NFTs are changing the art market paradigm

Posted 31 March 2021 02:04 PM

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Screenshot from the Makers Place NFT website

NFTs - who spiked the Kool-Aid?

At the moment NFTs (non-fungible tokens) are more for the digital artist rather than those who work in the analogue realm, however it is definitely worth all artists being aware of just how active the NFT market is. Now, what does this mean for artists. Well, it is bullish for digital creators who are in the midst of a big surge for collectibles which is reflected in the supercharged prices that are being paid for NFTs. Headline digital artists are earning crazy numbers in the 10s or 100s of thousands of dollars when they place a collection on an NFT site like Rarible or SuperRare. And all of a sudden there are artists with exotic handles whose prices are surging in flash NFT open auctions lasting around 7 minutes or so.

Media coverage runs the fluro marker over the price results for NFTs which are admittedly remarkable but the long term impact for artists will be managing the end-to-end process of creation to sales with the accelerant that we have come to accept from disruptive digital technologies.

Every now and then technology just wipes all the old paradigms. In the visual arts the development of the camera obscura impacted on drawing with perspective and the Renaissance artists were painting very differently to the Byzantine artists, while in the 19th century the development of bright (saturated) pigments made the development of impressionist palettes possible along with the invention of the camera. So here we are at another inflection point in the development of art with what I suspect is a major technological kick-starter for creatives in the form of NFTs.

While there is much hype about NFTs it is easy to dismiss this new technology as just a fad but I’d suggest that placing creative output in a digital format on NFTs will offer a compelling use case for younger artists and collectors. For adoption to swell it will only take a small number of well-known and respected artists to start issuing NFTs of their work before the mass follows. The game changer is that there are a significant number of millennials who have made sizeable profits in crypto currency and for whom spending a fraction of their Eth to collect digital artwork is significantly cheaper than for those who have come to the crypto game late and have to stump up around AUD $2.5k per Eth..

It is worth noting that pretty much anything can be minted as an NFT including music, IP (Intellectual Property), video businesses, collectible cards and so on - they aren't restricted to digital artists. 

These are the ways in which I’d anticipate NFTs shaking the way we’ve been doing things for the past 100 years:

  • More visual artists working in the digital realm
  • Collectors are able to hold more digital artwork without the issues of finding hanging/storage space and therefore they are able to collect more of an artists work
  • Sharing NFTs is easier than analogue artworks
  • NFT marketplaces will have a definite impact on commercial galleries as younger artists put their work in NFT collectible spaces and younger collectors who are cashed up following profiting from the crypto upswing are happy to build a collection of digital art. This will lead to a greying of audiences in traditional galleries.
  • The 20th century architectural signature of large windows in domestic residences along with open plan living restricts hanging options, but there are always one or more screens in every home which can easily display the collector’s NFTs
  • Tracking the provenance of an NFT is easy as are the sale prices on the secondary market
  • Artists can easily manage their income from royalties from subsequent resales of their work on the secondary market without the need for an agent or agency
  • The NFT market will eventually impact on the Resale Royalty schemes currently in place as the NFT channels payments automatically to the creator
  • NFT marketplaces will contribute to a gradual eroding of traditional online galleries as artists turn their back on paying large commissions to third parties. NFTs charge around 2.5% on sales.
  • Documenting original artwork on the blockchain using NFTs will eventually assist in fraud detection of artworks and automatically capture the provenance of works

At the time of writing the known downsides to artists creating an NFT is:

  • Unfamiliarity with the essential crypto tools like wallets and coins. There are a growing number of helpful tutorials in YouTube which will help you. Here is really easy one to follow -  https://www.youtube.com/watch?v=Gjo1hlIey9g
  • the cost of Ethereum (gas fees) for creating the smart contract which establishes the NFT is currently around AUD $100. Ethereum is the dominant blockchain for NFTs and the high cost of creating a smart contract is due to current inefficiencies in the Ethereum block chain.

The emergence of NTFs is likely a generational change and once artists employ NFTs and gain a better understanding of marketing and selling in this space we can expect to see a shrinking influence of traditional galleries and online galleries for younger artists and collectors.  Christie’s auction of Beeple’s NFT work surprised the broader market with their rapid adoption of a new channel pretty and the sale price of USD $69m but showed that it isn’t too late to adopt the NFT sales channel.

For the time being artists are not obliged to learn about NFTs or adopt them, but those who do will find the costs of marketing and sales significantly cheaper than going via the traditional channels. Not all artwork is best served in digital, but the space is so hot right now it is definitely worthy of your attention.

More info

Finally watch this video interiew with Vignesh Sundaresan (he paid USD$69 m for the Beeples at Christies) by going to https://youtu.be/tCn7M9bzxBE and check out this video for a very easy to understand description of producing your first NFT by an artist - https://youtu.be/7V_2xrmGrWI. 

For non-digital artists who still would like to have a presence on the NFT market have a look at this vid - "How to turn physical art into NFTs".

And you should listen to what a digital art collector (Australian) has to say https://www.youtube.com/watch?v=kLa2ceNvSM4

NFT Market Places       

Some sites are curated and only display credentialed artists whilst others are open to all

https://niftygateway.com/marketplace  all transactions are in US dollars rather than crypto

https://wax.atomichub.io/   Atomic Hub

https://rarible.com/    Rarible (not curated)

https://superrare.co/      SuperRare (curated)

https://makersplace.com/ MakersPlace

https://niftygateway.com/.   Nifty (by the Winklevoss Twins)

https://superrare.co/.   SuperRare

https://cryptoslam.io/. CryptoSlam

https://mintable.app/. NFT store

 

By Martin Shub, 31 March 2021