On March 11, 2021, the colossal digital work "The First 5000 days" created by Beeple over 13 years sold for $69.3 million at Christie's. This unprecedented sale makes Beeple the third most valuable living artist in the world, after Jeff Koons and David Hockney! It also marks the beginning of a new gold rush and puts a question on everyone's lips in the art world in recent weeks: what is an NFT? Artsper answers this question before delving into the future of digital art.
What is an NFT?
A Non-Fungible Token is a unique digital piece, certified by the blockchain. NFTs are insured as unique or limited by forgery-proof digital security. This is one of the key principles of the blockchain. So what is a blockchain, you ask? Simply put, it is a decentralized, digital storage technology for data. This means that data is not stored on fixed servers in a single location, but online. The information circulates between several computers owned by different people or groups of people, and for each data modification, the information must be verified and validated by the majority of the computers. Moreover, the information is stored in chronologically organized blocks, which makes it possible to date everything, ensuring unparalleled transparency. The information is therefore transparent, secure and fully traceable. It does not pass through any intermediary and is almost impossible to hack or falsify. These guarantees justify the value of blockchain as the ideal technology for all online transactions. This is why it is used for crypto-currencies like Bitcoin or Ethereum, and by extension for NFTs. There are different forms of NFT, and video games, sports and art are the main areas of use today. In the digital art sector, NFTs are usually JPEG or GIF files, i.e. a simple image, static or moving, that you can save on your computer with one click. In this case, if you can just save the image with a screenshot or view it on the internet at any time, what is the point of spending so much money? In reality, when you buy an NFT, you are also buying the ownership of the work. When you sell it, you lose that title. A screenshot is no more valuable than a paper reproduction or photo of a physical work of art. In short, it is not considered an original and has much less intrinsic value.
"Lost in a moment" by Mad Dog Jones
The Gold Rush? Explanations of a phenomenon
The sale of the first digital art work by Christie's generated incredible media hype in early March 2021. However, the subject of NFTs had already been of interest to the internet sphere for several months and the beginnings of NFTs date back to 2013. As a result, marketplaces dedicated to digital art have been created in recent years like OpenSea or Rarible. However, the most used and best known to date is without doubt Nifty Gateway. Getting art, even digital art, allows for a kind of reproduction of the "physical" art market, more transparent and much more reactive. You can sell your work within seconds of deciding to do so, as there is no middleman and everything is done automatically and securely. The lure of profit has obviously attracted many. Sometimes the value of artworks on the second market (i.e. resale from private person to private person) increases by several hundred percent in a few hours. Today, the most famous artists are Beeple (obviously), Blake Kathryn and his futuristic and ethereal projects or FEWoCIOUS and his cubist works. Musicians or singers have also associated with digital artists to make phenomenal sales, like the singer Grimes, the DJ Steve Aoki or even Daft Punk, just before the announcement of their separation on February 22. Today, many "traditional" artists are turning to NFT, seeing new opportunities. We can name among others Damien Hirst, Futura 2000, Takashi Murakami or the fashion photographer Mario Testino. The demand for NFTs is strong and the purchase of NFTs is now also of interest to some curious collectors.
"Gods in Hi-Res" by Grimes & Mac Boucher
How do you buy an NFT?
It's undeniable that NFT buying and reselling platforms have been proliferating lately. Some of these sites take a commission on each sale. They act as an automated online gallery, where daily "drops" are held, i.e. limited releases (in time and number of editions) as well as auctions. This is how Nifty Gateway works. Other sites, such as OpenSea, are simply online platforms allowing individuals to exchange digital works.
Who can sell NFTs?
Anyone can sell NFTs and anyone can create them. Artists can create digital works directly or they can digitize physical works by dematerializing them. It seems that even owners of physical works could theoretically sell them as NFT. Indeed, a collective of artists, under the cover of YouTube and Twitter accounts called "BurntBanksy" burned the work "Morons" by Banksy to resell it for $380,000, four times its original value, as NFT! Finally, private individuals can also buy and resell digital artworks, without time constraints, on marketplaces. However, beware of the devaluation of certain pieces, as prices are very volatile and difficult to anticipate.
"Morons" by Banksy, burnt by the artistic collective BurntBanksy
How can galleries get involved?
Some galleries are already starting to jump on the bandwagon, becoming interested in marketing NFTs. It's an investment that seems profitable at the moment and low risk if the NFTs are created by the artists they represent. But, the most interesting thing for art galleries would be to think about using the blockchain, rather than exploiting NFTs directly. Indeed, it is based on the principle of a "smart contract", which establishes and simplifies the creation and exchange of property titles. These could be used to improve transparency in the art market. A smart contract uses the blockchain for exchanges between a seller and a buyer. The terms of the agreement are then entered into the database and as soon as one of the parties honors the terms of the contract, i.e., provides the work or pays the requested amount, the smart contract holds it, waiting for the second party to fulfill its part of the contract. If the buyer and seller honor the terms of the contract, the exchange of the title is carried out and directly recorded by the blockchain. This way, the information is immutable, until the work is offered for sale again. It is even possible to verify the owner of a work at any time, since the data is fixed chronologically forever.
NFT from the series "Dreamcatcher" by Steve Aoki & Antony Tudisco
The dark side of NFTs
Despite all the talk of it being "the future of art", there is no guarantee that NFTs will be a lasting phenomenon. The recent market boom should be taken with caution, both for galleries and collectors. The main problem with non-fungible objects is that their value is not indexed to anything! Their stability is constantly under threat and their value can collapse at the slightest jolt. The value of a fungible currency (such as banknotes and coins, in euros or dollars, for example) is indexed mainly to the price of gold. In contrast, crypto-currencies have no index at all. Immense values can be reached, but fluctuations are regular and the bubble can burst at any time. Mistrust is the order of the day around all these bubble phenomena and the craze for non-fungible, dematerialized products. Another important issue of the NFT industry is the ecological impact. Today, digital is one of the causes of global warming. According to an independent American study, the simple creation of an NFT represents on average the production of 200 kilograms of C02 or more than 800 kilometers driven by a car. Incomplete studies on blockchain are gradually revealing the disastrous consequences on the climate, such as the consumption generated by the mining of crypto-currencies, which already threatens the climate objectives for 2021.
NFTs are an undoubted innovation in the art world. Digital art appears to be the natural continuation of art as we know it. Despite the recent boom of NFTs, the media-driven attention of buyers is likely to be short-lived. For art lovers, "physical" works are irreplaceable and all art mediums have their value, just as a sculpture is different from a canvas. Therefore, NFTs are simply a new form of art, adding to all those already on the market and opening up new possibilities. Talented artists are already flourishing in digital art and the world of contemporary art is not finished innovating and digitizing itself. Not to mention that thanks to non-fungible works and blockchain technology, the market is improving in terms of transparency and democratization. You can now even find a number of artworks made using digital media on Artsper!