NFTs AND CRYPTOART: IS THIS THE FUTURE OF THE ART MARKET?

The LTArt team dives into the phenomenon that has been shaking up the art world for the last weeks: NFTs (Non -Fungible tokens).

27 April, 2021

On March 11th, 2021, the art world witnessed the sale of the first-ever digital art piece through a unique NFT (Non-Fungible token) by Christie’s. The auction reached a final price of $69,346,250, making the American graphic designer, Mike Winkelmann, also known as Beeple, one of the top three most valuable living artists. The artwork, titled ‘The First 5000 Days’, was composed of 5000 digital art pieces produced by Beeple over the last 13 years. The auction attracted great attention from the public and art experts as ‘The First 5000 Days’ became the most expensive digital image ever sold. 

 

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‘The First 5000 Days’, sold through an NTF by Christie’s 

 

What this ground-breaking event illustrates is not only the rise and settlement of digital art in the art market but also the rapidly growing popularity of NFTs. Cryptoart and NFTs have indeed been increasingly popular in the past few years, allowing digital art to become unique and valuable. According to the NFT Report 2020, the Non-Fungible Tokens market has grown by 299% in 2020, with a total value of more than $250m. The report states that the market will only keep growing in 2021, to become a leading driver of economic activity in the digital realm. But what exactly are Non-Fungible Tokens and how are they changing the art market?

Cryptoart is a category of digital art pieces, linked to specific NFTs all of which are embedded in blockchain technology. Whilst these terminologies might be confusing for those of us not acquainted with cryptocurrencies and online trading, a cryptoart is simply a digital art piece that has been linked to an NFT. By becoming a cryptoart and therefore being attached to an NFT, this digital art piece becomes unique and inimitable. This is due to the fact that an NFT is a unique metadata referring to a specific cryptoart. Thus, although digital art pieces can be replicated, copied and downloaded infinitely by anyone, the NFT attached to a cryptoart makes it unique. Acquiring an NFT means owning the original art piece, as this NFT doesn’t exist anywhere else. Unlike other cryptocurrencies, NFTs cannot be exchanged. As their name suggests, they are non-fungible and indivisible.

In terms of how it works, when an NFT is acquired, the purchase goes through a network of computers, called a blockchain, which is a digital record of any transaction ever made with that NFT. Each computer validates the transaction and records the new acquisition. Because of the way blockchains are designed, the record of a transaction cannot be altered as new data needs to be validated by all computers of the blockchain. NFT owners can later resell their NFTs, license the rights to a museum to display it or even control the conditions under which it is displayed. When an NFT is acquired, a certificate is given to its new owner testifying of the cryptoart’s provenance and authenticity. 

Hence, all cryptoart possess an NFT, which is what makes it unique and tradable. However, not all NFTs refer to cryptoart as NFTs might be attached to items that are not art pieces. 

To illustrate the functioning of NFTs, let’s focus on one recent NFT transaction. Earlier this month, Canadian artist Grimes declared on Twitter that a collection of digital artworks composed of short video pieces, produced by her brother and herself, were about to be auctioned in the form of NFTs. Through this auction, the art pieces composing the collection became cryptoart as specific NFTs were attached to each of them. The whole collection was sold for a total of $6 million, whilst each of the pieces composing the collection were sold to separate owners through NFTs. Each NFT went through a specific blockchain and were validated by the computers composing the blockchain. This technology certified to their owners that they were the one and only true proprietors of these art pieces. Today, although each video is available to watch online, only the NFTs owners own the authentic original pieces. 

So, what makes NFTs so attractive to art buyers and artists? Well, the answer is quite simple. First, thanks to NFTs and cryptoart, traditional physical art that can be seen and owned has a correspondent in the digital world. Digital artworks can now be collected, bought, sold and reselled which is a true revolution for the art market in its globality. Thus, what motivates art buyers to buy traditional physical art or cryptoart through NFTs is the same thing: a passion for art, for an artist, an emotional response to an art piece or any other feeling that makes our relationship with art so special. The desire of owning an original piece remains untouched. Additionally, as blockchains record every transaction made around a specific NFT, one’s status as an art owner becomes public, potentially seen by anyone, feeding one’s need for social recognition. Furthermore, NFTs represent an opportunity for financial profit, as speculators invest in NFTs to see their value increase. Cyproarts have become exciting speculative investments in a booming market. Andrea Seminara, CEO of Redhedge Asset Management LLP and Financial market expert, expresses his enthusiasm regarding the emergence of NFTs in the art market: 

‘I believe the art market has adopted very few technologies since the 90s, lagging extremely behind any other market, especially the financial one. Now the art market has the occasion to skip many steps and jump ahead many others. It is always easier to adopt new technologies if starting from zero rather than change the ones in place now. In this specific case, I believe NFTs are a really valuable and promising solution. Actually, any digital ownership should be regulated by a similar process. I hope for once the art market will lead the way for many other sectors to adapt.’

Through their uniqueness, NFTs open doors to new forms of digital art, mixing visual art, technology and music. For digital artists, NFTs represent a new democratisation of art sales: any digital artist has access to the same opportunity to publish their artworks on NFT platforms, being able to now sell their artworks through NFT platforms regardless of their race, gender or professional background. Moreover, NFTs are an opportunity for artists to sell their works at much higher prices as well as to get a percentage of the resale value of the NFT. When it comes to ‘The First 5000 Days’, the auction house Christie’s specified that Beeple and his successors will benefit from 10% of any future transfer. Finally, blockchain platforms only get a rather small commission from each transaction. There are thousands of platforms through which art buyers and artists can respectively purchase and sell NFTs such as the very popular RadibleOpensea and SuperRare. One could argue that NFTs might slowly start to be integrated in more traditional art trading events. Indeed, during the 2021 edition of the international art fair Art Dubai, the first physical art fair since the start of the pandemic, its organizers had set up an inaugural cryptoart cruise where NFTs lovers could purchase crypto-artworks by, amongst others, Amrita Sethi or Debby Gommeren. Moreover, at the time of this article’s writing, the renowned auction house Sotheby’s has just launched its first ever NFT auction in collaboration with digital artist Pak and the NFT platform Nifty Gateway. Until April 14th, Pak’s ‘The Fungible’ collection will be available for purchase for any NFT lovers participating in the auction. The highlight of this collection is the Open editions, during which collectors will be able to purchase fungible cubes, for a fixed price of $500 each, which will later allow collectors to obtain different sets of NFTs, according to the number of cubes that they own. 

 

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Another example is ‘Nyan Cat’ produced by Christopher Torres, which sold for US$590,000 during an NFT art sale hosted by the new NFT marketplace Foundation. 

 

However, NFTs are also criticised for their important environmental impact, as every transaction consumes a tremendous amount of energy. Indeed, according to a calculator invented by Memo Akten, when the performer Grims sold for $6 million her collection of digital artworks through NFTs, the transactions consumed as much energy as an average EU citizen would in 33 years. Undoubtedly, the environmental threat represented by NFT transactions needs to be tackled soon, especially as the number of NFT transactions keeps growing around the world. Moreover, other critics have expressed concern around how the current NFT hype could create a speculation bubble as speculators have been invading NTF auctions. 

Despite these criticisms, NFTs keep seducing the traditional art audience and remain a popular form of investment and art acquisition applicable not only to visual art but also to the music industry, and more broadly, the digital realm. 

Amongst recent widely talked about NFT transactions, on March the 3rd, a blockchain company, called Injective Protocol, burned, destroyed and later sold as an NFT an artwork by famous street art artist Banksy. The blockchain company had acquired the artwork in 2018. After its destruction during a livestream video, the NFT attached to Banksy’s artwork was sold for $380,000. Seen as a stunt by some or as a strong artistic statement by others, this event allowed Injective Protocol to display its ability to bridge the physical and digital realms. The artwork, entitled ‘Morons’, is the first-ever artwork to be turned into an NFT while its physical version is destroyed. In the description of the Youtube video in which Banksy’s artwork is being burned, one can read: 

“We view this burning event as an expression of art itself. (...) The reason the burning itself is so important is because as long as the physical piece exists, the value of that piece will remain with the physical. However, if we entirely re-create the physical piece and input specifications such as the art version number into the smart contract code, no one can ever alter the digital art in any way. In this way, the physical piece will forever be memorialized in this NFT.”

Through this statement, Injective Protocol highlights the eternal nature of NFTs in comparison with physical art pieces that can be altered or destroyed. One could assume that destroying and turning the physical art into an NFT challenges the widely spread conception of physical art as being more valuable than digital art and reaffirms the legitimacy and value of digital art in the art market. Indeed, turning ‘Morons’ into an NFT increased its value as the artwork has seen its uniqueness renewed, in the eternal form of an NFT. Finally, the perception of Morons’ destruction as an artistic statement questions the role of Injective Protocol: has Injective Protocol become an artist of its own? 

Paradoxically, ‘Morons’, is a satirical illustration of an art auction at Christie’s. Next to the auctioneer, one could read in a framed image: ‘I can’t believe you morons actually buy this’. One can thus only interpret its own way the destruction and sale of ‘The Morons’ through an NFT. 

 

Image credit: BBC - ‘The Morons’ by Banksy being burned during a livestream

 

Pushing even further the unlimited creativity allowed by NFTs and blockchain technology, Sophia the Robot, a popular social humanoïd created in 2016 by David Hanson, co-founder of Syngularitynet, released its cryptoart on the platform Nifty Gateway on March 23rd. Amongst the artworks published on the platform by the social humanoïd, a self portrait untitled ‘Sophia Instantiation’ was sold for nearly $700000. Thanks to AI, Sophia the Robot has been studying the artwork of Italian London based artist Andrea Bonaceto to eventually develop its own. According to Dr. David Hanson, Sophia the Robot added to its art “data from {its} life”, blurring the fine line existing between human and technological creativity. This revolutionary association of a human artist and AI promises exciting work but also makes us question the common association of art with human creation, affirming also the primary role of NFTs in the market. According to Marcello Mari, Communication Director of Syngularitynet, “we are just scratching the surface of the impact of NFTs in the art world. In a few time, there won't be the need to mention NFTs anymore: they will be so deeply ingrained in the art commerce that it would almost become irrelevant to mention them. The ability to certify digital artworks is also opening up a new form of creativity between humans and machines, similar to the recently announced Sophia the robot artworks' auction on Nifty Gateway”. Following its sales of NFTs, Sophia the Robot announced its new musical project, ‘Sophia Pop’, in which the social humanoïd will collaborate with musicians. 

 

One of Sophia the Robot’s Instagram posts promoting the sale.

 

The fact that they are not replicable or interchangeable means that NFTs can really solve some of the biggest issues of the art market, in particular related to provenance, authenticity and ownership of artworks. With the use of NFTs to record and guarantee the ownership of artworks, creative industries would greatly benefit from a transparent and traceable online ledger of ownership. Potentially, they could also be referred to not only digital and crypto art but also to the ownership, or co-ownership, of different kinds of physical, unique and irreproducible assets. Of course, the road ahead for NFTs is a very long and uncertain one and we are all looking forward to seeing the innovative applications of them.

 

Sources: 

 

BBC - https://www.bbc.co.uk/news/technology-56362174

 

The Guardian - Patrick Lum and Lucy Clark https://www.theguardian.com/culture/2021/mar/05/what-is-cryptoart-how-much-does-it-cost-and-can-you-hang-it-on-your-wall 

 

Wired - Gian Volpicelli https://www.wired.com/story/nfts-boom-collectors-shell-out-crypto/

 

Forbes – Vipin Bharatan https://www.forbes.com/sites/vipinbharathan/2021/02/21/non-fungible-token-art-market-gets-boost-with-christies-upcoming-auction/?sh=6cc523012fc7

 

RollingStone – Samantha Hissong https://www.rollingstone.com/pro/news/kings-of-leon-when-you-see-yourself-album-nft-crypto-1135192/

 

The Guardian – Alex Hern https://www.theguardian.com/music/2021/mar/02/grimes-sells-digital-art-collection-non-fungible-tokens

 

Marker - James Surowiecki https://marker.medium.com/why-the-nft-craze-is-a-bubble-waiting-to-pop-ad35922ca210

 

Artnome - Jason Bailey ttps://www.artnome.com/news/2018/1/14/what-is-cryptoart

 

CBS news - Dan Patterson https://www.cbsnews.com/news/banksy-nft-injective-destroy-art-digital-token/


Reuters Staff - Reuters https://www.reuters.com/article/us-hongkong-robot-idUSKBN2BG3GB

Léonore Simon

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