The fine art world continues to embed itself in the internet ecosystem with collectors flocking to the web in a mad dash to snatch up NFTs, or non-fungible tokens. But what is an NFT, and how did the fine art community become so enthralled with these digital assets? And, how can you get involved?
An NFT is a unique digital asset built on Ethereum blockchain technology. Each token is a one-of-one, i.e. it has no equal and cannot be duplicated. What makes an NFT different from something like Bitcoin lies in the data—NFTs hold information within each token. What kind of data? Well, anything really. Photos, music, and just about any kind of digital file are fair game.
NFTs gain value through basic supply-and-demand principles within the market. A rare, in-demand NFT can fetch more than you might think. Take digital artist Beeple’s Everyday: The First 5,000 Days—it sold at Christie’s Auction House for a tear-jerking $69 million, making it the third highest-selling piece of art from a living artist in Christie’s history.
“Digital art is here to stay,” Beeple said in his IG reaction video during the final push to $69 million in the auction’s last few seconds.
Music artist Grimes dipped her toes into the NFT well, auctioning off a 50-second video for close to $400,000 and proving the power of the crossover from beats to bits. Other music artists are following suit with unique NFT projects and merchandise popping up in every genre one can think of.
Lay the properties of an NFT and fine art portrait side-by-side and you’d see many similarities, hence the logical leap collectors make from showroom to MacBook. Digital assets get “dropped” in packs in much the same way fine art gets “batched” in sets. An NFT gains value the rarer and more in-demand it becomes, just like a Basquiat. Both also benefit from auctions, where demand can skyrocket a piece’s value into the rarified air Beeple occupies.
A bit of controversy lurks within the NFT market, though, as creators have recently seen their original works sucked up by corporate fund vacuums, a far cry from the NFT’s origin story of artists taking back the power from the bourgeois community. Still, there remains plenty of room for artists to get their fair share of profits—creators receive royalties for every copy of original work sold and not just the original work itself.
“The NFT market is one of the more exciting developments inside the fine art space in the past 10, maybe 20 years. I know I’m not the only one paying attention,” says Chicago’s Thomas Kane, who works as a private wealth manager.
The fine art and investing worlds and, of course, the fine art investing community, are all certainly paying attention to the NFT craze. CryptoPunks, for instance, the latest gotta-get-em property in the NFT saga, already fetch quite a hefty price as investment-grade assets and are essentially nothing more than crude (albeit adorably crude) JPEG cartoons. So, as you can see, these NFT things have legs. How far they’ll walk, though, is anyone’s guess.
“NFTs are here to stay, but the bigger question is how Blockchain technology will influence the future of fine art. My guess? We’re on the cusp of a major shift in the way art is valued and consumed. It’s very exciting,” Kane says.