- A new Damien Hirst project sees owners forced to choose between a physical and NFT version of a painting. Whichever they reject will be destroyed
- This project hopes to test the boundaries of art and currency
The art world is about to be set alight by Damien Hirst. The contemporary artist and controversialist has launched a new project: ‘The Currency’, which will see thousands of paintings destroyed in a fire.
In 2016, Hirst produced a series of 10,000 physical paintings – canvases covered in a unique pattern of brightly coloured dots. These were issued to buyers as digital ‘non fungible tokens’ (NFT) – unique blockchain assets with digitally immortalised ownership. Now, in typical Hirst style, there is a twist – customers can choose to swap their NFT for the physical artwork. But the stakes are high: returned NFTs will be digitally annihilated, whilst rejected physical artworks will be ceremonially cremated next month.
To the art world, The Currency “marries one of Hirst’s most generative bodies of work to his lifelong fascination for technology and materiality”. But to economists, it provides a fascinating referendum on NFT use.
Matt Scott, senior investment research specialist at Mercer, argues that there is a strong use case for NFTs in art markets. In a world obsessed with provenance, blockchain technology can be used to immortalise existing ownership of valuable works. It can also provide an unalterable record of biometric or location information for art and collectibles, lowering insurance premiums and reducing the risk of fraud.
NFTs can also escape the shackles of the physical world entirely and exist as virtual art. Advocates of the metaverse argue that we will soon spend much of our time in a virtual reality world – and will need the virtual reality possessions to go with it. In what could be a sign of things to come, a surreal virtual chair by Argentinian designer Andrés Reisinger sold for $70,000 in February last year.
To some, NFTs are an enticing investment prospect, offering a new avenue for art connoisseurs. And as they are purchased using cryptocurrencies, the two assets retain a link. According to Yale economist Aleh Tsyvinski and colleagues, around half of NFT market fluctuations are attributable to moves in the cryptocurrency market. Yet NFTs are significantly less correlated to the stock market: IESEG School of Management professor, Mieszko Mazur, found that the correlation between NFTs and the S&P 500 was effectively zero. In theory, this means that NFTs can reduce portfolio variance whilst maintaining portfolio expected return. But NFTs are still in their legal infancy, and remain “excessively volatile” – Mazur cautions that they are only for investors who are willing to bear relatively high levels of risk.
And results from The Currency seem to bear this out. As my chart shows, of 10,000 customers, 5,149 chose to swap for a physical painting, while 4,851 kept the digitised version. Hirst, who owns 1,000 works, decided to embark on a “proper adventure” by keeping all of his as NFTs.
The thought of 4,851 physical artworks being thrown on a bonfire may be shocking, but you could argue that the numbers are surprisingly low. After all, this was a self-selecting group of customers: by applying to own an NFT, they presumably had an existing interest in digital art. Secondly, the ‘endowment effect’ (beloved of behavioural economists) suggests that we care more about the things that we already have and stand to lose than the things we could potentially acquire. In this case, however, it seems that the allure of owning physical artwork overcame the pull to hang on to existing NFTs.
Another idea from behavioural economics springs to mind, too: ‘regret theory’. This states that happiness depends on how we judge our past choices retrospectively, given the state of the world which unfolds after we have made our decision. Even Hirst himself is not immune, confessing on Twitter that “I still don’t know what I’m doing and I have no idea what the future holds, whether NFTs or physicals are going to be more valuable or less”. But Hirst is relaxed about the uncertainty: “But that is art! The fun, part of the journey and maybe the whole point of the whole project”. We will see if he remains this ebullient when the burnings begin on 9 September.
