Art & NFTs: Boom Or Bust?
James, Connor, Kevin and Alex, collectively known as the ‘four lads in jeans’, achieved virality for a snap that saw them become the target of online trolls.
The group recently announced they were selling their infamous meme as digital artwork, listing it at an NFT auction with a reserve price of £1 million.
NFTs are traded on the blockchain, a de-centralised database that validates transactions without a formal centre of authority, providing a one-of-a-kind proof of ownership. Yet whilst blockchain technology is nothing new, the creative sector has only just begun to realise its potential in the form of NFTs.
And now, the hype for the NFT is extending to popular culture, with figures such as musician Grimes and Twitters’ Jack Dorsey popularising the sale of these tokens. NFTs can take any form, so long it is digital. Recent examples have ranged from a video depicting the burning of a Banksy print, to an original copy of Jack Dorsey’s first tweet.
Institutional interest in NFTs was catalysed by the sale of one of these tokens, in the form of a digital collage by the artist Beeple in April.
Fetching a cool $69.3 million in an online auction, organised by the 225-year-old broker Christies, stakeholders within the industry are now beginning to grasp the revolutionary potential of this asset class for the art market.
How will this affect the Exchange of Art?
Through tokenising their creation, creators effectively bypass the traditional structure and logic of the market (for example, auction houses and art dealers), which assign value to a piece of art. This has a democratising effect upon art exchange, dispensing with the actors of the market that take a significant cut of the value created by an artist.
Digitisation also emancipates artists’ work from the high insurance and storage costs associated with physical art assets. The blockchain can also be encoded to produce royalties for the creator when the original asset is reproduced.
This decisively upends ownership relations and ensures that original, talented artists remain at the heart of wealth creation in the creative sector. NFTs, therefore, hold a great deal of potential, particularly for artists on platforms like Spotify, who have been hindered by their inability to retain ownership of their music (you can read more here).
Digitised Art has an Authority Problem
Yet removing the hold exercised by gatekeepers upon art valuation also has its drawbacks.
The number of tokens listed on specialised NFT exchanges, most notably OpenSea and Rarible, has exploded. This raises the problem of how to curate and value such a deluge of digital artistic assets, a job traditionally performed by established art brokers.
Without some form of subjective authority assigning value, digitised creation is not met with curation. And although art brokers, notably Sotheby’s, have attempted to solve this problem through online, curated exhibitions of NFT artwork, it’s ultimately left to the individual to wade through the digitised tokens to find the ones worth the time.
From this perspective, the intersection between popular culture and NFT art becomes clear. It is the clout of cultural icons which popularises these tokens and brings value to an asset that is entirely detached from physical articles.
The Future of NFTs & Art Markets
The long-term viability of NFTs is intertwined with the trajectory of the wider cryptocurrency space. The minting process of any NFT takes place on a particular cryptocurrency network. OpenSea, as the largest NFT platform, runs on the Ethereum blockchain network. To mint a unique NFT requires a gas fee, ranging from £1 to £100 worth of the ‘Ether’ cryptocurrency on which the network runs.
However, the underlying blockchain technology which NFTs are based on is particularly energy-intensive, and concerns have been raised about how this technology will increase the carbon footprint of the creative industries.
The Ethereum Energy Consumption Index illustrates that a single NFT transaction on the Ethereum network has an equivalent carbon footprint to the daily emissions of two average households. Without scalable, eco-friendly technology, the NFT market will face increasing resistance from green governmental regulation. This is an existential problem that also faces the wider crypto finance sector.
The viability of this space will also be fundamentally determined by the continuing health of different cryptocurrencies. If the platform hosting your encoded certificate of ownership goes bust, then you lose all ownership rights to your valuable NFT.
The global art and antiques market was valued at $50.1 billion in 2020, a percentage decrease of 22% in 2019. If the market is to diversify and reach younger, digital audiences, it must grasp the revolutionary opportunities that NFTs and blockchain technology present.
You may not like it, but these four pairs of ultra-skinny jeans represent a cultural re-calibration; a wholesale transformation in the way we think about value, ownership and art.
Header Image: a cryptocurrency group burnt an original Banksy artwork and sold it for $382,000 as an NFT.