CS: So in terms of minting an NFT, you need to do either Proof of Work (PoW) or Proof of Stake (PoS), right?

AB: For this question you have to do neither, where the PoW vs. PoS comes into play is what type of blockchain you’re implementing it on. For the sake of simplicity, the artist won’t have to worry about that — that’s actually a super technical question. When you’re actually minting an NFT you’re effectively creating a contract on the Ethereum blockchain. Either you can do it yourself from your terminal, but usually people are going to go through a platform like Rarible or Zora or Foundation to ‘mint’ their NFTs. So what you’re doing is creating a piece of code, this contract 721; the minting process is just creating the contract itself, you’re creating the token. So the Ethereum blockchain is using Proof of Work, and is migrating to Proof of Stake.

CS: I’m curious about the ecological impact of proof of work in particular. I know some platforms are trying to move to proof of stake because it’s a little bit more sustainable. Artists can go through these platforms to get their NFTs minted, and they themselves don’t actually have to do the verification; but the process of verifying something takes a lot of energy, and lets out a lot of carbon emissions. I’m wondering what your view of that is, and what your understanding is of this process of minting something as an NFT that has such a detrimental impact on the climate.

AB: Proof of Work is certainly more environmentally impactful. There are multiple reasons people are trying to move to proof of stake, and I don’t think it being ecologically friendly is the main reason. Proof of Stake is a lot cheaper and transactions can move a lot faster. With the Ethereum 2.0 update, we are trying to get to what’s called Layer 2 solutions.

The way blockchain works, you first have to mint it, everyone in the world needs to get a copy of that record, everyone has to verify it’s legit — this gets expensive. There are computers all around the world constantly checking and constantly trying to mine. The mining process is what gets really expensive.

The difference between PoW and PoS is that when you get to PoS, all the tokens are mined. You’re no longer mining, you’re just guessing math problems and fielding transactions. Where the trade-off is right now is that you can go to an environmentally friendly marketplace, called layer 2. Instead of having all your actual contracts on the actual blockchain, it’s called a sidechain. What happens is that all the transactions happen on the sidechain and at the end of the week they all get batched up in one go and get put on the blockchain. It’s a lot cheaper for the end market and it’s a lot friendlier because the miners don’t have to do as much work. Now, stuff can go wrong in that week, and it’s not necessarily permanently on the blockchain itself until the end of the week. There’s a security trade-off when you’re dealing with these layer 2 solutions.

The underlying protocol for Ethereum is going to be a little bit sluggish. The big thing with blockchains now is you have this thing called Zooko’s Trilemma — you can only choose two: speed, security, and decentralization. So you can have speed and decentralization, but you’re sacrificing security. We’re trying to get all three locked down right now.

As an artist you can try to find a layer 2 marketplace that is more ecologically friendly. But I don’t think the art markets themselves are having the biggest impact. The artists themselves, the creation of an NFT, and the running of the art market isn’t contributing to climate change. I don’t want people to think that. It’s the actual mining of the tokens, and having computers guess random numbers hundreds of millions of times a second that is mainly contributing to the ecological impact of these blockchains. In my opinion, I don’t necessarily worry about the ecological impact of these art markets and NFTs. I’m much more concerned about the underlying protocols and how the tokens are being created. That’s where the big spin is coming in.

CS: Is Ethereum 2.0 projected to roll out soon? I know it’s been in the works for a few years.

AB: I don’t know what soon is. I couldn’t tell you. I’m not sure when everything will be fully shifted over. There are still debates on whether you’d want to do security or compatibility, when it comes to dealing with code itself.

You’re not just dealing with NFTs. There’s a bunch of other contracts running on here: financial markets, derivative markets, lending products. They’re all on top of this blockchain. You’re really trying to steer this ship and make sure that when you do these solutions, that you’re doing the right thing. There are the optimistic roll-ups, the ZK roll-ups. The biggest difference is that the optimistic roll ups make the existing infrastructure, the existing smart contracts, compatible with Ethereum 2.0. With an optimistic roll-up it’s easier to go and port stuff over. However, with a ZK rollup, you can make every transaction anonymous, which is valuable for security if you don’t want to be traced.

The big purpose of this blockchain is to have your digital anonymity, which is very very important. There are certainly different trade-offs. There’s hundreds of billions of dollars of value sitting on these things now. So we can’t just take things lightly. I say take your time — I think we need to take our time when it comes to developing these things. If it does get messed up then all your NFTs just kind of go out the window.

CS: How do you see blockchain technology potentially transforming the art market? What is its role?

AB: From what I’ve talked to with artists, galleries have kind of shunned digital art. This medium had the ability to adapt to blockchain in using the technology, and they didn’t listen, and now software runs art now. I think people don’t really understand the great impact it will have. I can take my NFT and put it up as collateral to get a loan. That’s pretty powerful, and I can do that super securely right now. So being able to take a loan out with my pieces is really interesting, and also price discovery is something very powerful. Art markets are very opaque, blockchains are very transparent. Being able to find the actual price of a piece is pretty cool. In addition to that, being able to give artists a lot of their money back instead of having a gallery taking 50% and you take the other 50%, the artist can sell a piece with a gallery but can now get 10-15% in perpetuity every time one of their pieces gets sold. So they can constantly have a stream of income based off of the pieces they created. It’s extremely powerful.

For the size of the art market, art being on blockchain now will grow the market 10x. It’s the perfect storm: you’ve got a bunch of digital artists with a generation who grew up looking and enjoying their pieces on Instagram, who are digitally made and digitally understand how non-fungible tokens work, who now have the ability to not only purchase their favorite content creator’s stuff, but also use that for other traditional financial assets. For NFTs and crypto in general, we are in the third inning right now, top of the third, which is very revolutionary. So I think it’s gonna have profound impacts — especially the ability to go and take the digital physical. I’d love to buy one of KAWS’s pieces if he had an NFT, and then commission him to go and create a KAWS statue.

To go back to your original point, I think that’s going to be the ecological impact. If I have the NFT, I have the option to go and turn it into a physical piece. For example, If Nike has 100,000 sneakers that they want to create and they sell the NFTs for, they don’t have to produce all 100,000 sneakers anymore. Inevitably, people want these sneakers now for the resale value. If I can capture that resale through digital means, then why do I have to have the physical in the first place? Nike only might have to make 50,000 shoes depending on what the actual demand is. Most of the time people are buying super exclusive sneakers and just sitting on them, using them as a tradeable asset. If anything, that is the value itself.

CS: Do you think NFTs on blockchain will lead to a more equitable art marketplace?

AB: For sure. I certainly think it’s going to be a lot fairer because creators can collect royalties in perpetuity. And someone, say, on Instagram, who has 100k followers for their art, can now go and monetize that following. They are no longer at the mercy of an art gallery or producer. They can now go and tokenize their creation and leverage their existing community to monetize and add value to it. Creators of culture are finally going to be able to live off of their art and not be taken advantage of.

It’s interesting from a legal point of view. Let’s say if I made a beat, and someone goes and steals it, if I tokenized it there’s a cryptographic record of the date I created it. It’s proof in a court of law. Everyone in the world can see this is a genuine artifact. It’s really the democratization of art and creation and how that stuff gets monetized. There doesn’t have to be a middle man — there are just people who are going to be participating in creating something. There are far less gatekeepers.

CS: So artists can benefit from sales of NFTs by getting a cut every time it sells. Are there any other advantages to artists using NFTs that you’d like to specify?

AB: The cut of sales in perpetuity is a pretty big deal. Also, with an NFT, you have a perfect replica of your art. That’s another upside. Now if you take the digital physical, then things are going to be a little bit different in the physical space. But in the digital it will be perfect. Another benefit is that it reduces the cost in art supplies.

CS: How do people engage with NFT art?

AB: One of the solutions is having assets in AR, though that doesn’t work for all images. Another example is a company called Nifty Frame. The frame itself is a piece of art, but the underlying software allows me to go and cast my NFTs to a screen as if I was in a gallery. I can go and buy a Nifty frame, it comes with the TV itself, and I go and scan the QR code and I can show all my assets on display. So there’s different mediums.

One of the things I love about what Nam and I are doing is we’re really pushing the way you’re interacting with these assets. We’re working with an artist to go and put art pieces in Harlem, placing AR art down the Hudson and three in Central Park with the actual geo-coordinates put inside of the NFT itself. So you have to actually be at the location of the installations to go and view it.

You could also have a fully VR experience, going into this digital world and experiencing an exhibition. I’m also putting together a company now to do holograms for NFTs. We’re constantly trying to push the envelope on how you experience an NFT.

CS: On a much more basic level, the ways to see an NFT and potentially buy one is to go on one of these marketplaces.

AB: Correct. You can go on a marketplace, or someone can gift you an NFT. I’m actually gifting NFTs to people right now as we talk.

CS: So if I wanted to buy an NFT, how would I go about doing that?

AB: Right now you have to buy an NFT with ether. If you want to buy an NFT:

      1. You have to have a wallet. This will hold the ether you use to purchase it, and the NFT itself. Do NOT use Coinbase to buy NFTs. Don’t do it! You’ll hurt yourself. 
      2. You need to download something called MetaMask. MetaMask is a plug-in for your Chrome browser (there’s also an Android and iOS application, but the majority of blockchain apps are going to be accessed through your computer).
     3. Once MetaMask is installed, you’re going to purchase ether. You can purchase ether from Coinbase, if you need to, but you don’t necessarily want to hold all of your coins in Coinbase because I don’t think Coinbase is compatible with NFTs yet. Once you purchase your ether, you go and take your MetaMask wallet address, copy that, and then paste it into Coinbase, and then send the ETH from Coinbase to your MetaMask. It’s just like sending an email but instead of words it’s money. You don’t need to use Coinbase—you can purchase ether from anywhere that sells it.
     4. Now find a marketplace of your choice. It could be Zora Gallery, Rarible, Foundation, it doesn’t really matter. From there you can go and purchase your art. Once you buy the NFT, you send the money to the market, and they will send you a smart contract.
     5. Now you have the NFT in your wallet. I recommend two things: for a quick look up to verify that it’s in your wallet, you can go to eth.af to see the contents of your wallet. Option 2 is to download Rainbow Wallet for iOS.

CS: On the other end, how would an artist go about selling an NFT?

AB: So you got your Metamask, you bought your ETH. You then go and click the create button. You have the choice of creating either an ERC-721 or a rarible NFT. The difference is a matter of cost. The 721 costs more money to create because a lot of information is on the chain itself. Regardless of what you choose, you own the asset 100%. Once you upload your art, add a description, and then you hit the mint button. And it costs money to mint so you should have ether in your wallet to go and mint the token itself. Once you mint the token, you can start promoting and selling it. You can have people bid on the work or sell it at a fixed price.

CS: So the buyer then has ownership of that thing. Where does the artist stand in terms of ownership after it’s sold?

AB: As soon as the piece is sold it’s no longer the artist’s, it’s the owner’s. 

CS: Can the buyer do anything they want with it?

AB: I believe so. They could sell it, but I’m not sure about the digital rights and reprints. I would assume the buyer could do whatever they want with it because they now own the piece. 

CS: What would compel someone to buy an NFT?

AB: Like most things in crypto: utility and resale value. The ability to go make a profit and store a value. It’s part of the reason people buy traditional art. It’s the emotional connection to the piece, the resale value, and the stored value. The utility could be used as clout, as well as an asset. 

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