What are NFTs?
A key distinguishable aspect between digital and physical collectables, other than the nature of their materiality, is their uniqueness. Each NFT has distinctive information that makes them original. This also allows them to be verified more easily, as their data, which is generally stored in the Ethereum blockchain, can be traced back to their creation, facilitating the authentication of an item without third-party involvement. As each NFT is unique, they cannot be exchanged between one another like regular cryptocurrencies.
NFTs are also indivisible. This means that they exist as a whole item and cannot be divided. The ownership of an NFT is not possessed by their creators, but by their buyers. This is obvious when you think about material objects; if you buy a bicycle, it’s yours, not Decathlon’s. But when talking about digital items we enter a whole new world, for example when you purchase music from an online platform, you buy the song’s licence – you don’t actually own the song. Owning an NFT simply means having a digital receipt. So, while you may have bought the item you might not necessarily have copyright permission. This means the rightsholder can still continue selling the item or distributing it to the public.
Similar to other assets, the market for NFT-based items is strongly driven by supply and demand. Due to their scarcity and the expanding knowledge of them, there has been a growing interest in the use of NFTs that is provoking the integration of digitally produced and owned items in different sectors.
What is the role of an NFT in the art market?
Many of you (hopefully I’m not the only one) might have come into contact for the first time with NFTs after Christie’s online auction of a digital artwork made by an artist known as Beeple. With the sale starting at an opening price of $100, it ultimately sold for the record amount of $69.3 million for a digital artwork. Following Jeff Koons and David Hockney, Beeple is now the third most expensive living artist at an auction. The introduction of NFT-based art into an auction house sale is an unprecedented event for the art world. This defiance of the purchase of physical art raises many questions about the future of art collection and the concept of ownership. However, before diving ourselves into an existential crisis, we must first look into how NFTs work in the art market.
By now we (more or less) understand the basic functioning of NFTs, and therefore, if we apply it to digital art, then the NFT is a token that through blockchain technology is tied to an artwork, and therefore is again unique and easily traceable. The information that exists of an NFT cannot be edited, which means that its authenticity can be publicly verified, tackling the long-lasting problems the art market has had with the verification of ownership. The fact that the provenance of an artwork is so easily accessible means that the possibility of copying a digital artwork and selling it as a ‘fake’ is limited, as the origins of any NFT can be fully tracked on the blockchain.
Collecting NFT-enabled art allows both artists and collectors to sell without any restrictions, as the blockchain is not controlled by a central authority – meaning there is full freedom and transparency in the market. Another key benefit of selling artwork digitally for an artist is that there is no need to use a gallery or an auction house as an intermediary, and the profit made from the sale is greater for the artist.
Throughout the past year, the art world has seen a shift in the conceptualisation of exhibitions – a result of how the pandemic has forced us to stay at home – and therefore online displays of art and digital events have become a major way of seeing art. Museums have created virtual tours of both their permanent collections and temporary exhibitions, and artists have had to get even more creative to share their work on online platforms. The possibilities within digital displays exacerbate the limitations of galleries and museums, as the online world breaks liminal barriers and frontiers, providing more people with the opportunity to experience art. This concept is strengthened by the use of NFTs to sell digital artworks, as it opens up the reach of artists to a global extent.
Who are using NFTs?
We saw the art market’s newly-found fascination with NFTs reach a new level with the sale of Everydays: The First 500 Days (2021) by Beeple. The online sale lasted for 10 days, and 33 bidders competed for the artwork. The buyer of the piece, known as Metakovan, now owns the NFT of the artwork and a digital file that gives him rights for the display of the image.
However, in this case, the copyright of the work and the royalties that can be collected every time it is sold, remain with the artist. Noah Davis, art specialist at Christie’s Post-war and Contemporary art department, has stated that this was an inevitable development, especially after the events of the past year. He continued by saying that digital collecting will shift our understanding of ownership and positively disrupt the art market. One pro-NFTs argument that that is backed by artists and art specialists is the reduction in fraud that can be provided by this technology through its transparency and traceability. The potential of digital art is evident, and while it will clearly dislocate the functioning of the art market, experts seem very excited about this change.
Sotheby’s has now entered the crypto art revolution, as it has been announced by CEO Charles Stewart in an interview with CNBC, that the auction house will collaborate for their upcoming April sale with digital artist Pak. During the interview, Steward commented that the sale will include a combination of individual artworks and open edition NFTs, where for a short amount of time buyers can purchase an unlimited amount of NFTs. After giving the news, Steward continued by saying that Sotheby’s had been following the possible role of NFTs in the art market for a long time, as while crypto art presents a disruptive reality for traditional art, it is also linked to an interest in borderless ownership.
The NFTs fever is spreading through the art world, as the family of Russian-French artist Vladimir Davidovich Baranoff-Rossiné have recently announced the sale of an artwork by the artist, alongside an NFT. They have decided to auction Baranoff-Rossiné’s Abstract Composition through Mintable. The piece has been tied to an NFT, by which the buyer will receive both the original and the digital artwork. Nine other digital pictures of the artist’s will also be sold as NFTs in three different sales and the family will maintain ownership of these original pieces.
König Galerie has also joined this technological adventure, as it is hosting its first NFT auction of 29 digital items accompanied by an online group exhibition, which currently being shown through a virtual game world existing in the blockchain called Decentraland. The price of the artworks isn’t being established by the gallery, but by the auction itself, with starting prices between 0.5-2 ETH ($800 and $3200) with no additional buyer’s premium. Through this new project, König Galerie is trying to address the role of art in a digital world and adapt the generally traditional artistic environment to today’s economy, where the focus is being shifted towards technological innovation.
Judging from the events of the past months, Christie’s auction of Beeple’s work has encouraged a chain reaction in the art world, where galleries and auction houses have responded by starting to implement the NFT space into the market. The potentiality of crypto art has also become an interest for some museums, as the Guggenheim Museum has recently posted a job looking for an intern with an MBA background that will help them assess NFT-based art and how cryptocurrencies can impact art collections.
The Cons of NFTs
Since October, the NFT art market has experienced an explosion as digital artworks are being sold for thousands of dollars. Between January and February alone, $300 million were spent in NFT sales. With Bleeper’s Everydays: The first 500 Days at the podium, the list of most expensive NFT artworks is followed by another work by Bleeper, Crossroads, sold at $6.6 million in February, Forever Rose by Kevin Abosch, which was purchased for $1 million in 2018, and Pak’s Metarift, bought for $888,888 in March.
While the interest in crypto art and NFTs comes from an elite community of investors, the opportunities that NFT-based art provides in terms of provenance transparency and control over copyright for artists has increased the attention being placed on digital art by institutions. But despite all its benefits, there is still controversy surrounding the introduction of blockchain into the art world.
Early in March, a collective called Global Art Museum (GAM) began sharing a collection of NFT-based artworks from notable institutions such as the Rijksmuseum and the Art Institute of Chicago. Historic works from museums were digitally copied and uploaded to blockchain through a marketplace known as OpenSea, where buyers could own digital rights of paintings. In a Twitter thread, GAM explained the aim of the work, and stated that they “are disrupting the art museum industry by transforming old paintings and artworks into NFTs.” They also added to this ‘manifesto’ that they would share the revenues earned with the institutions.
As the backlash to GAM’s work grew, they stated that they wanted to increase the possibilities of their ‘mission’ by collaborating with large museums such as Museé d’Orsay and Museo del Prado. According to Artnet News, there has been no response from these institutions, however, the Rijksmuseum did provide a statement through Twitter. In their reply, the Rijksmuseum denies any collaboration with GAM and provides a link to their Open Data Policy, where they encourage their website visitors to look at the images of the collection and download them without any copyright issues, as the domain is public and people can use the images freely, even for commercial purposes.
GAM now claims that their project was a social experiment designed to gain publicity for the launching of their real project. According to their Twitter account, they were trying to draw attention to NFT-based art and have rebranded themselves as “a collective of NFT animators and artists” who animate paintings.
Disagreement with the transformation of existing works into NFTs has also risen from artists. As the interest in creating artworks through NFTs is increasing, a new service has been developed by which someone’s content can be tokenised and turned into an NFT. A platform called Tokenized Tweets promoted their service by giving people the opportunity to buy digital items as NFTs. This process was carried out through Twitter (Tokenized Tweets account has since been suspended) and users would simply have to tag the account @tokenizedtweets and request the item they wanted.
RJ Palmer, a freelance California-based concept artist, known for his work on Detective Pikachu and his hyper-realistic dinosaur designs, has joined the criticism towards this service. He denounced the work of Tokenized Tweets as art theft, and criticised their disruption of artists’ work, calling them scam artists. Transforming artworks into NFTs can become a real threat for digital artists, especially for those who have a smaller platform, as their work is being monetised without their consent and privatising their account would limit the reach of their work.
Understanding the potentiality of crypto art ownership is a complex issue – what does it mean to own the digital rights of an NFT when you can still freely share, save, or print the image. While the buyer of an NFT-based artwork has ownership of the NFT, they don’t have ownership of the physical object that the NFT is tied to, or of the digital asset itself. This means that owning an NFT does not directly give you rights over intellectual property – you cannot avoid people from downloading a JPEG of the artwork or sharing it on their social media platforms.
What is the point then in wanting to own the NFT rights over a digital work? At least when you purchase a physical painting you can display it or reproduce it, as you have the ownership of the painting. But when it comes to crypto art you don’t have any right over the artwork, other than being able to claim ownership of the work’s NFT and excluding others from that ownership.
Another criticism that is following the introduction of crypto art into the market is the large energy consumption involved in mining NFTs. The consumption of Proof of Work (PoW) blockchains results in a vast amount of carbon being emitted – bitcoin activity is estimated to emit around 45,800,000 Tonnes of carbon per year, and the Ethereum annual carbon footprint is comparable to that of Tanzania.
Early in March singer and visual artist Grimes, sold a digital art collection for almost $6 million. When the computations required to produce her animations’ NFTs were assessed through CryptoArt’s online calculator, the results showed that they produced 70 tonnes of carbon emissions. A percentage of the sales’ profit will be donated to environmental NGO Carbon180, however, this just highlights the existence of the issue.
Buying art online from websites such as Etsy also produces a carbon footprint. However, when we compare the scenario of purchasing a print and receiving it home and selling art as an NFT, there is a considerable difference in the energy consumption of both events. Shipping an artwork to an online customer creates 2.3 Kg of carbon emissions, while the average NFT will produce a footprint of around 215 Kg of CO2.
An alternative way to the Proof of Work method could be using a system known as Proof of Stake (PoS). The issue with mining is that it requires a significant amount of computer power to run different calculations – meaning that a lot of electricity is needed for the Proof of Work system. To pay for the electricity bill, miners can sell their coins for another currency called Fiat money, however, this can lead to a decrease in the price of the cryptocurrency. Therefore, the Proof of Stake was developed to address this problem, by allowing miners to create new blocks based on the amount of cryptocurrency they own – the power a miner can use is attributing to the coins they own.
While Bitcoin and Litecoin for example use PoW, NXT is the first cryptocurrency that employs the PoS blockchain. Ethereum is currently trying to reach a consensus across the network to transition from PoW to PoS.
The role of digital art is starting to experience a vast change through the introduction of crypto art in the art market. The storing of NFTs in a blockchain provides a traceable provenance and significant opportunities, especially financial for artists selling crypto art as the demand is extremely high. However, it also allows people to copy art and sell it without consent. This lack of control over NFTs encourages criticism for some digital artists and for institutions whose income is not directly tied to the art market.
Is the future of art collecting and ownership digital? Maybe. I guess we’ll have to wait and see if the fever is only temporal.
Words by Eugenia Pacheco Aisa.
Graphics by Charlie Colville.
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