Arts: Crypo Art

A JPEG selling for the same price as an original Van Gogh, or a cat meme worth more than a Boeing? Mary Corrigall sheds light on the concept of non-fungible tokens.

THE RISE OF NFTs IN THE WORLD OF CRYPTO ART

Non-fungible tokens (NFTs) are a new way of buying and selling digital artwork. They are unpredictable, so much so that when Everydays – a digital piece by American digital artist Mike ‘Beeple’ Winkelmann – fetched a staggering ETH 42 329 (Ethereum; $69 million) at an auction, the doyens of the art world and Winkelman himself were taken by complete surprise. Even Christie’s, the global art auction house that offered the work for sale had no idea what value to place on this NFT when it went under the hammer in March. There was no reserve price or estimate for the work and bidding started at $100. The auction was run entirely on the ETH blockchain, with settlement governed by a smart contract.

NFTs are a one-of-a-kind digital asset that acts as a certificate of ownership for virtual items. Put simply, the NFT is to digital artwork what a title deed is to real estate. Most of them are registered and secured by the ETH blockchain and can consist of many different kinds of digital end-products: from JPEGs and GIFs to MP4s and other files that can be turned into an asset.

An NFT can be owned by only one person at a time, and no one can modify the record of ownership. ETH is a technology platform for digital money, global payments and applications. The market capitalisation of ETH’s native cryptocurrency is the second largest in the crypto asset space after Bitcoin.

HOW BLOCKCHAIN TECHNOLOGY CREATES NFTS

Blockchain technology can assign ownership and property rights to digital objects by associating a unique string of code with that digital asset and registering this on a public ledger. That string of code is generated or minted according to a complex mathematical formula that takes into account every preceding entry, every previous link in the blockchain. In theory, anyone can mint an NFT but a few dedicated minters have sprung up. The likes of Rarible and OpenSea are making life easier for content creators who want to make their digital works available for sale on blockchain marketplaces where they are typically priced in cryptocurrency.

Marketplaces are not only an essential part of the NFT universe, but it is also the virtual space where NFTs live even after being sold. On most marketplaces, each NFT’s unique code is linked to a ledger that shows when it was made, who has owned it, and the amount of cryptocurrency that was used to acquire it. It is this form of transparency that makes NFTs so valued.

Apart from the infinite replicability of digital files, another rationale for tokenisation of digital assets is that they tend to be traded more frequently than regular artworks. Unlike your average Flemish masterpiece, a popular NFT might be sold twice a day, so it’s vital that sale records are transparent and that the artist can benefit from its resale, usually 10%.

“There is something of a land grab going on in the NFT space, where we see for the first time ever the ability to assign and prove ownership of digital goods not managed by a central intermediary. Digital content creators now have a direct route to market and the ability to monetise their creations, ” said Chris Becker, Blockchain Lead at Investec.

Since the dawn of the internet, the gatekeepers of digital value creation have typically been large technology and media companies whose business models centre on gathering audiences and, in turn, advertising revenue. This revenue is directed mostly to the platform and not the content creators responsible for attracting the crowds, a dynamic which many artists consider fundamentally unjust.

NFTs are oneof-a-kind digital asset that act as certificates of ownership for virtual items.

“Content creators in the digital era have drawn the short end of the stick, ” Chris added. “Blockchain and NFTs are a game-changer as they eliminate large tech intermediaries from all the verticals of digital content creation and distribution. NFTs put the power back in the hands of content creators and the most popular marketplaces are being built as public utilities, not for private gain. ”

WILL THE NFT BUBBLE BURST?

According to data from OpenSea and other marketplaces, the volumes of NFT sales surged to $2.5 billion in the first half of the year. While this pales in comparison to the $50.1 billion in annual sales of mainstream art and antiques in 2020, according to the UBS Global Art Report 2021, the fact that the market cap has grown nearly ninefold between 2018 and 2020 has pricked up the ears of the art world and investors alike. Chris believes there is an element of speculation and greed currently pushing up the prices of NFTs.

He said, “In the world of NFT art there are likely to be early projects that take on a cultural significance of being the first of a kind, such as the CryptoPunks. Only time will tell how the market values a project like this. ”

THE OVERLAP

Both NFTs and traditional art are sold at art auctions, the overlap between the two is peripheral and will likely remain so for some time. For starters, the sale of NFTs not only cuts out big tech, it also cuts out another middleman: the art dealer. Sales of NFTs can only happen via a blockchain marketplace because that’s how ownership is authenticated.

You can’t take it home after buying, it lives in your ETH or other blockchains and in order for it to exist in all its tokenised glory, it tends to be on view in your chosen marketplace, which also enables other NFT collectors to make you an offer for it. You can opt not to leave it open for sale but reselling NFTs and even swapping them is part of the culture. This way, after NFTs are sold, they largely remain in the public sphere. This has naturally cultivated a culture where the collectors are as visible as the artists.

Most collectors, like the artists, choose anonymity by adopting a pseudonym or moniker; one characteristic of the NFT space that separates it so clearly from the regular art market, in which the value of the art has traditionally been closely tied to the identity of the artist. The national identity of artists creating NFTs is almost completely hidden along with their gender, age or any other demographical information.

THE VALUE OF THE VISUALS

Best-selling NFTs include a series of cartoon-like characters or animals dressed in different outfits such as monkeys (Bored Ape Yacht Club), cats (Cool Cats NFT), penguins (Pudgy Penguins) or koala bears (Koala Intelligence Agency). Animated futuristic visual spheres with robots, skulls and other popular iconography are also popular.

Another distinguishing factor of NFTs is that their value is often tied to the fact that they are part of a large collection or series defined by a fixed characteristic. The Larva Labs, for example, has generated a following for pixilated avatars that reference early or crude digital portraits of people. Among the few recognisable names in traditional art circles who is doing well on the NFT circuit is Damian Hirst. Digital versions of Damian’s Spot series, paintings of near-perfect painted dots, are selling for around $35 000 (R500 000) a piece, placing him in the top 20 of highestselling artists on OpenSea.

THE SOUTH AFRICAN NFT SCENE

A couple of South African artists such Faith47 and Norman O’Flynn have been selling NFTs. However, they are simply selling digital versions of art they would sell in the real world. Worldart Gallery in Cape Town that represents O’Flynn will be selling some NFTs on its website shortly with the opening of a solo exhibition by Juan Stockenstroom. According to Gallery Director Charl Bezuidenhout, six paintings by this artist will be paired with NFT versions. He said the gallery is trying to convert collectors who prize paintings to embrace NFTs. Given that there is little crossover between those who buy art and those who covet NFTs, Charl seems to have his work cut out for him, but with the high-profile NFT sales led by Christie’s, he’s not the only gallerist up for the challenge.

“If it is going to be part of the art market and is collectable, we need to do homework to make sure that if we sell them, it is done properly, ” said Susie Goodman, Executive Director at Strauss & Co.

For Marelize van Zyl, Senior Art Specialist at Aspire Art Auction House, the blockchain’s ability to verify provenance and authenticity is very attractive to the art world, but she suggests the sale of NFTs via South African auction houses is a long way off given how risk-averse the South African art buyer is. “We are only breaking ground on contemporary art here. So, I think for us it will be a while before we get to that stage where we are selling digital art. Photography is still difficult to sell to locals. ”

On the other hand, Ashleigh McLean, Director of Whatiftheworld Gallery, thinks NFTs are geared for a new, younger generation. “I don’t have an interest in NFTs. I think they are cold and soulless but that could be a generational issue. I would have thought that with us now being forced to live more online, we would crave the unique, tactile item to be physically connected to. Maybe some people realised you need to let go of these physical things. ” A

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