In May 2007, Beeple set out to create a new work of art online every day. He hasn’t missed a day since, creating a new digital picture every day for 5,000 days straight, eventually making up EVERYDAYS: THE FIRST 5000 DAYS.
The art market’s fascination with non-fungible tokens, or NFTs, has reached a fever pitch. In March 2021, a piece of NFT (non-fungible token) artwork sold for US$69+ million at Christie’s. The work, EVERYDAYS: THE FIRST 5000 DAYS, is a collage of purely digital artwork created over 5,000 days by the digital artist Beeple. You can’t hang it on your wall. It is simply a bunch of pixels.
This sale marked many significant shifts in the art industry. It was the first major auction of a wholly digital work of art with a unique NFT. It was the first auction to accept cryptocurrency as a standard form of payment. The sale positions Beeple amongst the top three most valuable living artists, behind Jeff Koons and David Hockney.
So how did this happen, and what are the wider ramifications for the creator economy and art market in general?
Quickie introduction for the unaware, NFTs, or non-fungible token, are one-of-a-kind digital assets on a blockchain that can be bought and sold but have no tangible form of their own. Whereas Bitcoin or any standard banknote is fungible, trade one for another, and you’ll have exactly the same thing, each NFT can represent an individual digital object, so they are not interchangeable. They are one of one.
Traditionally, singularity is what adds to a work of art’s value, whereas digital assets can be quickly and easily duplicated. But NFTs “tokenise” artwork, creating a digital certificate of ownership. Blockchain has long been touted as the potential future of traceability, from baby formula to votes. As seen with cryptocurrencies, like Bitcoin or Ethereum, a record of rightful ownership and authenticity is stored on a shared blockchain.
Now, what is very interesting about this is that for a long time, the traditional art world did not see a way to monetise digital art because you could not hold onto it, or prove ownership for that matter. This infrastructure now allows for the validation of ownership.
In October, Beeple independently sold a 10-second video artwork that he could have watched for free online as an NFT for US$66,666.66. By February, they resold for US$6.6 million. At this point, the entire asset class was validated, and the future of art was changed forever.
“Crossroad” by Beeple sold for US$6.6 million on the Nifty Gateway platform.
You may be wondering, with digital art surely I can just download a high-resolution jpeg and have it on my phone? Why pay such an exorbitant amount? But this same argument could be applied to Da Vinci, Picasso, or Jackson Pollock. You are paying for ownership of the original. Human beings care about ownership. Owning art is an emotional experience that has existed for millennia. Now, technology has bridged the gap and provided that unique aspect of ownership in the digital space.
“We’re in uncharted territory now. This is a validation of the collecting category. NFTs clearly are more than just an emerging nascent collecting space. I hope it empowers digital artists to make interesting work, and for everyone to have more confidence in NFTs.”
Noah Davis, Christie’s specialist in Post-War & Contemporary Art
Another important aspect of note is that NFTs have a royalties structure, similar to owning the master recordings to an album. By embedding smart contracts, the artist will receive a cut of any future sale of the token. This allows artists, or whoever is in on the contract, to also have a stake in the primary function of art. The original seller, whether it be the art world or the hypebeast culture of sneaker reselling, does not typically get a share of the resale value.
Now, not every digital creator is going to be Beeple. Aspects of this are a bubble, but it still legitimises digital art as a good investment. There is a trend beyond just NFTs that links how audiences are interacting with digital art. In an auction setting, the audience defines how much the creator is worth to them, which is an emotional experience. The rise of Patreon and Only Fans in recent years shows the desire for audiences to gain a further exclusive emotional connection with a subject. Most large-scale Patreon creators get less than 20,000 individual patrons, but the amount generated from monthly fan contributions on these platforms far exceeds what that specific number of fans would be worth to a brand when dealing with that creator directly. At the end of the day, the market decides worth.
Beyond art, Kings of Leon recently became the first band to release an album as an NFT for US$50. This somewhat game-changing token offering is both riding this trend, providing the American rock band with easy press for their new album, and allowing fans to unlock special perks like limited-edition vinyl, merch, meet & greets, personal drivers to shows, and front row seats to future concerts for life. From an experiential standpoint, this is interesting for the most serious of Kings of Leon fans, who will have an incredibly unique collectable on their hands. The likes of Portugal. The Man, Shawn Mendes, and Grimes have also boarded the digital token train recently, as musicians seek out additional revenue streams in the concertless era of the pandemic.
“It’s early stages, but in the future, I think this will be how people release their tracks: When they sell a 100,000 at a dollar each, then they just made $100,000.”
Josh Katz, CEO of YellowHeart
Right now, NFTs are like an advanced form of vintage band tees or underground sneakers drops. They have an element of exclusivity and speciality. They satisfy individuals needs to be ahead of the curve. Deep down, everyone wants to discover an artist before they blow up. Before they go mainstream. There is also a sense that both sides of the relationship, the artist and the fan, are both able to gain financially from the trading of NFTs in the long-run. Fans could monetise the supporting of a creator through a digital token.
In the first 10 minutes of bidding Christie’s had more than 100 bids placed. The auction went from US$100 to US$1 million. They had 20+ intergenerational bidders from 7 different countries. But, most interesting, of those initial bidders only three were previously known to Christie’s. The vast majority were brand new to Christie’s, and thus the professional art market at large.
The star lot of the October 2020 virtual Sotheby’s sale was a 1987 Gerhard Richter painting that sold for US$27.6 million, achieving a record as the most expensive western work ever sold at auction in Asia.
The art market has had to be fast to adapt to our ever-changing world. In October 2020 alone, Sotheby’s tallied US$88.2 million in its live-streamed art sale in Hong Kong, its most successful contemporary art sale in Asia. The sale also garnered two million views across the digital and social platforms, with a star lot sold for US$27.6 million, making it the most expensive western work of art ever sold at an auction in Asia. The Sotheby’s auction also broke ground as the first live-streamed sale from Hong Kong, with bidding via phone banks from staff in London and New York.
Virtual viewings and social distancing are the new normal within the art world. Collectors have become accustomed to seeing images and videos of artwork virtually, without being able to view it in-person. These changes have resulted in a definitively more flexible market, opening up opportunities to further integrate arts and technology in the future, as we are now seeing with NFTs. This shift online and opening up of the market has resulted in the art world as a whole becoming more accessible to a younger audience. Both Christie’s and Sotheby’s reported that bidders aged 40 or younger accounted for more than 30% of sales in 2020, compared to 8% in 2016.
Time will tell whether NFTs will become a mainstay of the art world. The enormous energy consumption involved in mining cryptocurrency and minting NFTs may become an obstacle to progress for the art world, which has lately become more vocal and proactive about acknowledging and reducing its environmental impact. For instance, the ecological impact of Beeple’s $6.6-million selling work Crossroad alone is roughly equivalent to the average person’s entire energy consumption for five and a half years. However, the process of creating tokens for digital artworks and then buying and selling them with cryptocurrencies may seem like an ecologically innocuous process, especially when compared to the art world jet setting pre-COVID habit of travelling the globe for fairs, biennials, and auctions.
At the end of the day, the only way the perceived value business carries any weight is if you build trust through social proof. A business’s value is founded in social proof. Why do diamonds matter? Because we say they matter. Because we have tied them to storytelling and a deep-rooted tradition in our culture. NFTs are starting to develop their own social proof, cementing their perceived value as true value. Time will tell just how large of an impact they will have, but for now, the underlying technology certainly has the potential to disrupt not just the traditional art market, but anything of monetary value.