How useful is artificial scarcity really?

NFT are the hit. In the truest sense of the word, because more and more musicians are publishing their works as non-fungible tokens (NFT) as a rare commodity on the Ethereum blockchain. Now Scooter also wants to ride the NFT wave. But how useful is the artificial scarcity model?

The happy hardcore artists Scooter around their exalted frontman HP Baxxter will release their twentieth studio album on April 16 with “God Save the Rave” – and rely entirely on digital scarcity. The sale of exclusive fan articles will start in advance, more precisely next Friday, April 9th opensea.io. One suspects that the digital works of art that are offered for sale there are NFTs. In cooperation with the Berlin start-up twlvxtwlv, the band wants to auction off NFT art related to scooters. One of the works for sale from April 9th ​​is based on Da Vinci’s Last Supper; in the center is of course not Jesus, but – how could it be otherwise – HP Baxxter.

In addition to the digital works of art, which are of course a matter of taste, twlvxtwlv is also auctioning off special editions of the Scooter album with animated covers. Largest item of the opensea-Auction is a lifetime ticket for performances by the band. The aim of the exclusive album artwork is to bring back the feeling of being able to call a rare piece of art your own. What vinyl album covers are, could be NFT art in the digital age.

We wouldn’t be scooters if we hadn’t tried something new every now and then. It is an exciting step for us to now also release the 20th Scooter album as NFT. I am sure that our fans will be happy about a new opportunity to interact with us and our music and to bid for real collectibles. With our NFT you get something unique that nobody else gets.

HP Baxxter

The aim is to use NFT to bring the principle of scarcity back into the digital space. But can that work?

Scarcity as the basis for property rights …

Scarcity is the natural state of the world. We do not live in the Garden of Eden: The availability of raw materials, goods, labor and means of production is naturally limited. Property rights are built on this state of affairs: We need a fair mechanism to determine who can dispose of scarce resources. In other words: the principle of private property is intended to protect against conflicts over scarce goods.

However, it is questionable how this logical and sensible principle can be transferred to digital space. The fact is that the possibility of unlimited reproduction reverses the principle of scarcity of goods. In the digital space, goods, in this case data, can be copied. In other words, they are fundamentally no longer scarce, but simply omnipresent.

Incidentally, this is also in contrast to Bitcoin. Bitcoin’s digital scarcity also remains in the digital space, since BTC does not represent a fungible off-chain asset such as a work of art. In addition, a powerful social contract controls and enforces Bitcoin’s absolute, digital scarcity; this aspect is missing from NFT. What is preventing the artist from just mining more and more NFTs of the same work of art? In contrast to BTC, NFT are not “trustless”.

… and desires

This presents artists with a difficult task, the solution of which seems to have come with the NFT. The idea is as follows: Instead of making works of art infinitely replicable, the artist creates works that are unique. In the case of Scooter, the portraits of frontman Baxxter are underlaid with signature shouts such as “Hyper, Hyper” and are therefore not so easy to reproduce.

At its core is the idea to arouse desire among fans, to own something of which there is only a limited number. The blockchain makes it possible.

HP Baxxter is also convinced that Ethereum is benefiting from the NFT hype. The frontman of the most successful German techno act told BTC-ECHO:

I’m not an art expert, but I do believe that NFT will, on the one hand, give the crypto currency Ethereum a further boost towards the mainstream. But it will also be exciting for galleries, artists and musicians to auction / acquire originals for the first time.

HP Baxxter in an interview with BTC-ECHO.

It is still questionable whether the NFT system can prevail. Because the argument that an original is always more valuable than a copy (a Van Gogh print is available for a few euros while the original costs millions) only works if there is a really recognizable qualitative difference between the original and the copy. That can hardly be achieved in the digital space. NFT are .jpegs, .mp3s or other digital files that can be copied absolutely congruently. A copy of an NFT artwork is 100 percent the same file as the original. In contrast to the original oil painting, the master did not swing the original brush over the original canvas, so that a qualitative difference can be seen.

The digital space is fundamentally not scarce

NFT are an attempt to transfer the principle of scarcity into the digital age. But isn’t that diametrically opposed to the promises of the Internet age? The great thing about the Internet is that everyone has access to the knowledge and creativity of humanity. In order to complete a Harvard course, for example, you no longer have to take on six-figure debts and move to Boston, you can follow the professor’s explanations from the comfort of your own home and don’t pay 100 euros for it – you don’t get a certificate for it, but that is exactly imparted knowledge.

But the digital age also has its downsides. On the other hand, artists have to deal with new methods of monetization. A problem that the music industry in particular has had to face for decades – keyword: illegal file sharing networks. Selling scarce records worked well back then, but today it is difficult to earn anything at all from selling music. Selling fan articles via NFT could help. HP Baxxter also sees this opportunity:

I would like to hang the artwork on a large display in my fireplace room. The Berlin start-up twlvxtwlv has turned our album artwork into limited collector’s items and gives the new generation of music fans the opportunity to jump on this bandwagon.

HP Baxxter

How sustainable the hype about NFT really is is still questionable. Most recently, the artist Beeple achieved the record sum of 69 million US dollars with the sale of his digital work of art “Everydays: The First 5000 Days”, making him one of the most successful contemporary artists in one fell swoop.

But one rightly wonders what justifies this price. The NFT image was sold as a .jpeg and is a collage of digital drawings made available in high resolution for Lau on tumblr. Of course, if you download a .jpeg, you do not have the ownership or marketing rights to the image. But does art really have to be about possession?

Of course you can be happy for the individual artist if he or she achieves a million dollar deal and is rewarded for the work. How hyper the hype about NFT will become is still open. Also in the latest edition of the Crypto compass the focus is on NFT. Should the buyer find out at some point that their NFT is not unique after all, the bubble could burst as quickly as it came into being.