The Hawala History of the NFT

From its founding in late 2006 inside artist Shezad Dawood’s London home, Paradise Row has presented an exciting program of local and international artists to much acclaim. Led by curator Nick Hackworth, the gallery created intimate and spectacular encounters between the work of living artists and a curious public. Despite its untimely inaugural exhibition of work by the Chapman Brothers just prior to the global financial crisis, Paradise Row persisted in nurturing talent — offering a platform for artists to show new work, while cultivating trust among a small group of interested collectors.

But, like many other mid-sized galleries, its position in the contemporary art ecosystem was vulnerable, its financial footing precarious. Pricey London rent, the year-round circuit of international art fairs, and competition to retain artists eventually proved insurmountable, forcing the gallery’s closure in 2014. Last year, it re-emerged in the form of Paradise Row Projects, a year-long curatorial enterprise led by Hackworth alongside collector Pippa Hornby that tinkers with the traditional gallery model, nudging it away from art for art’s sake (or at least for profit’s sake) toward social and environmental benefit.

In New York, Candice Madey opened her gallery, On Stellar Rays, in 2008, on the eve of Lehman Brothers’ collapse. In spite of everything, she successfully operated the space through 2017, gaining recognition as a visionary and strategic dealer-curator. The years leading up to the crisis had seen a period of economic expansion, low inflation and falling interest rates, which piqued collectors’ interest in emerging markets and encouraged a number of young dealers to open shop on New York’s Lower East Side. Madey recalls the period as “vibrant and remarkably collaborative,” as peer galleries reflected together on their role in the art economy.

Although financially stable, Madey closed the gallery to rethink its business model according to new metrics of success. Last year, she reopened an eponymous gallery at the same address, sharing space with two culture-centered businesses, an experimental chamber music ensemble and an architecture firm — all sharing in and supporting each other’s programs. Adaptation is critical for mid-sized galleries, and Madey now accepts cryptocurrency as payment.

Taking the lead from shared and cooperative working spaces, art dealers have recently leaned into new opportunities to evolve and survive. Condo and Cromwell Place have emerged in the UK and internationally, offering art dealers alternative modes for collaboration, cost sharing and increased artist support. Others are doubtless on the rise. The post-pandemic art economy demands a new interdependency between commercial galleries, non-profit platforms, museums and universities, not to mention creative pop-ups, artist-run spaces, hybrid and semi-commercial initiatives, as well as artist-as-entrepreneur ventures. In short, the greater the variety, the better for artists, patrons and audiences alike. 

Paradise Row Projects has established a new model whereby artists function as curators and co-creators to develop new exhibitions, with sale proceeds benefiting charitable organizations identified by the collective. For Hackworth, “It’s about introducing the idea of sustainability and trust into a system that has historically not been about those things.” Fittingly, last year’s debut show “Hawala,” curated by former gallery artist Dawood, was a two-part group exhibition whose title and conceptual framework were “hawala,” a centuries-old trust-based system for transferring value globally that continues today. Hawala networks gained widespread recognition after 9/11 when authorities attempted to combat terror financing. Subsequent investigations yielded few connections to terror groups, and in fact, Al-Qaeda and other terror organizations are understood to have channeled funds most frequently through formal banking institutions.¹ 

In the show, Dawood presented the work of artists of South Asian origin, including himself, in an IRL exhibition inaugurating Paradise Row Projects’ new Mayfair space. A complementary metaverse exhibition, “The Mangrove Institute of Contemporary Art (MICA),” includes a number of digital works sold as a single NFT. The project draws comparisons between hawala and the blockchain — both decentralized, ledger-based systems that are nonetheless culturally and spiritually worlds apart. Trust-based hawala networks have supported the circulation of goods — including art — for centuries, while some see the “trustless” ecology of the blockchain as the future of the creator economy. But how did these networks evolve?

Ownership

For most of our history, humans were hunter-gatherers, living in mobile, shared societies without a sense of private ownership. To be human was to receive and to give, without asking much in return. Farming developed and, over time, the need to stockpile resources collectively diminished. It is believed that agriculture and private property evolved together. But, total self-sufficiency isn’t easy. 

As people settled into larger towns, they realized they could trade for things they hadn’t produced themselves: Meat for grain, for instance, or silk for vessels. Longer-distance trade was dangerous but reaped exciting rewards and proved lucrative for middlemen willing to make the journey. Animal skins and salt served as early forms of currency, later being supplanted by coins and then paper money, which rapidly accelerated business transactions. Currency is the physical form of the intangible concept that is money. And, money must move. It fulfills its purpose only when it changes hands and geographies, and when it benefits those involved.

This brings us to hawala: The informal, trust-based system whereby money is transferred over long distances without physically relocating the currency. With its roots in 8th-century West and South Asia, founded on Sharia principles, hawala evolved as a diffuse and decentralized system to safeguard merchants reluctant to carry large amounts of money on dangerous routes.

Most hawala transactions build on a basic form, in which a sender and recipient of cash utilize a network of operators called hawaladars. These hawala dealers are usually trusted community members who, in addition to facilitating money movement, offer free or low-cost financial education and legal guidance, making regular donations to the community. Though maligned by authorities, hawaladars often perform essential community organizing. 

Deals happen when a hawaladar collects money from a sender and pays it out to a recipient, each in a separate location. Participants exchange a secret code to ensure everyone is who they claim to be, and ledger books document transactions. Trust encircles and buttresses the system, and each successful transaction reinforces the network. As it developed in a period that predates the modern nation state, hawala transcends national and political boundaries. Its archetype is the family or ummah — a transnational community. Each hawala deal isn’t simply an isolated financial transaction, but rather a means for establishing kinship and familial bonds. Its contours are pre-modern, embodied, adaptive, brown-skinned, sweaty, communal, survivalist.

Central Banking‍

Meanwhile in the West, the Romans erected buildings, instead of temples, as early banks to deal in loans. The Medici established banks to exchange money and facilitate international trade. The currency market emerged when banks and elites started buying and selling currencies from other nations. Regulation became a means of increasing centralized control and maintaining overall economic stability, with international money transfer becoming a hallmark of 19th-century industrialization.

‍Western Union launched the first wire transfers, utilizing the telegraph network, which the Society for Worldwide Interbank Financial Telecommunication (SWIFT) refined in the late 20th century as a more sophisticated form of financial messaging. As global wire transfers grew, so did the hefty fees banks charged to facilitate transactions. The system demanded disruption, which the internet enabled through its expanded horizon of possibility. In the late 1990s, PayPal entered the scene, offering a cheaper and more efficient method of moving money.

All of this happened, and yet hawala has barely changed. While it has incorporated new technologies like telephone and email to speed transactions, it remains fundamentally the same system. In fact, companies like TransferWise in the UK and Dahabshiil across Africa are known to have cribbed hawala’s business model to reduce fees and expand user-friendliness. These internet-based companies differ from hawala, however, in that their focus is on disrupting dominant operating modes and increasing efficiency, rather than building trust, enabling interdependence and generating social cohesion. 

Pseudo-sharing and Mistrust‍

The first decade of the 21st century laid much of the groundwork for our current reality. Big spending (and big loans) in the early aughties created the conditions for financial collapse and great recession. Meanwhile, the explosion of reality television, in part ignited by insatiable coverage of 9/11, shaped the way fame and success operate in today’s digital culture.

By this time, eBay had already replaced the garage sale. Amazon sold and shipped books all over the world, while peer-to-peer lending platforms proliferated as people hungered for the collectivity of our ancestors. We wanted to share, lend and borrow on marketplaces and crowd-funding sites while traveling on holiday, listening to music, or commuting to work. Early social media, itself positioned toward good-doing and innocuous connection, simply accelerated how we talked about the goods and services circulating in this new “sharing economy.” A genuine desire for interdependence — perhaps for global ummah — fueled this economy, and trust returned as currency. Sharing platforms contributed to a broader phenomenon: An economy slowly moving away from that of centralized organizations doling out services to passive consumers. The new model instead aggregated services across platforms while targeting an active consumer base.

Disruptive yes, but genuine sharing this was not. Writing in Harvard Business Review, researchers Giana M. Eckhardt and Fleura Bardhi explain how, “When ‘sharing’ is market-mediated — when a company is an intermediary between consumers who don’t know each other — it is no longer sharing at all.[…] It is an economic exchange, and consumers are after utilitarian, rather than social, value.” You might literally be sharing your couch, but what’s not evenly shared is revenue. Ownership remains private, and the focus of “sharing” platforms is ultimately profit, not true generosity. 

One development that emerged from this period was different: Bitcoin. Forged by Satoshi Nakamoto in 2008 as a decentralized digital coin or cryptocurrency, Bitcoin was designed to work via peer-to-peer transactions and provide a real solution to ongoing financial woes. Bitcoin responded to the instability and mistrust of fiat or government-backed currency. But unlike the new platforms of the so-called “sharing economy,” Bitcoin disavowed trust as a currency. Or, rather, with Bitcoin trust was no longer needed. Without the regulatory role of the central bank, Bitcoin proffered a philosophical and tangible path away from capitalism as it was then practised.

Bitcoin and other cryptocurrencies are powered by an underlying infrastructure, blockchain, which runs software securely without the need for a centralized server. Blockchain is a digital ledger of transactions that is copied and distributed across a peer-to-peer network, not controlled (or profited from) by any single entity. These new decentralized organizations are both produced and administered by participants in an un-hierarchical manner. Thus, blockchain technologies can support a more cooperative type of crowd-sourcing. Users operate as generators of content as well as shareholders, and, without a centralized mediating party, value produced can be more fairly distributed among those who have participated in creating that value. Blockchain is decentralized, transnational, ledger-based, networked, secure, speedy. It is hawala without the trust. Or the sweat. Where hawala is maligned as vicious for its associations with tricksters and shady financial deal-makers, blockchain is celebrated for virtuously ushering in a more equitable, shared future.

Institutional Adjustments‍

According to “The Declaration of Bitcoin’s Independence,” the cryptocurrency is “anti-establishment, anti-system, anti-state…[it] undermines governments and disrupts institutions because bitcoin is fundamentally humanitarian.” Despite such a position, Bitcoin eschews traditional political polarities. It is celebrated by anarchists, progressives — who cite the increasing number of people of color using it — and populists, alike. Steve Bannon is rumored to have a stash of his own.

Politics aside, Bitcoin responds to one certainty: Our institutions are in dire need of overhaul. People demand transparency. They yearn for flatter hierarchies and horizontal systems. We’ve seen attempts at crowd-sourcing across the tech sector, but these have not brought about the sustainable change required to reduce inequality and improve quality of life. Until, maybe, the arrival of blockchain. 

The NFT is currently shaking up the art market’s business-as-usual. Unlike Bitcoins, which are fungible or mutually interchangeable, non-fungible tokens are certificates of authenticity linked to a range of digital artworks, which may be unique or editioned. Traditional auction houses like Christie’s and Phillips have giddily embraced NFTs, which continue to generate inordinate sums for digital art. Connection to a new, younger collector base is a bonus. Artists benefit from another channel through which to sell their work, and smart contracts afford artists a percentage each time a work is sold or transferred. This explodes the way the secondary art market has traditionally functioned –– to sever the artist from any transaction following the first sale. What’s at stake with NFTs is the whole canon of art’s hierarchy, scarcity, ownership and mystery. In theory, this should be a good thing.

The NFT undeniably disrupts. But disruption in and of itself may not be enough. NFTs are touchless, disembodied, anonymous, pseudo-utopian, flattened. Are collectibles akin to baseball trading cards? Has the NFT become the real medium of art, as opposed to the actual thing the artist created? After purchase, how should these assets be classified and taxed fairly? Many questions remain unresolved.

Unlike hawala, which evolved long before formalized banking, NFTs are reactionary. They’re also currently environmentally unsustainable. As they don’t actually require humans, they’re arguably anti-human. For the critic Dean Kissick, when we live in an algorithmically generated reality, humans start to resemble algorithms and behave like them. Like the internet, blockchain all but guarantees a utopian, collective vision of the future. But, as we know, the form of our solutions can often take the shape of the problems. Legal scholar Primavera de Filippi cautions, “Just as the internet has evolved from a highly decentralized infrastructure into an increasingly centralized system controlled by only a few large online operators, there is always the risk that big giants will eventually form in the blockchain space.”

How can we combat the centralization of the blockchain and so address the pressing needs of our communities?

Behavioral studies show that our trust in each other has declined since the 1970s. And blockchain caters to such a culture. As a trustless mechanism, it is purpose-built for a context in which human failure and subjectivity — our very humanity — is no longer required. But what does a system like blockchain do to promote trust in the collective? What does it do to nurture deep connections between ourselves and our environment? In an endlessly unfolding series of crises, how can we repair our disconnection with ourselves and each other, our lands, our ancestry, and our earth?

Abundant Ecologies‍

For centuries, hawala networks have disrupted dominant financial channels, evading regulation and capture. Artist and curator Shezad Dawood has long been fascinated by this informal system and fondly recalls the little black ledgers maintained by his grandfather. The idea behind his exhibition “Hawala” at Paradise Row Projects, in both its physical and virtual forms, has been to provide an updated look at the South Asian experience in the UK. Renowned photographer Sunil Gupta and Chila Kumari Singh Burman (of the Black British Art movement of the 1980s) helmed the show, which also featured works in myriad media by Rithika Pandey, Anousha Payne, Haroon Mirza and Haroun Hayward. The hawala model inspired this vision for an intergenerational and non-hierarchical group of artists to form their own type of network in the physical space of the gallery.

Designed by Enayet Kabir and Nic Symbios, the show’s metaverse component, “The Mangrove Institute of Contemporary Art” (MICA), invited viewers through a lush mangrove environment incorporating outdoor installations by Jasleen Kaur and Harminder Judge en route to a fictional museum loosely inspired by the architecture of Louis Kahn. With MICA, Dawood plays on the genesis of a new art institution (the building sits on Somnium Space purchased by Paradise Row Projects as its own kind of investment). Is it real or virtual? Perhaps both? The whole MICA experience rolls out as an NFT that is itself an edition of one, a unique digital work, whose sale proceeds will be split evenly among artists, engineers and their charities of choice: Conservation Action Trust in India and WWF Pakistan.

Dawood and Paradise Row Projects seek to observe the NFT unfold in real time, capitalizing on its structural capacity for generative fairness. The enterprise is a provocation; it plays and proposes: Can this collaborative artistic endeavor inform future understandings of a new technology? Can an experiment with a financially equitable, environmentally-focused art context put pressure on the traditional gallery model? 

The MICA NFT sale is yet to happen, but for Dawood, “If this isn’t an economic success, it’s important as an artist to have a quixotic percentile.”² “Hawala,” in its IRL and virtual realities, envisions a more sustainable mode of collaboration between arts institutions, curators, artists, patrons and an engaged public. 

We know that Bitcoin can’t be mined forever. Like all cryptocurrencies, it is in fixed supply and therefore deflationary. This means that scarcity is an inherent operating principle. What hawala reminds us is that, in the face of scarcity and competition, trust is all we have to rely on.