NFT Redrawing the Art Market

NFT…An art form, digital goods, or platform?

A digital token of Nyan Cat, an animated flying cat created by Chris Torres over 10 years ago, was sold at almost $600,000 in February 2021.  The sale of the iconic meme brings more attention to the NFT-based arts market, which has surged with the crypto markets and with success seen by crypto-native and traditional artists alike. 

NFT stands for non-fungible token –  okay, that probably doesn’t make it any clearer. In normal language, “non-fungible” means that an NFT is a type of cryptocurrency, a unique digital asset that cannot be exchanged with anything else with equivalent value. A similar concept that came out before NFTs is bitcoin. Bitcoins are fungible; one Bitcoin is always equal to another Bitcoin, which makes this a trustworthy means of conducting transactions. Whereas NFTs are different, each with a unique digital signature that can prove ownership of digital products, so their fungibility enables NFTs to be considered a modern version of collectibles, giving intangible, digital items equal chance to be purchased and traded just as physical collectibles. NFT technology has gone mainstream with extensive application in the entertainment industry, commodifying digital artworks, music, virtual avatars, and even tweets. Twitter CEO Jack Dorsey auctioned an NFT of his first tweet, which sold at $2.9 million, and many believe that the trend of selling tweets with digital authentication will likely continue. To NFT advocates, tweets are just like the fine arts of the 21st century. 

What may NFTs bring?

NFTs and the blockchain technology that the digital assets are built upon could give artists and content creators a unique opportunity to monetize their artworks. Artists no longer have to rely on galleries or auction houses to sell their art. They can sell their works directly to consumers as an NFT, which also lets them keep more of the profits that are usually divided between distributors and galleries in the traditional art market. In addition, physical art venues are diminishing in the post-pandemic era, so artists in financial hardship are actively seeking new ways to present their work to the public and market their efforts. Many of them are drawn to the NFT technology for its democratizing nature: anyone can log on to OpenSea (the largest NFT marketplace) and sell their goods, and the work comes with a publicly visible ledger of its entire history – when it was created, who has owned it, who has purchased it, and for how much. 

Photographer Kevin Abosch, who once sold a photo of a potato for $1.5 million, describes NFT technology as “a departure from art purchases of the past,” in which investors put valuable art aside in storage to save it for a time when it will be worth more. He believes that the craze surrounding NFTs has been ignited by two factors: that the technology is legitimately interesting and useful, and that any get-rich-quick scheme can easily draw extensive attention.

For collectors and the general public, NFTs also serve as an unprecedented experiment that aims at decentralizing and democratizing artwork ownership through blockchain technology. Art collectors are traditionally wealthier, whereas the rise of NFT trading platforms is disrupting the access to art and creating a broader market for content creators and buyers. It doesn’t mean that NFTs will give rise to a free utopia for art trading though. NFT marketplace platforms created across the established art world will tend to feature more prominent artists, while emerging artists remain relatively undiscovered. Thus, how less-famous artists will benefit from the direct access to potential buyers through NFTs and how any future resale of their work will generate additional profits for them remains uncertain.

A bubble or a crypto-art revolution

NFT-based art has been around for years and digital art sales are generating headline after headline this year, but many are still struggling with whether the NFT phenomenon means the future of digital art or if it is just another financial bubble. 

The highest valued living artist, David Hockney, couldn’t care less about NFTs - he calls them “international crooks and swindlers.” However, the 83-year-old artist is a digital artist himself, who started drawing on an iPhone and iPad back in 2009 and reflected on how significantly technology has transformed his practice when talking through his iPad drawing exhibition “The Arrival of Spring” earlier this year. Hockney is skeptical about NFTs in that NFT artworks are fragile. NFTs use links to direct their owners to information about the artist and any details about the artwork, but links can and do die. An NFT with a broken link represents nothing other than the collective memory of what artwork the link used to represent— say, fully imagined value and appreciation based on trust. 

While the burgeoning NFT market is seeing booming potential, experts also point to possible risks like its dizzying volatility and appeal for unified regulatory intervention. The market has experienced “hyperkinetic growth” lately and a bubble could likely pop soon, according to Carlos Domingo, founder of the digital-asset firm Securitize. There are also disputes about the fair, legal use of NFT artworks. Some of the issues that will have to be resolved include whether the NFT involves a creative work of digital labor, and the copyright ownership issue will also become far more complex than in traditional art markets. 

Despite the uncertainties, many artists and art critics see huge potential in the future of NFTs. Delhi artist Seema Kohli asserts that with continuous correction, the NFT market will ultimately chart out a parallel course and coexist with the physical art world. 

In a nutshell, NFTs, at the very least, envision a delightful future with millions of opportunities that our time presents. However, there are risks investors cannot ignore, such as fraudulent projects, regulatory risks, and evaluation challenges. Not a lot of people are actively pursuing NFT art projects yet, but despite the uncertainties, the way these top players are integrating NFTs makes me think that these are not just marketing or bubbles, but our new reality.