It is not new that in the last couple of months, the Art World was been taken by storm – to say the least. If back in January no one in the Art World was aware of NFTs or crypto art, now, a couple of months later, we might as well consider it a miracle if we hear anyone important in the industry talk about anything else.
But, what exactly are NFTs? And for how much NFTs are currently being sold for? Is crypto art a new market or only a quick viral trend?
What are NFTs?
NFT is short for Non-Fungible Token which means the registration of ownership of a digital object. So, this can be any type of media including but not limited to art, videos, music, gifs, games, text and even memes. If in the past artists might have been provided with an authentic signature or their representative gallery has passed some sort of certificate to authenticate an artwork, NFTs work the same but only work in digital format. So, essentially, NFT’s work as digital Certificates of authenticity that helps to prove the authenticity and ownership of virtual goods.
How do NFT’s work?
In 2008 Satoshi Nakamoto, the creator of bitcoin – introduced a new method of verification and product authenticity, now known as the blockchain. Blockchains were historically used to record financial transactions, but they’re pretty malleable. These days, you can find everything from collectable games to new methods of finance – all living on blockchains.
The most important feature of blockchain used in Art is that blockchains are impossible to change. An artist can provide proof authenticating an artwork that can never be altered. This proof can then be sold at auction passing it from artist to collector, making blockchain art highly liquid.
Why pay money for NFT’s if I can consume media for free?
As an art advisor, this question pops out a lot lately. Well, you can also look at Picasso’s work for free, in a museum, gallery or even online, however that won’t make you the owner. You can even own the best replica ever of that same painting but you won’t be able to sell it as the real owner. In the end, the CoA counts more than the work itself so paying money for an NFT is the same as buying an original painting with its original certificate.
Do people really think this will become a form of art collecting?
Yes, some people are getting interested in NFTs and how that can turn newbies into becoming art collectors or regular individuals can just be interested in a new way of starting an investment. Nevertheless, in this particular case, what collectors buy are “non-fungible” tokens. Non-fungible means either one of or a limited edition that is made once. NFT tokens cannot be replicated. In some cases, the art or these media objects will be stored on the blockchain, but more commonly the NFT will reference an external artwork. While many people might not consider this “owning art”, it’s clear that many collectors do. The implication is NFT artworks are scarce and therefore highly valuable.
Are NFTs just a hyped-up trend?
This growth has led to concerns of an NFT balloon, – one that may explode when the world emerges from massive global pandemic-era restrictions…
While collector Rodriguez-Fraile thinks that “NFTs are here to stay,” he accepted that “we might be going through a period of hype… and I think the general ecosystem might slow down a bit when it comes to pricing.”
For Cock Foster – founder of Nifty Gateway, however, the return to normality offers opportunities rather than threats: Not limited to but because galleries can propose ways to experience digital art beyond a computer screen.
“Digital art is very, very immersive,” Foster said while adding that displaying art is still important to online collectors. “So, I think we can build some really cool physical experiences.”
Nifty Gateway may be a long-distance from its goal of 1 billion collectors, but the platform’s growth nevertheless reveals an overwhelming interest in crypto art. In March 2020, the site recorded monthly transactions of $30,000; last month, this number was up to $75 million, according to Cock Foster.
This big jump coincides with the biggest casualty in the art world: Covid-19. With galleries and auction houses shuttered around the world, and people spending more time browsing the web and shopping online,- NFTs have opened up a new outlet for art enthusiasts and collectors.
NFTs and the Art Market
Christie’s is no stranger to new technology. The company has hosted regular Art+Tech Summits since 2018. Back then, Christie’s proudly announced it was “the first auction house to offer a work of art created by an algorithm”, with the sale of the AI-generated painting Portrait of Edmond Belamy for more than 40 times its estimate.
At the same time, Christie’s upcoming auction is only the tip of the NFT collecting iceberg. Industry publication Coindesk, estimates the total value of the NFT market to be US$250 million. Platforms such as Opensea, Nifty Gateway and SuperRare host a rapidly expanding range of digital collectables to buy and sell by a growing community of collectors.
NFTs are useful in the digital art market because they enable claims to authenticity and scarcity, despite the ease with which digital works can ordinarily be copied. Artists and galleries have tried to create scarcity via limited-edition works and to assure authenticity with certificates, but NFTs seek to automate this process. NFTs document and register ownership on a blockchain, which is a decentralised alternative to a central database. Built through cryptography and niche community networks, blockchains are resistant to plagiarism and hacking, which makes them useful for storing important records.
So, when selling Beeple’s “Everydays” as “the first purely digital work” to be offered by a major auction house, Christie’s is reinforcing its self-described “position at the forefront of innovation in the art world”… Quite a statement, right?
Auction houses are trying to jump on the trend as quickly as possible. Sotheby’s has alreay launched its first NFT auction, a three-day sale of works by the anonymous crypto artist Pak. On day one it raised almost $10 million. Phillips will sell its first NFTs later on.
Nft’s and the Museum Industry
In light of these headlines and hype, today there are more questions and concerns than there are answers about how NFTs may impact museums. While recent news has started to illuminate the potential applications of NFTs in arts and culture, this technology also comes with some environmental repercussions and other obstacles that must be considered. So here are the 3 main issues:
The environmental cost of NFTs
Environmental concerns are top of mind. “The escalation of resources to create the idea of scarcity makes it hard for museums to get into and though there’s a buzz about clean, green NFTs, we are far away and it would be wise for museums to pause before jumping in.” — Holly Shen, Former Deputy Director at San Jose Museum of Art.
Minting of Museums
The idea of museums minting works came from earlier this year when a group called Global Art Museum started listing NFTs from open access collections, such as those of the Rijksmuseum and the Art Institute of Chicago, using it as a social experiment. As slow-moving, non-profit institutions, museums aren’t to be expected to launch into NFT marketplaces, however, there are certain areas of potential revenue income. Collaborating with artists on charity NFTs, in the same way, artists produce limited release prints or collectables around an exhibition, is one option. Simpler and easier still would be opening a cryptocurrency wallet and allowing people to donate (as many prominent charities already do)…
Will NFTs create more opportunities?
Limitations regarding accessibility and inclusion carried over from traditional to digital art first emerged in the 1960s. Practices and cultural behaviours mirrored as institutions belatedly began collecting digital work. Similar issues of diversity and representation are still present in the NFT sector, nevertheless, the removal of establishment gatekeepers is creating a more welcoming environment for artists and collectors that are still alive.
Galleries and Digital Art
Artists who have never worked with NFTs are starting to do so, – not through galleries, which have little access to the crypto community, but through NFT specialists. The CEO of the NFT platform MakersPlace, Daniel Chu foretells that companies like his will, over time, dismantle traditional institutions. “If there’s any indication from past examples,” he says, “things that are taken over by a digital movement tend to not exist anymore.”
But that won’t happen anytime soon… NFT platforms still struggle to curate and promote auction pieces, craft galleries and auction houses have mastered as a way to drive up value. The art market’s central idea is that the object itself is less of a determinant in price than the story you tell about it. But anybody can put an NFT up for sale on these sites, and visiting one is to wade through an undifferentiated mass of images.
Yet, there are signs that the NFT world is catching up. In March, Casey Reas, an artist and curator in Los Angeles, launched a new venture called Feral File. Reas selects small groups of NFT artists working with similar themes and presents their work in an online exhibition, selling limited editions of their pieces. It is a middle ground between NFT platforms and galleries, adopting the technology and economics of the former and the rigour of the latter.
Increasingly and surprisingly, more artists are turning to traditional auction houses to sell new work. Institutions like Christie’s and Sotheby’s take smaller commissions than the major galleries that ordinarily handle the primary market, and their brands carry more cultural capital. They are also experts at generating buzz around their events. “There’s less of a tradeoff to working with an auction house,” says Robert Alice, Christie’s first NFT artist. “It’s becoming obvious that if you want exposure that Auction Houses can be much better than galleries.”
Is Digital Art worth more than Traditional Art?
In response to the lockdown and the absence of offline, in-person consumption of art in the form of ownership or experiences, a different mode of consuming art has become ascendant: that of liquid consumption, which supersedes the solid consumption of material objects. The concept of liquid consumption emphasizes the dematerialization of goods and experiences.
However, the idea that big-money collectors are paying huge money for works that can often be seen and shared digitally for free is not that simple… Some digital-art collectors said they’re paying not just for the pixels but also for the digital artists’ labour to make that piece. And of course, for the scarcity they implied. Still, a valid concern arouses that those evaluations have become artificially inflated. Some non-believers said that just as bitcoin has proven to be a volatile asset, NFT prices are likely to swing down. In my opinion, this current version of non-fungible tokens will continue to evolve into bigger and broader use cases.
Are NFTs a good thing for artists?
Many digital artists, after being fed up for years for producing content that generates visits and engagement on big social media platforms like Facebook and Instagram, while getting almost nothing in return, have jumped recklessly into the trend. Artists of all kinds—designers, musicians, filmmakers, – envision a future in which NFTs reconstruct both their creative process and how the world regards art, now that it’s possible to actually “own” and sell digital art for the first time. “You will have so many people from different backgrounds and genres coming in to share their art, connect with people and potentially build a career,” Boykins says. “Artists put so much of their time—and themselves—into their work. To see them compensated on an appropriate scale, it’s really comforting.”
The NFT market just works differently… Its artists, usually immersed in the world of blockchains and cryptocurrency, use social media to build their audience in that community, and then sell their work directly to crypto collectors through specialist online platforms like MakersPlace and Nifty Gateway. These platforms take a roughly 10% commission on each sale and offer artists automated resale royalties at rates set by the artists themselves. According to a British crypto artist who goes by the name Robert Alice, “sometimes, after three or four weeks, you are making more money from the resale than you are from the initial value of the drop.”
The Overall Potential of NFTs
NFTs create possibilities for new business models that didn’t exist before. Artists can attach conditions to an NFT that assures they get some of the proceeds every time it gets resold, meaning they benefit if their work increases in value. Admittedly, football teams have been using alike contractual clauses when selling on players for a while, but NFTs remove the need to track an asset’s progress and enforce such entitlements on each sale.
New art platforms, such as Niio Art, can demonstrate in a really simple way that they own digital works. When customers borrow or buy art from the platform, they can display it on a screen in the knowledge that there is no issue with copyright or originality because the NFT and blockchain guarantees that ownership is authentic.
Also, NFTs gives musicians the potential to provide enhanced media and special perks to their fans. And with sports memorabilia, between 50% and 80% of items are thought to be fake. Putting these pieces into NFTs with a clear transaction history back to the creator could overcome this counterfeiting problem.
But beyond these fields, the potential of NFTs goes much further because they completely change the rules of ownership. Transactions in which ownership of something changes hands have usually depended on layers of middlemen to establish trust in the transaction, exchange contracts and ensure that money changes hands.
There will be many other improvements in this decentralized economy that have yet to be imagined. It will be a much more transparent and straightforward type of market than what we are used to.
How to Buy NFTs
There are a variety of marketplaces on which to buy and sell NFT’s: Nifty Gateway, MakersPlace, OpenSea and Rarible are just a few of many platforms dedicated to purchasing and selling these types of media. For those who might be interested in NBA and Sports related highlight collectables, check out NBA Top Shot—where $230 million(!) has already been spent just by trading tokens, or “legendary moments”… Crazy, right?
How to Make and Sell NFTs
If you’re an artist, a designer or any other type of creator, you could make and turn anything you do into an NFT. So, let’s say you have a meme you want to turn into an NFT, or, an image or a video or any other visual like media: the so famous Nyan Cat, you know that cat…? That animated cat that flies off in space with a Rainbow trail behind him… Yes, Nyan Cat was sold as an NFT for almost $600,000, and you only have to register on one of those websites and you are, pretty much, all set and good to go. The process differs from site to site obviously, but you can start on platforms like Nifty Gateway, where basically you just have to apply to create a project so it can be sold as an NFT on its marketplace.
- In retrospective, NFTs are essentially digital visual media you can claim ownership over.
- NFTs are an easier way to sell and purchase authenticated work off of the internet. NFTs allow anyone to own a piece of digital content as well as facilitate sellers and creators to sell their work through a safe and regulated environment, making it easy for anyone interested in investing or simply just interested in collecting artworks.
- NFTs are useful in the digital art market because they enable claims to authenticity and scarcity.
- NFTs reconstruct both the artist’s creative process and how the world regards art, now that it’s possible to actually “own” and sell digital art for the first time, artists can benefit from selling their own work.
- NFTs create possibilities for new business models that didn’t exist before. Artists can attach conditions to an NFT that assures they get some of the proceeds every time it gets resold, meaning they benefit if their work increases in value.
- NFTs can be highly valuable depending on how trending and viral a piece of content is.
- Due to its “virality” and “trendiness”, it makes sense hopping on this hot new trend as fast as you can, otherwise, due to market and financial fluctuations, you might lose momento and value over the piece of content you might be interested in.