NFTs are disrupting the traditional art market, creating new communities of collectors, and giving artists more access to their fans and buyers.
In the past couple of years, NFTs, or non-fungible tokens, have captured the imaginations of global artists and collectors, spurring new economic activity. But lost in much of the conversation is how NFTs are reshaping the traditional art market. The implications for buying and selling are interesting not only for artists but also for collectors, galleries, museums and auction houses.
NFTs are a new type of crypto asset, but unlike Bitcoin, which is fungible or interchangeable, NFTs are unique. In the context of art and collectibles, an NFT is typically a unique digital representation of a good, such as a work of art. It’s akin to a certificate of authenticity and gets recorded on a “blockchain,” a digital database that often serves as a decentralized public ledger. NFTs can be based on physical or digital artwork, music, collectibles or other digital assets. So how do NFTs fit within the existing art market landscape? Some may think that NFTs are a fad, but there are interesting implications for existing art and the future of the digital art world.
Players and Profits
For decades, there has been a well-worn path that artists and their artwork take, starting with galleries, which place the art with museums and collectors, followed by the secondary market, centered around auction houses. Art galleries and auction houses have been the market makers of the art world: where museums, collectors and artists go to buy and sell art. NFTs and their marketplaces disrupt this process by allowing more artists to go straight to market and sell directly to buyers.
NFTs also disrupt pricing of artwork and how galleries and artists get paid. Generally, the gallerist sets the price for works of art by new and emerging artists as art is created and initially sold. Then, after time, a secondary market may grow for a mature and seasoned artist’s work, enhancing liquidity. Under the traditional model, each time an artwork sells in the secondary market, the proceeds go to the then current owner. Thus, after the initial sale, the artist does not benefit from potential subsequent price increases. NFTs change this. NFT contracts may include clauses, so artists get paid a royalty on each subsequent transaction, getting a piece of any potential upside.
Access and Affordability
NFTs and blockchain are already changing how people think about art and art ownership. NFTs typically reference some piece of artwork, either physical or digital. But ownership of an NFT does not also mean ownership of the physical art. NFTs are sometimes sold with the physical art and sometimes not.
British artist Damien Hirst explored this question of ownership with his collection of 10,000 NFTs, "The Currency," in which each NFT corresponded to a unique physical artwork. Buyers first receive NFTs and then decide between the digital NFT or physical artwork. The other is destroyed.
Museums are also assessing how to utilize NFTs. Some museums have created NFTs of masterworks of art in their collections to generate proceeds for the restoration of the same masterworks. Museums are also contemplating NFTs as forms of art in their own right, bringing up new questions about how to buy, store and curate them.
Collectibles and Communities
NFTs are not just impacting fine art. Collectibles, like baseball cards or sentimental artifacts, lend themselves well to minting NFTs. The result can be a unique profile picture, online gaming items or sporting clips. An example of an early NFT in this category is NBA Top Shots, which allows fans to collect highlight basketball clips, like your favorite athlete dunking or making a jump shot.
An interesting characteristic of this category of NFTs is how they may also derive value from a large community of fans or collectors who reinforce one another’s tastes. NFTs are in effect creating new art communities and giving artists new, more direct ways to interact with their supporters.
Bored Ape Yacht Club
The Bored Ape Yacht Club, a collection of NFTs of cartoon apes that was launched by startup Yuga Labs in 2021, has made a splash in the worlds of art and business, raising millions and counting celebrities among its fans. The “Club” allows members to access exclusive chat rooms and offers “airdropped” (new NFTs sent directly to a user’s wallet), and the ape pictures even act as a digital coat of arms for online profiles on social media. Traditionally, galleries have created art communities; now NFTs facilitate the growth of virtual and online communities as well.
CryptoPunks and CryptoKitties
CryptoPunks was the next stage in the evolution of blockchain entertainment. Rather than only dealing in memes, creators produced characters that users could own as avatars. There were only 10,000 available characters, and the low supply drove up demand as people bought and traded the unique animations.
Around the same time, CryptoKitties came to the scene not only as stock characters but as a virtual game through which players could adopt, raise and trade virtual cats. The highest-priced cat characters sold for over $100,000.
Types of NFT art
There are two main types of NFT art: generative and non-generative.
Non-generative artworks are ordinary paintings and other artwork created by people and uploaded to a blockchain and then assigned to an NFT. Most of the NFT art you'll see on the Internet is not generative. They are the results of human creativity (and technology).
The most famous examples of non-generative NFT art are:
A digital collage titled “Everydays: The First 5,000 Days” by artist Beeple was sold at Christie's for $69 million.
Another piece of digital art by artist Beeple called “Crossroads” sold for $6.6 million.
Generative artworks are created using a specific algorithm that uses a unique NFT identifier as the “seed” to create digital artwork. Such NFT artworks can be generated from start to finish by an algorithm. Or they can be created based on something the user specifies, e.g., they can specify a name, color, description or upload/draw some image, then based on these elements (all or individually) the algorithm creates something new. Here are some similar projects:
Autoglyphs — generative NFT art. Created and stored on the network.
CryptoKitties — generative cats. NFT Project stored on the chain, the images are generated and stored on centralized servers.
Axie Infinity — generative Pokemon-like game. NFT Project stored on the chain, — generated on the chain, but stored on a decentralized storage.
Art Basel Miami & Budja.io: Andy Warhol’s fractionalized NFTs
Works by iconic artist Andy Warhol are available as NFTs. The sale of the Andy Warhol NFTs began on December of 2021 during Art Basel Miami and collectors could buy fractionalized NFTs of 4 Warhol pieces on the Cardano blockchain. Miami-based art collector and gallery owner Rudolf Budja is behind the sale.
To clarify, Budja sell 4 Warhol pieces as part of the collection. The 4 pieces are a 1982 Campbell Soup silk-screen on a t-shirt, a 1980 “Art” t-shirt, a 1977 canvas silk-screen of a Volkswagen Beetle and a 1980 Joseph Beuys t-shirt.
However, it’s important to realize that these NFTs do not translate to full ownership of the Warhol pieces. Rather, these are fractionalized NFTs representing partial ownership. Fractionalized NFTs are a way for collectors to buy into high value pieces that may otherwise be too expensive. The NFTs are on the Cardano network and are available for sale via NFT marketplace, Budja.io.
There are 1.000 NFTs for each of the 4 Andy Warhol pieces. Of these, Budja sell 499 NFTs for each collection and keep 501. This allows Budja to keep a 51% stake in the artworks.
Unit London & Cinello
Some European galleries and museums have begun selling NFT reproductions of works of Leonardo da Vinci, Caravaggio, Raphael and Gustav Klimt.
In partnership with the Italian company Cinello, which in 2021 patented an NFT method involving high-resolution reproductions that are displayed on backlit screens placed inside period-appropriate frames, the digital-focused Unit London art dealership, closed out a showcase of Italian masterpieces reproduced as NFTs.
Same-size digital versions of the Leonardo portrait, Caravaggio’s “Bowl of Fruit” and Raphael’s “Madonna of the Goldfinch” (in the Uffizi in Florence) were offered in editions of nine, ranging in price from €100,000 to €500,000 per piece (around $110,000 to $550,000). 50% of sales proceeds went back to the licensing museums.
Hermitage Museum, St. Petersburg
The State Hermitage Museum, in St. Petersburg, Russia, held an auction of NFT replicas of five of its best-known paintings that raised $444,000.
Belvedere Museum, Vienna
The Belvedere Museum in Vienna has fractionalized the digitized image of Gustav Klimt’s “The Kiss” into a one-off drop of 10,000 NFTs. Each NFT was priced at 0.65 Ethereum, or €1,850. These Klimt NFTs had been sold, generating about €4.3 million.
British Museum, London
One institution that has wasted no time in embracing NFTs as a fund-raising tool is the British Museum in London. the museum entered into an exclusive five-year partnership with the Ethereum-based NFT platform LaCollection. The museum has since made several token drops, in editions varying in size from two to 10,000, using digital copies of works by Katsushika Hokusai and J.M.W. Turner. Prices ranged from $500 to $40,000.
OFFF Festival Barcelona 2022 – Ouche
Launched as part of OFFF Barcelona 2022, Ouche is an NFT platform created by the OFFF community. The physical NFT Ouche exhibition took place on the top floor of the Museu del Disseny (Design Museum of Barcelona).
Roads Not Taken offered an exciting glimpse into the alternate selves of the creatives luminaries who continue to pave the way forward, being the fuel for your imagination.Showcases a collection of perspectives and artworks from around the world that translate our "today" into timeless essays and visual inspirations.
Centre Pompidou, Paris
The Centre Pompidou in Paris has opened the museum’s first show dedicated to works linked to the emerging NFT technology. It was the very first institution dedicated to modern and contemporary art to acquire a group of works dealing with the relations between blockchain and artistic creation, including its first NFTs. The exhibit was called “NFT: The Poetics of the Immaterial from Certification to Blockchain”.
In all, eighteen projects by thirteen French and international artists joined the collection. Produced by a variety of practices and cultures, such as crypto art, the plastic arts and new media, these works reflect the astonishing wealth of the forms of artistic creation associated with blockchain.
Conclusion
NFTs are a revolutionary technology that is transforming the art industry. By eliminating intermediaries, democratizing the art world, and redefining ownership and authenticity, NFTs are creating new opportunities for artists and collectors alike. While there are risks and challenges to consider, the potential of NFTs to create new revenue streams and business models is exciting. As the NFT art market continues to grow and evolve, we can expect to see new forms of art emerge that are uniquely suited to the digital medium.