Market Chats: What the Art World is Getting Wrong About NFTs

(From left); Yuga Labs, 101 Bored Ape Yacht Club #9087; #5809. Image courtesy of Sotheby's.
The mid-year Art Basel and UBS Report produced by Arts Economics. Image courtesy of Art Basel.
Beeple, Everydays: The First 5000 Days, 2021. Non-fungible token (jpg). 21,069 x 21,069 pixels (319,168,313 bytes). Image courtesy of Christie’s Images Ltd 2021.
A collage of the Bored Ape Yacht Club NFTs offered in Sotheby’s “Ape In!” sale. Image courtesy of Sotheby’s.
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Introducing…our (new) column where each month we take a deep dive into the ever evolving art market.

With the NFT hype in the art world and the latest Art Basel and UBS Report indicating digital art is taking centre stage in the art market, it is time to address the fundamentally problematic way we are talking about NFTs.

TEXT: Denise Tsui
IMAGES: Courtesy of various

 

The mid-year Art Basel and UBS Report produced by Arts Economics. Image courtesy of Art Basel.

 

For the better part of the last six months I have been (quietly) observing the rise of the Non-Fungible Token (NFT) in the art world, much to my personal distaste. Has the world simply gone crazy? I often find myself asking. My work as an editor requires me to embrace, at least outwardly, all that is happening to the market—we are the know-it-all, the go-to person, the one who is expected to have an informed opinion about everything that occurs. But the truth is, we don’t.

When time came for my first Market Chats contribution—a monthly column between Reena Devi and myself that yours truly thought was a great idea until it was my turn—I had decided to write about findings in the latest mid-year Art Basel and UBS Report produced by Arts Economics, which largely focused on sales and employment in the gallery sector, but truth be told it didn’t quite inspire as I had hoped. Ultimately, the report reinforces the already known conclusion, as Arts Economics founder Clare McAndrew notes: “This pandemic hasn’t really done that much to change [market] hierarchal infrastructure.” In short, employment is on the rise, market is on the mend, blue-chip galleries are still monopolising the big bucks, and the wealth disparity is still growing despite some early optimism that the digital transformation of the art market might create a more democratised system. Sparing you a repeat of summarising the findings, I do want to focus on the following aspect of the report: Digital art accounted for 8% of the type of art in the collections of all High Net Worth (HNW) individuals surveyed.

 

Although this number seems insignificant, it is nearly on par with photography (10%), prints and multiples (10%), and equal to film and video art (8%)—yet digital art is a much younger medium than its siblings. Furthermore, among the 500 respondents gathered in the HNW collector sample, a whopping 64% fall into the age profile of Millennials (aged 23–38)—which is 12% up on the sample gathered for The Art Market 2021 released back in March—while Gen X (aged 39–54) made up 31%, and 3% fell into Gen Z (aged under 23 years). Broken down by generation, digital art made up 8% of the type of works in the collections of Millennials, 9% for Gen X and 18% for Gen Z. While this confirms the long-standing theory that the young and digitally native favour digital art, it does also simultaneously dispel the myth that Gen X is not interested. Moreover, these statistics indicate digital art is an established medium that will grow in popularity in the foreseeable future. It is also vital to note that digital art accounted for 12% of the aggregate median expenditure by collectors in the first half of 2021—a strong sign of digital art’s rising place in the market, especially in light of traditional mediums of paintings, sculptures and works on paper combined came to 31%.

 

 

At this stage, it must also be stressed that digital art does not equal NFT, and NFT does not equal digital art. The two are mutually exclusive. Digital art, rather, may be thought of as a medium encompassing any art created through means of digital technology. What NFT offers us is a digital method for authentication, certification, provenance and trade. And this gets me to my main point: there is a very fundamental issue with NFTs that the mainstream art world is getting wrong—intentionally or not.

The root problem of how we are discussing art and NFT is that there is a great misunderstanding in what constitutes “NFT art”—and I don’t mean for those artists, researchers and industry specialists who have been working at this intersection of art and technology since its early days, I mean for the rest of us who are still catching up on this buzz term. In fact, if one was to look at the market tracking reports of NonFungible.com, you will quickly see that the NFT world comprises much more than art—for example, gaming and sports memorabilia made up significant segments of this pie, until recently. According to NonFungible.com, collectibles accounted for a stellar 66% of the market distribution of NFTs traded in Q2 2021, while art accounted for 14%. This now takes me back to why the term “NFT art” needs to be cleared up if the art world is to believe NFTs are going to become a mainstay of the art market.

In NonFungible.com’s glossary, the segment Art is defined as follows:

  • Marketplace, Project or individual Artist who produces, sells or generates content in the form of an NFT which is considered to be a work of Art or relates directly to an Art form whether manual or generative.

Meanwhile, Collectibles is defined as:

  • Project whose primary function is to issue Tokens intended to be collected. These Tokens can be part of a system that includes gamification or a set of interactions between Collectibles themselves or between the Collectors and Players.

So those 101 Bored Ape Yacht Club NFTs that brought in a combined US$26.2 million at auction house Sotheby’s on 9 September? In fact, it is categorised as a collectible, not art. It even says as much on its website: “BAYC is a collection of 10,000 Bored Ape NFTs—unique digital collectibles living on the Ethereum blockchain.” Larva Lab’s CryptoPunk? Collectible. Meebit? Collectible. Kevin McCoy’s Quantum (2014)? Art. Katharina Grosse’s NFT that dropped on 18 September? Art. Beeple’s Everydays: The First 5000 Days? Art.

 

Beeple, Everydays: The First 5000 Days, 2021. Non-fungible token (jpg). 21,069 x 21,069 pixels (319,168,313 bytes). Image courtesy of Christie’s Images Ltd 2021.
A collage of the Bored Ape Yacht Club NFTs offered in Sotheby’s “Ape In!” sale. Image courtesy of Sotheby’s.

 

What troubles me is that the term “NFT art” is misused interchangeably with digital art, and NFT collectibles that are in the form of a visual idiom—such as those Bored Apes gracing our screens—are being called art when really, for the purpose of tracking the art market, it shouldn’t be. Why is this happening? Because the NFT boom in the art world struck us so fast this year that most of us haven’t acquired the requisite knowledge to comprehend it—myself included. And auction houses are also guilty of causing further confusion through mass marketing slogans for its NFT sales, which often comprise both collectibles and art but collectively call it “NFT art”. On the other hand, what NFT offers is a method for authentication and certification. Imagine the traditional artwork certificate digitised. There are a lot of nitty gritty differences we could go into but let’s just take it as that. NFT allows us to develop another way of tracking artwork provenance, and being a product of the crypto world, opens up a new avenue for the art market to tap.

Consequently, the bone I want to pick is that before we dive deeper into NFTs within the art world, let’s get our terminologies straight. Despite fears that NFT marketplaces will overtake galleries and auction houses, it just won’t. As McAndrew remarked over the phone, “I don’t think that has happened or will happen in any way but there is a lot of positive crossover.” The report further noted that most dealers and collectors surveyed saw the impact of NFTs as positive. “It has given people an interest in collecting digital art and a sense of ownership, it gives them that scarcity value that people couldn’t get their heads around before.” McAndrew adds, “The amount of people actually doing active buying and selling is a tiny, tiny fraction of the potential that could be there in terms of if you look at the amount of people with growing, expanding wealth”. All this is good news for the art market, but I’m inclined to think it could all come crashing down quickly if we don’t first get our heads on straight.

How much long-term sway NFTs will have in shaping the future of the art market remains to be seen but there is little doubt digital art as a medium is here to stay, and very likely, so is cryptocurrency trading in the art market. After all, of the HNW collectors surveyed, 48% expressed interest in buying digital artworks over the next 12 months, including 52% of Gen X and 47% of Millennials—but first, we need to address the root problem of how we talk about it.

 

 

 

 

 
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