Can NFTs Truly Impact The Art Market? (Part I)

After a few rounds of blockchain fads, the focus is now brought to NFT, the non-fungible token, a new toy the blockchain world has introduced to the world.

If you are not an insider in the crypto world, all these dazzling terms can only make you feel dizzy: decentralization, non-fungibility, immutability, e-democracy, financial innovation, this chain and that coin… But don’t be intimidated. When you meet someone at a networking event dropping the jargon here and there, they are very likely don’t know what they are talking about either. No need to mention those projects in funding rounds declaring to be blockchain innovations, they are often lacking an authentic or meaningful business model.

It is inevitable to see a fad. Back in the 1990s, 90% of the newly emerging startups during the dot-com bubbles are now dead. But it is also true that it was thanks to these gold diggers, today we can enjoy the benefit from the internet, which is profoundly interconnected with various aspects in our daily lives. To resonate with a lot of people, it is more important for new technology or a business model to solve problems instead of being a ‘new idea’ without a sound rationale. Furthermore, this solution method has to have an actual benefit (e.g. low cost) to improve societies on a larger scale.

Innovation is for humanity. What we are considering first is humanity, and then we can consider the right innovation that responds to our needs. It shouldn’t be reversed. We wouldn’t be changing our true desire just to fit in these novel trendy terms such as ‘decentralization’, ‘immutability’, and ‘distributed ledgers’, right?

In this entry, we will continue to tackle NFT and blockchain technology. Are they truly, as what the hype is promoting, going to overthrow the art market and how we change our way of evaluating art in the future?

So, let’s begin!

If you are not yet familiar with blockchain and NFT, please read here. We’ve covered a thorough introduction of the attributes of blockchain, technological principles, and NFT applications in the art market. In a nutshell, the fact that they can achieve asset digitalization can indeed create a big market potential, but blockchain is not the only avenue to do so. For physical assets such as fixed-rate bonds and artworks and other digital-native contents, including texts, videos, etc, the two quintessential considerations are authenticity and liquidity. The former can be crucial in the consented market value as well as personal sentiments or spirituality/feelings one projectes towards the art. The latter is more to elevate their investment value, the inflation-protecting potential (surely, appreciation potential, too), and trading value. For example, are they transferable or liquidable? Or even a tool for money laundering?

So, what do art collectors really care about? Whether it is an HNW collector’s personal collection, an amateur collector’s wall art display, or the museum archives, the collecting party will usually care about the authenticity of the artworks. It is human nature to go after authenticity and truth. Despite the fact that most people can’t even detect a forged artwork, it makes a tremendous difference for the owners, spiritually and psychologically, to know that the art they own is genuine. On that note, if a certain technology can bestow the artwork with an identity certificate, we will be able to strengthen the credibility of the authentication process. Whether the certificate should be in physical form (paper certificate, seals, anti-counterfeit labels, or scholarly testimony, etc.) or digital (digital signature, QR code, smart contract, etc.) will largely depend on which will be more cost-efficient, effective, and accepted by the general public. Now, NFT is a digital authenticating technology per se. Via NFT, assets can be easily digitalized, tokenized, and then stored in decentralized storage. Hypothetically, this is much quicker and more convenient than the traditional mechanism. That said, the traditional way doesn’t have to be weeded out. Just like the nostalgic are still buying record players even today.

Only genuine, authentic artworks can elevate one’s spirit and be valued as an invaluable, irreplaceable collectible. Physical objects indeed have a very different impact on the viewer spiritually and emotionally comparing digital work. This is why, despite how hyped and skyrocketed in value NFT has made digital art, it was not accepted by every person in the art world overnight. Indeed, NFT can improve the verification process and be linked with decentralized storage methods. Imagine Leonardo da Vinci walks out from his tumb to demonstrate a months-long performance for us today. Would you rather see him create Mona Lisa on a tablet on zoom and have the digital file sent to you on WhatsApp or admire him putting each stroke on a canvas day after day and see him putting his final signature with the brush in his presence?

Meanwhile, new media art has been recognized by the institutional art world for a period of time. The twenty-first-century artists have been bringing us various kinds of new media from animation, interactive art, sound art, 3D printing, to cyborg art. Various types of cyber artistic expressions are receiving wider audiences and passionate dedicators. Bio art, cyberformance, tradigital art, electronic art, evolutionary art, kinetic art, telematic art… These dazzling terms can dizzy the newcomers while excite the enthusiasts. Most of the universities with an art school also have a new media art department today. Even UNESCO has made Linz, a small city in northern Austria, into the City of Media Arts since 2014, following the city’s inception of Ars Electronica and the Cloud of Sound in 1979. Digital artists continue to bring us new forms of experiences by applying new technologies, or even via VR, AR, MR, and XR.

The art world can only foresee a trend of increasing digital native artworks, given all the above digital media and forms that continue to prosper. Evidently, NFT will play an important role in this trend as in distinguishing the ownership of digital art. This means NFT in fact solves the problems that it was difficult to own a new media art in the past without it simplifying the certificating process. With the advent of NFT, now the differences between owning the NFT and owning the digital file of an artwork are clearly distinguished.

Now, who will buy really this? Facing the immense inselected supplies of digital art in the market right now, the attention is largely determined by the artworks’ scarcity and the celebrity effect. And that is why the resources are only going towards things like the first tweet or the first YouTube video. Before NFTs are more accepted by the general public, few can understand the necessity to own a high-level photography work of grandiose Antartic sceneries, however breathtaking it is.

Technology and art have been two leading industries that challenge the world with cutting-edge concepts through history. We believe that technology can step in and engender more artistic transformation and breakthroughs. The digital movement in the art world is not only bringing more digital expressions on the table, but improving the accessibility to art for a larger audience. Given that most of the major museums have digitized their exhibitions and provide OVR, you can simply rely on your PC to enjoy the experiences in galleries, world’s leading museums, and of course, all the world-class art fairs, or even performance in Shakespeare’s Globe! (Surely, you also need high-speed internet at home to achieve a good quality viewing!)

The digital turn in the art world (especially thanks to 2020) certainly is enhancing the accessibility of art and further elevating our collective asthetic sense and cultural cultivation. Think about this, simply by setting up proper devices and equipments, children in remote countryside can also immerse themselve sin the grandiosity of the British Museum and Louvre. As the cost of devices becomes increasingly lower, more people are able to create art on their devices and share on the internet. On that note, I’d say technological innovations are, on various aspects, responding to people’s true, creative desire and the core of humanity. Now we even have NFT and the blockchain coming in to assist us to separate the original from their copies, (although it is another issue whether people care so much about authenticity in the digital world.) Evidently, we are on the track embracing the next stage of a digital breakthrough. Yet, on the flip side, the emphasis on how NFT will shake and reshape the art world could still be what mediators are manipulating behind the hype.

In the next entry, we will tackle with a more worldly matter: the liquidity of artworks. Simply put, we’d like to examine the process of art investment, their appreciation, liquidation, and how art investors are making money through this process.

Contributed by: Jack H, Jamie M. and 3ArToken