NFTs After The Merge

Fanny Lakoubay: The Ethereum Merge happened with no major issues to report. Where were you all when The Merge happened? Was it a lot of work for you? 

‍Micol Ap: It’s exciting to be in Berlin during The Merge, because there’s a very strong Ethereum community here. The Department of Decentralization (DOD) was founded in Berlin; Blockchain Week is happening here too, so I’ve been lucky to meet a lot of people coming by the gallery who work in different environments — from API (Application Programming Interface) protocol to Filecoin. 

‍Jesse Damiani: The way that I saw it manifest is in Nancy Baker Cahill’s solo show at Vellum LA. This was the first body of work that she had minted on Ethereum because it had moved to proof of stake [protocol]. So, to me, that was the clearest signal that we would be seeing some interesting action, particularly among artists who had taken a really strong stand about the choice of blockchain to mint works on relative to their environmental impact. 

‍Erick Calderon: Regarding the drama, I think that we are somehow driven to participate in watching these epic moments because of the potential for disaster. The fact that there was no drama with the Ethereum Merge was wonderful and just demonstrates how incredible these developers are. I’m really excited about it. 

‍FL: I have a question specifically for you, Erick. Most platforms stopped minting from the 14 to 15 September, and most collectors stopped buying. I’m assuming [your platform] Art Blocks also had to update their Ethereum client. Was it an easy transition from the platform’s perspective?

‍EC: I work with some brilliant developers so we were able to handle it seamlessly. It did cause some uncertainty at first, but on the whole it feels like a huge weight has been lifted off everybody that operates on the blockchain. Art Blocks is a platform that has gone out of its way to offset every single thing that we’ve done. But I also think that that’s not a solution at all. That’s just one thing that someone can do to recognize the problem. We’re all relieved to move into this new era of minting NFTs on the Ethereum blockchain.

‍FL: Linda, you’ve actually minted over the past few years on both Ethereum and Tezos. Do you think that artists will be going back to Ethereum and change the way they mint on Tezos versus Ethereum? 

‍Linda Dounia: I’m involved in a very multidisciplinary practice. I love blurring the lines between the digital and the tangible, and I’ve been obsessed with training GANs (generative adversarial networks) over the last year and a half. When I first started working with NFTs, obviously my biggest concern was the environmental footprint. I think there was a trade-off as an artist. [Ethereum’s former mode of achieving consensus] Proof of work is very costly on the environment, and it’s very costly on you as well from a financial standpoint. I decided that I would mint all of my single-edition NFTs on the Ethereum blockchain and keep volume editions on Tezos. At the time, I was really grateful that Tezos existed because it allowed me to grow my portfolio without having to feel like I was minting too much.

I think The Merge is going to make a huge difference for artists who are now entering the NFT space, since you can decide the blockchain you want to work on based on its community or where you’re gaining traction; you don’t have to make a compromise based on your carbon footprint.‍

‍FL: For a long time, if you were an artist who cared about the environment, you really felt like Tezos was your only option. Now that Ethereum is more environmentally friendly, does that mean that all other blockchains have lost their competitive advantage? What is going to be the new dynamic? And how will this influence decisions made by artists? 

‍MA: I think there will be many creators who will mint their work on Ethereum but I still firmly believe that Tezos will hold its value with the community that it has created. The fundamental platforms that have developed on Tezos such as fxhash, Objkt, and many other smaller platforms like C-Verso and Tender Pass probably won’t go away in the foreseeable future. So I’m on the fence, but I’m excited to work again on Ethereum because I think it’s a great chain and should not be undervalued. 

‍EC: I see a lot of tweets questioning what’s going to happen to Tezos now. We have a sustainability thing that has changed on Ethereum, but we still haven’t fixed the onboarding situation. For instance, costs to upload an algorithm to Art Blocks on Ethereum are still relatively high when compared to Tezos, which makes it less inclusive.

I think that Tezos and other blockchains offer an inclusive onboarding path based on lower cost interactions that the Ethereum blockchain does not yet offer. But we should be celebrating all of the art, regardless of where it is located. ‍

I have concerns about the potential misalignment between the beauty and vibrancy of the Tezos art community and the platform itself. For example, there are multiple cars in Formula 1 that are plastered with Tezos stickers, but part of the inclusivity, cost-effectiveness, and ease of operating on Tezos is the fact that it isn’t bloated by people operating on Ethereum. The reason Ethereum is expensive to operate on is because there is a significant demand to operate on the platform. So when millions of dollars are spent to get new users via advertising, it is done either to increase the price of the cryptocurrency or to increase the user base of that blockchain. Both produce a situation that is headed toward what happens on Ethereum — full blocks and total consumption of the blockchain. I would love to see Tezos thrive, but the more successful it becomes, the more problems that the blockchain will suffer and the more difficult it will be to be onboarded into that ecosystem. 

‍JD: I agree with Erick. Ethereum had a massive head start in terms of scale and community. 

Although The Merge took longer than expected, when you think about the scale of human output, and getting things done within a decentralized context, it’s kind of a miracle. ‍

What I’m expecting to see now are more use-based solutions that respond to Ethereum or to each other. So people might say: “If I want to have pure proof of stake that is truly random, then maybe I’m going to go to Algorand, which solves the blockchain trilemma [of providing decentralization, scalability, and security] and because it fits my particular use. Or, when Filecoin rolls out NFTs, maybe I want to have a one terabyte on-chain NFT, and Filecoin is the only place that you can do that in a resilient, secure way. Likewise, if I’m building a metaverse world where the NFTs have to deal with real-time game mechanics then I’m going to use Solana because that’s the fastest. 

Those are the conversations I expect to emerge now rather than: “Who can take on ETH?” I don’t think that there is such a thing as an ETH killer. It’s more a question of what can newer blockchains offer, especially because, as Erick pointed out, they’re not as much of a hulking beast from a community and scale standpoint as Ethereum.

‍Anika Meier: The first thing that artists from the traditional art world worry about is the environment. But then I ask: “have you ever seen all the waste you produce when you simply set up an exhibition?” 

I’m curious as to what the new argument against NFTs will be — maybe that they’re dead. But all of us know they’re not dead. So let’s just wait for the next argument.‍

‍FL: We’re lucky to be joined by Kyle McDonald, whose recent project, Amends (2022) calculated the total carbon footprint of some of the main Ethereum-based platforms — OpenSea, Rarible, and Foundation — and then priced the NFTs for his three digital sculptures in a way equivalent to the cost of offsetting the carbon emissions incurred by each marketplace. But the longer The Merge was delayed, the more energy these platforms were using, and the more money they were making. Now it feels a little too easy to just say, “Okay, never mind. It’s all good now,” and move on to the next thing. I’m wondering if you can tell us more about Amends, Kyle. How do you see the project evolving after The Merge? What’s the next step?

‍Kyle McDonald: There was a moment in early 2021, when there was a lot of pushback against individual artists who were making work with Ethereum NFTs. There’s always been a classic deflection tactic used by big corporations that say: “Don’t look at us, look at yourself, think about your personal carbon footprint, not our corporate carbon footprint.” So I wanted to put the focus back on the marketplaces instead of the individual artists. 

I found that the total energy consumption of Ethereum was on the same scale as all of Netflix, all of Google, and three times more than Facebook. But the other day, waking up after The Merge, I felt like some kind of skeleton had been cleaned from the arts closet. Part of the point of Amends is not just to forget about the past because we’re doing better now. 

The deeper we can look into the past and take more accountability for it, the further we can look into the future and understand what it is going to be like. ‍

With Amends, I’m trying to offer that past for sale and say: “Okay, here’s about a million tonnes of CO2 mostly from OpenSea. Who’s going to take responsibility for that damage?” Just because we’re not adding to it, doesn’t mean [the problem] disappears. Some organizations have done something about it — Art Blocks has already bought offsets of about the same level as the total emissions of its entire platform. I also have a lot of respect for Foundation for even engaging with this project. They didn’t have to let me on their platform when they did. I’m now going around and talking to platforms and collectors to see if I can find someone who will take responsibility for around $600,000 or $700,000 of the historical emissions of Foundation and Rarible, and then about $22 million for the past emissions of OpenSea.

‍FL: Vitalik [Buterin] tweeted a quote from an Ethereum developer that said that The Merge acually reduced worldwide electricity consumption by 0.2%, which should be taken with a grain of salt. It’s important to look into the past when considering the transition because there’s still a lot left to figure out. Most platforms said they would only recognize NFTs on the proof-of-stake chain, but it’s a fork, so the proof-of-work blockchain did not disappear. There are also fanatics for the proof-of-work Ethereum, and there’s big question about what’s going to happen to the historical NFTs. Are the ones on proof-of-work Ethereum just going to disappear? Is it a risk? What is your view, Erick? 

‍EC: I was with a close friend a few months ago who said: “You know, there will be 20,000 Chromie Squiggles,” which I was worried about. Prior to that, my biggest problem in this space was the incompatibility between the physical and the digital. All of a sudden, I was presented with this other issue, which is really terrifying, because we can choose not to acknowledge the proof-of-work chain, but what are you going to do when you receive a bid on proof-of-work on OpenSea? If you do accept it, you are legitimizing the value of that NFT on this other chain. It’s similar to the CryptoPunks V1/V2 debate but on an exponential scale. 

So what happens next? People start trading proof-of-work Squiggles, and there are secondary market royalties being generated. Those royalties might automatically get sent to the artists. So are the artists also to ignore those? The conundrum is real because, at the moment the artist starts accepting those royalties, that is an acknowledgment of the value proposition of that artifact on a different blockchain. I believe that we should act in the way that the artist chooses to act. 

Part of me wants to believe that this conundrum will just blow over. But seeing what happened with the V1 and V2 Punks, it doesn’t blow over. There are a lot of narratives in this space. ‍

‍KM: Something to keep in mind about these proof-of-work forks is that they do not have the same hash rate as Ethereum did before The Merge. [...] So 4% of the miners, or 4% of the energy that was originally put into the Ethereum network is now on proof-of-work Ethereum. So the chance of that proof-of-work fork surviving very long is pretty low. 

‍LD: I didn’t anticipate that much would change with The Merge because, even at the beginning, my strategy was to offset my carbon footprint as much as I could. The reality is that different subcultures have developed around each blockchain, so my experience with artists and collectors on Ethereum is vastly different from my experience with those on Tezos. I will still continue to work on Tezos because I’ve had such a different experience from Ethereum and, to me, it’s artist-led. Before we had the massive sales on Tezos that we’re seeing now, for a really long time it was mostly artists buying from each other. I think there’s something really unique and special about the culture that developed over time there. So it just doesn’t make sense to throw it away because the technology exists elsewhere. 

Ultimately, the blockchain is not just the technology backing it, it’s also how people have evolved to use it, and I don’t think that changes overnight.‍

‍MA: The reason we started working so much on Tezos was simply because of the art and artists that we saw there. It was never something that was blockchain-led. It was really art-led. The other reason we saw so many artists on Tezos was its accessibility. The VerticalCrypto Art residency is very focused on Tezos at the moment because creators from all over the world can access the blockchain even if they don’t have much capital. Tezos is a good alternative for anyone who might not be able to access the Ethereum community. And I think that’s why a lot of the art on the Tezos blockchain seems to reflect more of what is happening globally.