control. These waters get muddied even further when NFT projects like, for example, Mutant Ape Planet, promises utilities like development of a metaverse, additional drops and rewards - all the sorts of things that last year the popular YouTuber Legal Eagle was asking about: what is the legal status of a roadmap? The point here is that if art as art is a commodity, but NFT art that functions as a legally binding promise ends up working more like a security (or some other new thing we haven’t come up with a regulatory label for like a contract), then it may eventually and reasonably fall under the jurisdiction of the SEC.
In a word: Gensler seems utterly detached from the lack of economic mobility that paycheck-to-paycheck Americans face. He suggests returns on savings that only serve the wealthy. His public stance on cryptocurrency seems to suggest that he’s deliberately blurring lines and making power plays. NFT projects eager to find buyers that aren’t interested in art at all but more in returns on their NFT investments are actively playing into his hands by making more and more complex value propositions that push art NFTs out of the traditional legal assignment of commodity into foggier and more legally dangerous areas of definition.
As an artist, you may find eventually that your art project that earns future airdrops or rewards for collectors ends up being considered something other than a commodity, and because of that your status as an artist (eventually you may not actually be able to deliver the benefits you wanted to) may become a different status subject to legal accusations of fraud. In addition, you may find that instead of staying in the crypto ecosystem and earning modest interest on your art sales, entities like the SEC may do their best to ban any kind of reasonable returns on your income under the threat of labeling it a security.
Do Kwon
Lots of new crypto artists seemed only peripherally aware of the collapse of Terra/Luna and what it meant for them. Terra was one of the first major dominos to start a series of crypto liquidity crunches (read: bank runs) in 2022. Somewhere around $60 billion was lost in a matter of days when a stable coin de-pegged and everything started shaking the collateral backing it was too intimately linked to it to hold value. Crypto enthusiasts probably recalled the similar failure on a smaller scale of Iron Finance. One of the worst aspects of the Terra collapse under Do Kwon’s “Lunatic” leadership was that Anchor protocol had been heavily pushed with “promotional rates” of almost 20% on their $UST stablecoin. Note that this was an algorithmic stablecoin — a sketchy departure from fully backed currencies pegged to the US dollar. Lots of average investors who were curious about crypto asked around about stable investments and were quickly pointed towards Anchor on Terra to hold their stablecoins. People wary of volatile tokens like Bitcoin and Ether (never mind meme coin insanity like Doge or Shiba) were given the impression that this was a relatively safe investment. More like a savings account for money that you didn’t want to invest in any market, but were content to earn outsized APY on as an early-adopter bonus with the expectation that it would taper off once the total value on Anchor had made them a success.
This really may not matter to a lot of artists who are new and didn’t and still don’t have a lot of crypto they want to save and are just trying to pay some bills in the real world. What does matter is that $40 billion evaporating (one way or another) means that lots of NFT art collectors had their savings go up in smoke. They may have thought this was a relatively safe place, but this was the safety net money, not their play money for investing in art: now they need to be more conservative with their investment funds until they regain some of their massive losses. Not only did that collapse probably affect lots of collectors, but it was one more domino in the bad optics campaign being run by our beloved industry. Anchor was promoted all over the place (it was hard to go far in subreddits about crypto without seeing people mention it as a good place to hold stable coins) and touted as a safe entry point to cryptocurrency for outsiders. If you follow Coinfessions on Twitter, some of the content is definitely made up for entertainment, but some of the stories coming out around the Luna collapse sounded real enough and downright tragic. Investors burnt by LUNA and Anchor are probably not going to double-down and explore elite asset management like art collecting.
It’s also worth mentioning that the collapse of LUNA has cast a shadow over the entire Cosmos multi-blockchain network. Artists intimidated by expensive fees on Ethereum experimenting on other chains may find that the confidence in Cosmos’ narrative of a multi-chain future has been seriously shaken. Not just in the sense of bridges from one chain to another being hacked - but in the same way that a very tall post in a large tent getting put through a woodchipper may not collapse the tent, but it certainly deflates it a little and makes everything feel shakier.
The silver-lining, if there is one, is that algorithmic (and native-token backed) stablecoins may become unwelcome in crypto. The apparent stability of DAI and USDC in contrast means that in the eventuality of a future where buying and selling art with volatile currencies seems silly and difficult, we may have meaningful alternatives as artists. What it means in the meantime, however, is that the collapse that happened while Do Kwon was tweeting taunts to his detractors and making empty promises to his following made all of crypto start to decline in 2022 because confidence in the entire crypto ecosystem was weakened. That much money crumbling meant that other foundations that were built on it, quietly, began to also give way. It was called “contagion” for a reason, and a part of Do Kwon’s cockiness was based on his belief that Luna was too big to fail - that they were too interlaced with other funds and protocols to fail without dragging everyone else down and so the users would defend the UST peg with him. Ultimately, they did not, and since the collapse of Luna we have seen a long unwinding process where other funds admitted they were spread too thin as well.
For artists: if you were watching the collapse of Luna as it was happening, your expectations of what kind of NFT market there would be in the coming months was probably dampened. Art is not independent from the larger market conditions, even if it defies them sometimes. Big tectonic shifts affect you too, whether or not the horizon shifts for you with every ripple of catastrophe.