and why it is making gallerists uncomfortable
Since 2020 the art market has been forced to go digital due to the covid-19 pandemic and the drastic mobility restrictions. Now we are wondering: is digitalization the inevitable result of a globalized world, that was only accelerated by the pandemic limitations, or is it the direct consequence of the latter? Art exhibitions and fairs, auctions and viewing rooms became virtual, but what about the works per se, specifically the digital ones? This niche has long been in the underdog space of the art industry with a few thousands devoted convents: in the past we have heard about the CryptoKitties first released in 2017, which sold for decent figures at back then little heard of online digital art platforms. But the hype was quickly over, with the figures of cryptocurrency turnover fading and hitting lows in 2018 up until 2020.
For someone who is not digitally- savvy, an artwork that only exists online or on a digital ledger, sounds counterintuitive: JPG or other types of image file are easily duplicated and transferable, which would not have any sense in terms of uniqueness, authenticity and possession: until the NFTs came around.
Blockchain applications to art: the NFTs fever
You have certainly been away from this planet (or you haven’t read the news for a few months) if you have not heard about how NFT (Non-Fungible Token) technology is revolutionizing the digital -particularly the art- market. Unlike other common cryptocurrencies (e.g., Bitcoin) that are fungible in nature, any digital asset that is attached to an NFT is permanently non-mutually interchangeable and possesses a unique record on the Ethereum blockchain. And it is this uniqueness, this scarcity, that makes an NFT good desirable, thus tradeable. The allure of this innovative mechanism is the use of blockchain to prove authenticity and ownership, operating as a database that records that stores any information related to provenance and previous transactions of the NFT.
So, what NFTs have to do with art? Why this fuss on all the art news platforms -and why do some brick and mortar gallerists feel threatened?
Let us explain it to you: for the first time in (digital) art history, any artist can create and put up for sale an NFT artwork, which, as a condition of a ‘smart contract’ of the underlying token guarantees the ongoing resale royalty. So, each time an artwork exchanges hands on the secondary market, the system is automatically issuing a royalty payment to the artists token wallet.
The idea of paying for a digital piece’s ownership -at the same time downloadable by anyone- could sound bizarre, but as New York gallerist Vincent Harrison says, “it’s the ownership [of the artwork] that creates value”.
Beeple’s case at Christie’s
NFTs websites are running since mid-2010, booming with the blockchain game CryptoKitties in late 2017. After a few stagnant years, the crypto currency world is back on the rise, with the value of Bitcoin quadrupling over the last year only: which has liberated a lot of financial resources for the ‘new age mercenary’. Many artists have sold crypto art before in online marketplaces, however, there has not been much focus on it until one of the world’s leading auction houses has decided to put an NFT artwork under the hammer to capitalize on the crypto world’s massive push forward.
EVERYDAYS: THE FIRST 5000 DAYS by the South Carolina-based digital artist Beeple (aka Mike Winkelmann, 1981) has been sold for $69 at Christie’s online auction last 11 March 2021 -being the first purely digital NFT-associated artwork ever offered at Christie’s, in addition to setting a new record as the third-highest auction price reached by a living artist. Beeple’s opus, besides representing a milestone for digital art collecting, is also considered “the most valuable piece of this generation” -said a few days ago the current owners of the work in an interview for Artnet News. It must highlight both Beeple’s digital collage creative process and raised themes: the ground-breaking artist has been posting new digital artwork online daily, throughout the past thirteen years, dealing with issues from society’s dread of tech to recent political outrages, always with a satirical tone. For all these reasons -and who knows how many more-, Singapore-based NFT collectors, under the pseudonym of Metakoven and Twobadour, have purchased this monumental digital collage claiming that “this is going to be a billion-dollar piece someday”.
Uncertainties about NFT art market
Though the NFT system intends to solve vague physical art market issues, e.g., artworks’ price formation, ensuring traceability and transparency, there is no guarantee of embrace, especially by the most traditional art market institutions. As the NFT method is not subject to any legal regulations, there is still a large gap to fill. Like other speculative assets, growing demand implies price increases, and this is what has happened with NFTs: the dollar value of Ether has soared this year. And let us expect it will not continue, as what characterizes NFTs are their non-interchangeable condition. Another concern is the environmental one: NFTs on Ethereum blockchain are consuming a substantial amount of electricity to keep the millions of servers worldwide going 24/7, so the carbon footprint is very far from 0.
The ultimate question is: are NFTs just another trend, or they are here to stay? We do not know it yet but let us hope the traditional art world finds a way to adopt the best practices and utilize the newfound technology for increasing transparency, resale royalties and more freedom to the creators.