What to know about the NFT art boom

The Art Syndicate Staff Writer: Constanza Ontiveros

NFTs have taken the international art market by storm making headlines everywhere. All this fuss comes with many warnings pointing to the speculative bubble created around them, to copyright issues and legal gray spots, to their negative toll on the planet, and to their potential longevity. But, how does this market work, and who are the top players redefining it?

Let´s first cover what NFTs are. Non-fungible tokens are digital tokens tied to all types of assets that can be bought, sold and traded. They can be thought of as computer files of any type (mainly JPEGs, GIFs, or MP4s) combined with proof of ownership and authenticity obtained by validating the data on a blockchain. On the opposite side than traditional art forms, NFTs are only linked together by their technology, and not by style. Likewise, artists frequently get a percentage of resale transactions of their works and the ownership of some NFTs is fractionalized between many buyers, something not seen in the mainstream art market.

Now, while the arts represent only one of the many market segments of NFTs, in the last few months, it has reached unprecedented levels. In February alone, the sales of NFTs were $200USD million versus $250USD million throughout all of 2020. Also, recently, aside from the most important NFTs marketplaces, such as Nifty Gateway, SuperRare, and Foundation that work similarly to eBay, the top auction houses like Christie´s, Sotheby’s, and Phillips are trying to get a piece of this market. But, why are auction houses that normally sell works by Picasso, Basquiat, or Da Vinci, now turning their eyes to NFTs?

Christie´s was the first one to dive into this market and whose Beeple´s sale broke all previous records when the JPG of the work “EVERYDAYS: THE FIRST 5000 DAYS” by American graphic designer Mike Winkelmann (known as Beeple) was sold for $69USD million making this the third-highest sale by a living artist, just following Jeff Koons and David Hockney. Christie´s executives openly shared they aimed at the NFTs market as a means to staying up to date and of expanding their client list with young (rich and not afraid to take investment risks) collectors that, while being interested in NFTs, may also be drawn to more conventional art forms. And, on top of that, let’s face it, auction houses love to be the first at anything and to break all sorts of records.

But, who are some of the top “young collectors” buying NFTs? Usually, they are investors of cryptocurrencies who are digital natives. For example, Metakovan, who bought Beetle´s $69 million work and whose identity remains unknown (something commonly seen in the NFT world), owns a crypto investment fund. Likewise, Pablo Rodriguez-Fraile, a 32 years-old mathematician who regularly invests in cryptocurrencies, is another NFT collector who gained millions by reselling one of Beeple´s works. Justin Sun, a 31-year-old Chinese tech entrepreneur and founder of cryptocurrency platform Tron, is yet another NFT collector who was the underbidder for Beeple´s $69 million work. Sun recently acquired a Picasso and a Warhol at Christie’s, somewhat proving the point of how these collectors would find traditional art appealing. However, his intentions are far away from those of the everyday collector given he intends to register major works of art as NFTs through the Just NFT Fund.

It needs to be said: while NFTs are going stronger than ever and new collectors and the mainstream art market are now looking to them, there is still much to be defined in terms of copyright laws and shared ownership of this technology. Also, even if this technology is supposed to grant unbreakable security, scams and identity thefts are in place. For example, recently a fake profile of artist Derek Laufman (who has not joined the NFT mania) was created and a fake NFT was sold to an avid fan. On the other hand, since they depend on a blockchain, the creation of NFTs is not at all eco-friendly and entails a humongous carbon print.

Only time will tell what the future holds for NFTs and how long the out-of-this-world prices will last, but for now it is safe to say this is one of the most important art market trends defining 2021.

Who owns the most expensive NFTs by Beeple? (Up to March, 2021, prices in USD)

Beeple, Everydays – The First 5000 Days NFT, 21,069 pixels x 21,069 pixels (316,939,910 bytes). Image courtesy of the artist and Christie’s. https://news.artnet.com/opinion/beeple-everydays-review-1951656