In what measure has the appearance of a new art form (NFT) affected the art market and its affiliates?
Creative Outcome- 3 NFTs
Research Paper
In what measure has the appearance of a new art form (NFT) affected the art market and its affiliates?
NFTs - The “need to know” basics
NFTs are non-fungible digital tokens. They are a unique digital asset with a certificate authenticating ownership on a blockchain network. (1)
NFTs were invented in 2012 and reached mainstream popularity by 2017.(2) Fungible is defined as “easy to exchange or trade for something else of the same type and value” by the Cambridge Dictionary.(3) The term 'non-fungible' was coined to describe the concept of a single item that cannot be replaced by something similar. By definition, they are not only art but can also be games, financial applications, and collectables. By 2021 they made up 16% of the entire art
market and easily became one of the most accessible forms of art with around 4% of the US population owning one.(4)
The creation of NFTs triggered a digital art renaissance and the emergence of a new market in which they are now traded.
The digital art market before NFTs
Before the advent of NFTs, digital art was not regarded as ‘real art’, especially within the fine art community (the collective of artists/buyers or anyone with extended knowledge of the field.) This community prioritised the tangible aspect of traditional art, as private ownership was guaranteed upon purchase.
With traditional art, it is difficult to date and authenticate and artwork unless you are a professional. With NFTs, artists and collectors can prove ownership and authenticity of digital art using digital certificates, and anyone can check authenticity. Trading traditional art entailed an increased probability of forgeries and paper-trails occurring. NFT’s, however, made it possible to publicly trade art with fewer paper-trails or risk of forgeries .This while still maintaining an assurance of private ownership, efficiently solving both problems at once.(5)
How has it affected its main stakeholders:
In the second edition of ‘ A Handbook of Cultural Economics’ Velthius identifies artists, art dealers, collectors, the general public, institutions, critics and auction houses as main stakeholders of the market.(6) So in the following paragraphs, I will elaborate on how NFTs have affected artists, buyers and the public, all of whom I consider to be important stakeholders in this market.
Public
In 2021, NFTs boomed in popularity, reaching the peak of their sales and creation. This also brought concerns about the impact of NFTs on the general art market. Many are concerned that NFTs are a simple fad, and that their value and popularity will fade over time. But to understand why they got so popular in the first place we need to look at a basic economic theory: Scarcity- when an object is scarce it is more demanded. NFTs entail there is only one original piece thus making them scarce. In turn, we are more likely to want a scarce product before it is bought by someone else.(7) Due to their nature as unique assets with certificates, I believe it is unlikely that their popularity will fade in the near future.
Another popular opinion is that the increasing commodification of art through NFTs and digital art will lead to a devaluation of art as a whole. Now anyone can own or create an original artwork. It is now possible for AI to generate works of art and sell them, thus replacing the jobs of traditional artists and causing backlash from the public, who are contesting the lack of passion, personality and individualism digital art has.(8)
Artists
NFTs now allow artists to bypass traditional art market intermediaries such as galleries and auction houses. Now artists can sell their work directly to buyers through websites such as Opensea therefore, completely cutting out intermediaries that would have otherwise retained a percentage of the profit made by selling the artists’ work. In the sale of traditional art, after the first sale the artist does not gain any additional profit from any subsequent sales ,however, with NFTs the artist is paid royalties after each sale. This enormously helps new and struggling artists since they retain 100% of the profit (9)
Author Herman Narula described the previous benefits as “These innovations will help turn commerce inside virtual worlds into a legitimate carer opportunity”(pg.173–74) (10) This indicates the birth of a new generation of jobs and endless possibilities for digital artists, as a consequence of
the invention of NFTs.
Buyers
When buying art you are making two investments, one in the artist and one in the artwork. When investing in the artist you aim to support their work and effort by indirectly financing them. By investing in the artwork you are hoping its value rises and you can later resell it for a profit, this is its monetary value. This new commercial change in the market is also beneficial to artists, as after every sale they still receive royalties.(11) The true value of NFTs, however, comes from the community built around them. When purchasing an NFT you become an investor, shareholder and member of an elite club. The status that comes with purchasing an NFT stems from their association with celebrities and influential persons of our times such as Snoop Dog, Elon Musk and Stephen Curry. When owning an NFT and ,for example, using it as a profile picture, it becomes part of your personal identity. Thus making you part of a collective.(12)
Legitimation/ Recognition of digital art
The emergence of a new market has led to an increase in demand for digital art. As previously mentioned, authenticating art has been made easier since transactions now occur between two entities: seller and buyer. Intermediaries now being websites such as OpenSea, Rarible or SuperRare that vouch for the originality of their products.(13) An issue NFTs pose, however, is the authenticity of the artists, as anyone can create a digital wallet and upload art. Their identity as the real artist, however, cannot be verified. (14)
Another barrier is the tangible aspect as it remains a dividing issue among collectors, some still highly valuing the physical traits of art such as displaying it and observing it. Nevertheless, museums have started to adapt to the emergence of a new art form by selling NFTs of their most famous artworks. The Hermitage museum sold works by Van Gogh and Da Vinci in order to raise funds (15)
Work Cited:
1.Nansen Team, “NFT Statistics 2022: Sales, Trends, and More.” Nansen. (September 2022) https://www.nansen.ai/guides/nft-statistics-2022.
2.A. Hamilton, “The Beginning of NFTs - a Brief History of NFT Art.” Zeno Fine Art. (March 2023) https://www.zenofineart.com/blogs/news/the-beginning-of-nfts-a-brief-history-of-nft-art.
3. ”FUNGIBLE” | English meaning - Cambridge Dictionary (2023)
4. Koba Molenaar, “NFTs Statistics - Sales, Trends and More.” Influencer Marketing Hub (December 20, 2022) https://influencermarketinghub.com/nfts-statistics/.
5. A. Hamilton, “How NFTs Changed Digital Art and the Fine Art World.” Zeno Fine Art (March 2023) https://www.zenofineart.com/blogs/news/how-nfts-changed-digital-art-and-the-fine-art-world.
6. Olav Velthuis, Art Markets. In: R. Towse (Ed.), “A Handbook of Cultural Economics, Second Edition”, Second edition, (pp. 33-42). Edward Elgar Publishing (2013).
7.Hannah Bateson,“Why Is Everyone Buying NFTs?” Cowry Consulting. (August 2023). https://www.cowryconsulting.com/newsandviews/buying-nfts.
8.Sie Douglas-Fish, “NFTs Are an Embarrassment to the Art World.” Martlet. (November 2021). https://martlet.ca/nfts-are-an-embarrassment-to-the-art-world/.
9.Sarah McDaniel and Denny Galindo, “Democratizing Art: How NFTs Are Reshaping the Art World.” Morgan Stanley. (June 2022). https://www.morganstanley.com/articles/nft-art-market-nft-collectibles.
10.Herman Narula, Virtual Society: The Metaverse and the New Frontiers of Human
experience(October 2022) Published by Currency. (pg.173–74)
11. Mitchell Clark, “NFTs, Explained.” The Verge. (June 2022). https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq.
12. Steve Kaczynski and Scott Duke Kominers “How NFTs Create Value.” Harvard Business Review. (November 2021). https://hbr.org/2021/11/how-nfts-create-value.
13. Sheila Bsteh, “From Painting to Pixel: Understanding NFT Artworks.” ResearchGate. (May 13 2021). https://www.researchgate.net/publication351346278_From_Painting_to_Pixel_Understanding_NFT_artworks.
14. Wall Street Journal, “NFTs Are Fueling a Boom in Digital Art. Here’s How They Work | WSJ.” Www.youtube.com. (March 2021). https://www.youtube.com/watchv=zpROwouRo_M&feature=youtu.be.
15.Foteini Valeonti, Antonis Bikakis, Melissa Terras, Chris Speed, Andrew Hudson-Smith, and Konstantinos Chalkias, “Crypto Collectibles, Museum Funding and OpenGLAM: Challenges,Opportunities and the Potential of Non-Fungible Tokens (NFTs).” Applied Sciences 11 (2021)
https://www.mdpi.com/2076-3417/11/21/9931/htm
