Nov 24, 2021
NFTs: The Future of The Art Market
With sales of over $2.4 Billion in the first 6 months of 2021 non-fungible tokens or NFTs have been trending in the news and social media. A trend that has caught the attention not only of art auction houses but also of art traders around the world. NFTs “are tokens that we can use to represent ownership of unique items.”* These can include images, videos, books, texts, music, and much more.
Concerning the art market, it has reported an exponential growth of online sales during the pandemic. In this brief article, I will explain the reasons for which I think NFTs will dominate the art market. To do so, I will compare the key aspects of NFTs and artworks on three key aspects: value, market, and distribution.
In recent years, the prices paid at art auctions featuring contemporary art have been bizarre. Let’s take the case of “Love is in the Bin” by Banksy as an example of this, artwork for which someone paid £18.582,00 at Sotheby’s London on October 14th, 2021. Who would have imagined the artwork made by a street artist would reach those prices? Likewise, nobody would have imagined the pixel image of a CryptoPunk algorithmically generated through computer code and minted as an NFT in a blockchain, would be sold for 11 million dollars in September 2021.
When we talk about value in the world of art we have to admit there are no strict rules to determine the price of an artwork. But in most cases, the price of a piece of art is defined by the importance of its author, its history, or its desirability. Compared with art, setting the value of NFTs it’s a process that depends not only on those three factors I mentioned before but also on other variables like scarcity, trends, and the ups and downs of cryptocurrencies prices.
The real potential of NFTs is yet to be discovered. According to the Art Basel and UBS Global Art Market Report, the global art market was valued at 50 billion U.S. dollars in 2020**. On the other hand, the NFT market is estimated to be around $20 billion U.S. dollars by the end of 2021, an impressive figure if we consider the first NFT was created just in 2014. Additionally, the NFT market it’s expected to reach trillion dollars in sales in less than ten years. This exponential growth is the reason why some of the most famous auction houses have started to sell NFTs. Recently, Sotheby’s has just launched its own online NFT marketplace under the name of Sotheby’s Metaverse.
Regarding distribution, NFTs have proved to be the fastest way to buy both a piece of art or a kitten meme and get it delivered right away to a crypto wallet. Paying thousands of dollars for a meme might sound funny at first but unlike the art market, the NFT world has space for every single thing you can imagine as long as it is minted on a blockchain. In contrast, art distribution follows special logistics to avoid damaging artworks, and since they are physical objects, the handle implies a lot of time. For art distribution logistics, NFTs offer a viable solution that consists in creating an NFT of a physical artwork that can be later used in an auction instead of the original. Doing so will reduce the risk of damaging artworks while the new owner will immediately receive a digital token that will serve as proof of ownership.
We are just at the beginning of a new era that will take art sales to levels nobody imagined before. Furthermore, if you ever thought about investing in art, NFTs are the ideal way to start doing so and you don’t necessarily need to pay thousands of dollars for a single piece of art since NFTs will allow you to buy a fraction of an expensive artwork that you can sell or trade later.
Although there is still much to see in the applications of NFTs in the world of art, I’m sure about something: this technology will lead the art market into the future.
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*Ethereum. (n.d.). Non-fungible tokens (NFT). Ethereum.Org. Retrieved October 25, 2021, from https://ethereum.org/en/nft/#:%7E:text=NFTs%20are%20tokens%20that%20we,%2C%20collectibles%2C%20even%20real%20estate.&text=Non%2Dfungible%20is%20an%20economic,song%20file%2C%20or%20your%20computer.
**Art Basel and UBS. (n.d.). The and UBS Global Art Market Report. Art Basel. Retrieved October 25, 2021, from https://artbasel.com/stories/art-market-report-2021
