NFT [non-fungible token]
NFT [non-fungible token]
- Molly Dorkin
A unit of data that is stored on a digital account (blockchain) and certifies a digital asset—including an audio file, image, or video—as unique and not exchangeable. It serves as a proof of ownership even for a digital item that is easily copied and distributed. NFTs can therefore be traded and sold like other assets, and, with the provenance permanently recorded in the blockchain, the risk of fakes is largely eliminated.
The market for NFTs has exploded in recent years, valued at over $250 million in 2020 and with sales of $24.9 billion 2021 (calculated across ten blockchains). Digital artwork is not a recent invention: the first exhibition of digital art in America took place at Howard Wise Gallery in New York in 1965. There are also precedents for the sale of art that does not involve the exchange of a tangible work, such as performance art, conceptual art, and installation art. In acquiring such works, a collector typically receives a certificate from the artist authorizing the reproduction or performance of the work in question.
What is new to the process of sale and certification is the blockchain technology required to secure the “uniqueness” of digital artworks in the form of NFTs. This appeared in the mid-2010s and began reaching a wider collecting audience in 2017. NFTs initially traded on specialist websites such as Nifty Gateway, Valuables, and nonfungible.com, but more recently (and in tandem with the explosion of value in cryptocurrency) NFTs have entered the mainstream global market for contemporary art. They now appear at auction houses including Christie’s and Sotheby’s.
From February 25 to March 11, 2021, Christie’s staged a single-lot online sale featuring Everydays: The first 5000 Days, a digital artwork by Mike Winkelmann, known as Beeple. This piece comprised individual digital images that Beeple had posted online daily for the previous thirteen and a half years. Everydays: The first 5000 Days fetched $69,346,250 including buyer’s premium, making Beeple the fourth most expensive living artist after Damien Hirst, Jeff Koons, and David Hockney. This was the first purely digital NFT to be offered at Christie’s although on October 7, 2020 the house sold Robert Alice’s Block 21, an artwork that existed in both physical and digital format ($131,250 including premium; pre-sale estimate $12,000–$18,000). Everydays: The first 5000 Days was sold to the Singaporean internet businessman Vignesh Sundaresan, known as “MetaKovan.” MetaKovan began building a virtual museum featuring 5,000 NFTs by Beeple and selling shares to the public; having been released at under $2 each, they were trading at $28 within a few months.
Two months after the sale of Everydays: The first 5000 Days, Christie’s offered nine “Cryptopunks” as a single lot in its May 11, 2021, Contemporary Art Evening Sale alongside physical artworks by Jean-Michel Basquiat, Gerhard Richter, Christopher Wool, and others. Christie’s cites the Cryptopunks project by LarvaLabs, founded by Matt Hall and John Watkinson, as the start of the Crypto art movement. On June 23, 2017, LarvaLabs launched a collection of 10,000 24 × 24, 8-bit-style images of “punks” created from pixel art. While anyone can access images of all 10,000 punks, only one collector at a time can “own” any of them. Initially, Hall and Watkinson retained 1,000 punks and gave others away for free; even then, few people wanted them. Soon, individual punks began trading and selling for currency. In February 2021, Cryptopunk 6965 sold for $1.5 million. On March 11, 2021, Cryptopunk 7804 sold for $7.5 million, a record price that was beaten the following day by Cryptopunk 3100 ($7.58 million). The pre-sale estimate for nine punks was $7–$9 million, and the lot sold for $17 million. Christie’s accepted bids and payment in both US dollars and ether cryptocurrency.
Sotheby’s held its first NFT sale on April 12–14, 2021, in collaboration with Nifty Gateway and digital creator Pak. On offer were virtual cubes ($500 each) and two unique pieces, The Switch and The Pixel. The sale achieved a total of $16.8 million, including $1,444,444 for The Switch and $1,355,555 for The Pixel. Digital artworks appeal to auction houses because the profit margins can be much higher. When a physical object is sold, the sale process incurs a number of costs such as shipping, insurance, conservation, photography, and storage.
Other notable, recently sold NFTs include Twitter founder and CEO Jack Dorsey’s first-ever tweet (sold for 50 Bitcoin or around $2.9 million on March 22, 2021); Sir Tim Berners-Lee’s original source code for the World Wide Web (sold for $5.4 million on June 30, 2021); and feminist entrepreneur, actress, and model Emily Ratajkowski’s Buying myself back: A model for redistribution, an image of herself standing in front of a controversial Richard Prince photograph (sold for $175,000 on May 14, 2021).
Significant digital artists and creators of NFT include Beeple, Pak, Trevor Jones, Matt Kane, and Fewocious. Like graffiti artists, many operate under pseudonyms. Some, like street artists Banksy or Pak, choose to remain anonymous.
Not everyone is convinced about the longevity of NFTs. Hockney declared: “I call them ICSs: international crooks and swindlers.” Critic Waldemar Januszczak predicted: “It’s clear as crystal the bubble will pop. The question is when.” Further to the unproven status of NFTs as long-term investment opportunities, the NFT market raises other concerns. In an effort to deter criminals seeking to launder money, the art market imposed stringent anti-money laundering regulations and background checks as of January 24, 2020, with fines for non-compliance. These regulations are far less effective in the digital realm, where a combination of anonymity and the speculative nature of NFT trading facilitate illegal activities. NFTs also carry a high environmental cost. It has been estimated that a single NFT (edition of 1) is responsible for generating approximately 90 kg of CO2, roughly the equivalent of that generated during one hour of an international commercial flight.
- Delaplaine, Sophie. “The Brave New Virtual Art World the Evolution of Digital Art: NFTs and Their Effects on the Art Market in 2021.” MA thesis, Sotheby’s Institute of Art, 2021: https://digitalcommons.sia.edu/cgi/viewcontent.cgi?article=1094&context=stu_theses.
- Escalante-De Mattei, Shanti. “Should You Worry About the Environmental Impact of Your NFTs?’ ArtNews (Apr 14, 2021): https://www.artnews.com/art-news/news/nft-carbon-environmental-impact-1234589742/.
- Jordanoska, Aleksandra. “The Exciting World of NFTs: A Consideration of Regulatory and Financial Crime Risks.” Butterworths Journal of International Banking and Financial Law 10, no. 716 (Nov 2021): https://kclpure.kcl.ac.uk/portal/files/164306528/The_Exciting_World_of_NFTs._A_Consideration_of_Regulatory_and_Financial_Crime_Risks_Jordanoska.pdf.
- Lambert, Nick. “Beyond NFTs: A Possible Future for Digital Art.” ITNOW 63, no. 3 (Autumn 2021): 8–10: https://doi.org/10.1093/itnow/bwab066.
- Nadini, Matthieu and others. “Mapping the NFT Revolution: Market Trends, Trade Networks, and Visual Features.” Scientific Reports 11: 20902 (2021): |https://doi.org/10.1038/s41598-021-00053-8.
- Rivers, Tina. “Token Gesture.” Artforum (May 2021): https://www.artforum.com/print/202105/token-gesture-85475?fbclid=IwAR26uY5mundkdAdowgzcQx69OD8jXp6Rc1KH—CAODe9FFXjXQ8uaec9cuI.
- “NFT Sales Hit $25 Billion in 2021, but Growth Shows Signs of Slowing.” Reuters (Jan 11, 2022): https://www.reuters.com/markets/europe/nft-sales-hit-25-billion-2021-growth-shows-signs-slowing-2022-01-10/.