Tokens and Art
M. Citroen

The past months I have been busy getting funding for my startup. When Holland entered its corona lockdown I decided to take a short break and work on an idea I had for a while.

This article contains my views on tokens and introduces my side project.
I will explain some features of tokens and provide a framework for estimating their utility. This article covers Ethereum based tokens (ERC-20 and ERC-721) and not Ether or Bitcoin which share some features but are value propositions on a whole different level.

Some knowledge of Ethereum, smart contracts and Ethereum tokens is assumed. In short, ERC-20 are fungible tokens and ERC-721 are non-fungible tokens with unique identifiers. Both are deployed through smart contracts on Ethereum.
Newer standards are in development, the most promising being ERC-1155. This article from Open Sea is an excellent introduction.

After the crypto bubble of 2017 development has not stopped and apps and websites for trading and owning tokens have become a lot better. Mobile digital wallets have become really nice. For tech savvy people I reckon the risk of being hacked or losing your backup key is about the same as losing your old school physical wallet.
Once tokens become more useful it will make sense for a lot of people to have as much crypto in their digital wallets as they would hold cash in their pocket wallets.

So far ERC-20 tokens have mainly been used for funding, voting, as elaborate gift cards and as stablecoins. The most common uses for ERC-721 have been games and art.
Here are some of the features of tokens.

Digital scarcity

Bits and bytes are cheap to store and easy to copy. Tokens create scarcity in a digital world.


Anything happening on the blockchain becomes permanent. If you are bullish crypto it means information on Bitcoin and Ethereum blockchains will survive longer than any other digital database.
Mistakes on blockchains are also permanent. Blockchains are unreasonably unforgiving. People make mistakes, things go wrong. Holding crypto securities is more risky than keeping stuff in your broker account.

Transferable ownership

Anyone can create a wallet and trade with other wallet holders.

I’ve never had issues spending my Euro’s anywhere in the world except for slight costs. If you live in a country with a stable fiat currency, crypto as an alternative for money does not add much value.
The network size and effect of Bitcoin isn’t larger than traditional currencies, especially first world currencies. This doesn’t hold for stocks, options, online bets and other derivates. You are bound by an exchange or your broker. Try sending an option from your broker account to a friend.
For any kind of instrument crypto can open up a massive network of trading partners.

If I tokenize my pen and auction it on OpenSea, anyone in the world can buy it. Still, someone in Australia buying my pen token will have a hard time getting me to send it over or stop me from using it. Ownership can still only be enforced by the Dutch legal system and state.

I think in most cases tokens only make sense if they are extensive. What I mean by that is that all benefits and actions stay on the blockchain. So for financial instruments, payments, corporate actions, expiries and voting must be handled on the blockchain.

Censorship resistance

No one can stop you from adding data to blockchains. And no one can stop you from sending and receiving cryptocurrency or tokens. It’s also extremely easy to create new digital wallets.

Interaction with the blockchain through smart contracts

Tokens can hook into smart contracts for things like voting.

Here are the features that decide usefulness:

  • Safety
  • Network effect
  • Extensiveness
  • On chain utility
  • Fun factor

They are fluid, they change because of technology and circumstances. Again, this is not about cryptocurrencies like Bitcoin or Ether, they have much broader appeal. It’s a framework for the question: “Should I put it on the blockchain?”.


This is a balance between the risk of losing tokens and the alternative (for example your broker). Tokens with large value you want to hold long term are currently not worth the risk. As mentioned before a rule of thumb is that you are as likely to lose your tokens as you are to lose your pocket wallet. The safety score decreases as tokens are worth more.

Network effect

How many more people can you reach and how many more people can you reach who would use your token. As the number of wallet users increases this will become more favorable for tokens. This also relates to censorship.


If you have to rely on things outside of the blockchain you lose core blockchain qualities. Tokens like Maker are full extensive. Tokens representing off chain digital assets are half extensive. Half because digital assets can travel as fast and easy as tokens, but they can still be lost, copied. Anything that relates to physical assets or services is not extensive.

On chain utility

Do the tokens hook into smart contracts?

Fun factor

There is still a kind of mystique around crypto. For leisure and entertainment assets like art, games and gambling I think tokenization is a plus. Not so much for holding your pension.


Should we tokenize US stocks? Safety scores bad for holding anything significant, your broker is safer. Almost anyone in a position to benefit from holding stocks can get US stocks and trading in and out of them is easy, so network effect also scores badly. Extensiveness depends on implementation. If all corporate actions and voting are done on the blockchain it can be extensive. On chain utility is probably zero, just like the fun factor.
Tokenizing US stocks will only become useful if safety increases and the number of wallet holders increases a lot.

What about tokenizing digital art? Safety scores bad for anything expensive. Network effect scores high, there are no mainstream online trading platforms for art. Extensive, half. On chain utility none, fun factor high. I would say it scores enough points for inexpensive items.

People have been reluctant to store much data on blockchains. It’s expensive and there isn’t enough capacity. They resort to storing data off chain or storing hashes, but a hash does not contain the soul of the data.

Computers attained mainstream appeal when programmers stopped caring about efficiency. From Wired:

So far art on the blockchain has been about tokenization of art. Here are two early examples.

Blockchain art projects

The Tulip

The current state of the Tulip auction site

The Tulip was an auction for an ERC-20 token with a supply of one and a watercolor. A tulip was grown live on a webcam and when the tulip died the auction would be over. The auction seems to have never ended and still contains some bids.
A few words from the anonymous artist:


Bitchoin by Sarah Meyohas is an ERC-20 token that you can exchange for one of her works. One token gets you 25 square inches of photographic print.

Art trading sites

Examples are SuperRare and Nifty Gateway. It’s an extra revenue opportunity for artists which is always a good thing.
Be aware that they store the art in original quality on public URL’s for anyone to download. And if they go out of business, the art will disappear from their websites.
Their tokens are purely a legal or symbolic form of ownership.

Etherdoek is inspired by Reddit r/place and the million dollar homepage.

The result of r/place

Etherdoek is a 1,000 by 1,000 pixel canvas. Pixels are sold through a smart contract. The buyer sets the pixel color (hex value, 3 bytes) and gets an ERC-721 token which corresponds to her pixel. The top left pixel is pixel 1, right from that pixel 2. Below pixel 1 is pixel 1,001 and the bottom right pixel is pixel 1,000,000. Pixel tokens can be traded like any other ERC-721 token.
Through the same smart contract any owner of a pixel token can change the color of the corresponding pixel.

The blockchain contains the full state of the image, pixel for pixel, with for every sold pixel its hex value. On top of that, any pixel sale and pixel change will be stored forever as an event. Etherdoek is a crowd created image, censorship resistant and stored forever. Because token owners can change the pixels it’s always alive.

The pixel tokens actually have a function. The tokens are an integral part of the artwork.

Anyone with access to Ethereum can construct the image. Nothing is stored outside of the blockchain.

Etherdoek is the first true piece of art on the blockchain.

I hope to have shown that we can do a lot more with tokens, and to have given an idea of how to estimate utility of tokens.

Developers are hard at work improving the plumbing of blockchains. The best funded crypto companies are all working on fundamentals. In the crypto gold rush everyone is only selling shovels. We still need massive improvements in efficiency and tools but they are covered.
Now is the time for entrepreneurs to come up with things people actually want to use.

I’ve had a lot of fun building Etherdoek and writing this article in these strange times. I wish everyone good health.