Any discussion of non-fungible tokens raises a question from most advisers: What is an NFT?
The answer is inevitably disappointing because what the applicant really wants to know is “why is DFT worth the money?” “
The sarcastic, but true, answer is that some NFTs are worth the money because people are willing to pay money to own them – think of the images of Bored Apes or pixel-art Punks, whose iterations have touched. six-figure prices. Most refer to the technology and the widespread belief that blockchain is the future of financial transactions, so anything associated with it carries a burst of promised wealth. Even so, it’s hard to look at prices being realized in a chaotic, unregulated market for a tangible asset (arguably) and not remembering Tulip Bulbs and Beanie Babies.
But many NFTs exist simultaneously in an equally nebulous, unregulated and volatile market, which few doubt is a legitimate asset class – art.
It is impossible to predict the future of blockchain or whether an “asset” registered there will become part of the culture or fall into fashion. But NFTs seen as art offer a more solid proposition to attach value to them beyond wild speculation (although the art world is not immune to volatile speculation either). .
This brings us to an even more daunting question than “what is an NFT?” “, Namely” what is art? To find answers, we turn to auction houses.
On March 11, 2021, Christie’s hosted the very first sale of a purely digital work of art by a major auction house. The piece, an NFT titled “Everydays — The First 5000 Days” by digital artist Beeple, aka Mike Winkelmann, sold for $ 69 million, instantly making Beeple, who before October 2020 had never sold a work. for over $ 100, one of the top three most expensive living artists.
This sale, by a 255-year-old auction house that has sold works by many of the greatest artists who have ever lived, offers a glimpse into the power of these companies to legitimize NFT art and in turn d ‘establish a value for them. Having your work sold in the same venue as, say, a da Vinci, will.
But why is Beeple’s coin, among a huge range of NFTs minted every day, the one that has achieved this huge prize? What makes one digital artwork worth more than another?
“As with any other work of art, we first look at the influence of the artist. Their popularity, their existing community, social media platform tracking and the prices their past sales have made on other platforms, ”says Rebekah Bowling, senior contemporary art specialist at Phillips auction house in New York City. . Then attention turns to the work itself: “Is this a truly artistic use of the medium? Does the artist use technology in meaningful and innovative ways? “
Nima Sarghachi, head of digital art sales at London auction house Bonhams, agrees. “We do our best to copy and paste the principles that we would apply to any other artistic movement or field in the NFT world, which takes on the work of digital artists who are sought after, credible and have artistic integrity. “
As an example of the significant use of technology, Bowling mentions Phillips’ first NFT sale in April. The piece, by digital artist Mad Dog Jones, titled “Replicator” (which sold for around $ 4 million) is, at first glance, the image of a copying machine. However, he takes advantage of his digital medium and hard-coded contract on the blockchain to automatically create new, unique versions of himself over the course of a year, and even has the ability to get stuck. “It’s a cool use of technology and a really fascinating piece of art. Its form and its support have such a significant relationship, ”she said.
Both experts point out that delving into the NFT space requires auction houses to operate outside of their own comfort zones in the aftermarket and in more direct contact with the artists themselves. “The way the NFT market is set up right now is not in line with the traditional auction house model,” says Sarghachi. “Normally, we wouldn’t have contact with the content creators. It opened my eyes. All those who have an idea or a creation, often even before having really created it, are now coming to us.
“We’re artist liaisons all of a sudden,” Bowling says. “While we don’t directly influence the creative aspect, it’s a much more direct and collaborative relationship. Consider the possibility of hosting events, such as surprise drops of digital assets, a marketing movement borrowed from sneaker culture, and for artists to reward early adopters by trading in some NFTs for new edition NFTs. limited.
This spirit of collaboration extends to established NFT trading platforms as well. “We are in many ways at a disadvantage compared to NFT platforms, which sell NFTs on the chain,” says Sarghachi. “Our process is more manual. So we are working with the platforms now, rather than against them.
“The buyer of the future will look a lot more like the NFT buyer of today than the traditional fine art buyer of yesterday,” he says. “There’s a degree to which we sell NFTs takes us to the mainstream and connects them to the traditional realm, but there’s also a strong degree to which we realize that our own customer experience needs to change to engage buyers on Twitter and Discord,” in spaces we are not used to, and no longer see them as a niche.
Engaging the general public also means lowering prices to gain access to the mass market.
“For a large auction house, selling a physical piece for less than $ 500 just isn’t worth it, given the costs involved,” said Sarghachi. “But with NFTs and blockchain, we can cost-effectively access the young art buyer looking to spend $ 500 on a piece of art. Artists who release an open edition can instantly sell 1,000 works. Even though they are sold at a low price, this is a very relevant scope. “
“For the majority of our NFT auctions, since there are often very few past sales metrics available, we just start the auction at a fixed amount of $ 100. We just let the market decide for itself the value of the coin. That way we can take risks with less established artists, ”Bowling explains.
This low-cost approach is largely made possible by the fact that most NFTs encode a 10% royalty to the original artist on each subsequent sale in the aftermarket, a feature not available in the physical art space. In the traditional art world, the artist really only profits from the initial sale and is unlikely to enter the market with a low initial supply. However, since NFTs offer automated royalties on each sale in perpetuity, artists can participate without risking their future value.
For advisers still skeptical that a digital image of an ape has the power to remain as art, Sarghachi offers historical context.
“If you think about it in value, everything auction houses were selling at the time was subject to the same charges. This is what art markets are based on: cultural irreverence. It’s no surprise that the new wave is exactly the same. Banksy is now considered a traditional artist.