This article was originally published on The Daily Chain, 30th April 2021.
The $69 million sale of Beeple’s digital artwork Everdays at Christie’s in March propelled non-fungible tokens, or “NFTs”, into the mainstream of the financial and cultural spheres, despite their almost total obscurity prior to this event. The bang of the auction house gavel signalled a fundamental shift in people’s preconceptions of both cryptocurrencies and of art.
At their most basic level, NFTs are a one-of-a-kind entry on a blockchain ledger which cannot be duplicated, and which have a wholly unique value and virtual entity. This is to be compared to fungible tokens, like bitcoin, for which two coins are indistinguishable from one another and have the same value (omitting considerations of transaction history, for now) .
There are several notable benefits and use cases for NFTs which are particularly pertinent to the art world. Beyond the fact that, due to their decentralisation, they make the need for agents and intermediaries redundant, arguably the most significant benefit of NFTs is that they provide an immutable and completely trackable record of ownership; as they are one-of-a-kind and non-interchangeable, whoever is in possession of an NFT can be safe in the knowledge that they are the sole owner, and provenance can be directly traced through a blockchain ledger.
However this quality of indivisibility is a double-edged sword; because they’re one of a kind, there can only ever be one NFT for each physical object which they represent. This exclusivity, while playing into the scarcity element that drives value throughout the crypto space, can also be regarded as a limiting factor for assets that could be accessed, transacted, and held by communities of people across the world.
The concept of “fractional ownership” addresses this, and has the potential to align the digital art and NFT industries more closely with the egalitarian ideals of crypto. In essence, fractional ownership is a process whereby a whole physical asset is digitised in the form of a single NFT, and that NFT is subsequently tokenized into any given number of fungible, indistinct, and comparable contracts or tokens. Such a structure enables communities of owners to emerge and shape a variety of factors pertaining to the management and evolution of the underlying artwork.
One project employing this innovative new concept, and embracing the numerous benefits it brings with it, is CHAIN; spearheaded by world-renowned industrial artist Rob Buchholz, CHAIN is a stainless steel sculptural representation of the blockchain, which stretches imposingly towards 70 ft tall. CHAIN is also a digital interactive artwork that exists in the Metaverse. It will appear in virtual worlds such as Decentraland, Cryptovoxels and Somnium Space, as well as having its own dedicated VR space where token holders can explore the art piece and interact with each other.
The physical CHAIN structure will be comprised of 7 layers, or CHAIN-Blocks. Each CHAIN-Block is made up of a number of CHAIN Tokens. The tokens represent the total ownership of CHAIN, with each CHAIN Token fungible within the total sculpture, providing an immutable link to ownership in both the digital and physical art pieces.
The tokens also confer governance rights on the holders, who will be able to stake their ownership tokens to mint governance tokens which will be used to shape the life of the structure in both the physical and digital worlds.
Speaking exclusively to The Daily Chain, founder Neil Rankin commented on this project stating: “The inception of blockchain technology started an international movement to separate money from state and reset power structures that have existed for centuries. CHAIN is a homage to this innovation, celebrating blockchain’s subversion and transformation of historic power structures in our financial and transactional systems — with the art world being no exception.”
Discussing the benefits of tokenising CHAIN through the fractional ownership system, Rankin went on to say: “CHAIN is an experiment in community ownership and governance; an amalgamation of real-world purpose and structure effected through a network of equals whose collective voice shapes the destiny of the project and where trust is in code.”
An increasing prevalence of the fractional ownership model would mean that more projects in the cryptocurrency and digital art spheres would be able to reap the rewards of distributing their products to wider audiences and user-bases; they would be more collaborative, enjoy greater community participation, and would open themselves up to higher levels of exposure and adoption.
It could well be the case that fractional ownership does to NFTs what NFTs did to the art and cryptocurrency spheres. If so, it will be projects like CHAIN which will be leading this revolution from the front.