NFT’s took the Artworld by storm earlier this year, to such an extent that many questioned whether they would be a short-lived craze, but they are not that, they are part of a digital revolution, they will indeed evolve, but they are most likely to stay and increase their influence on the market over time.
The reason is that NFT’s are part of a much bigger change impacting finance, insurance, logistics, the way value is exchanged and how it is controlled. The blockchain is entering the mainstream and will affect the way most things work.
In art, NFT’s issue a number of opportunities and challenges to the status quo. The most significant being:
1. Market expansion
A large number of NFT artists and collectors are new to the art market. NFT’s are thus expanding the art market - new art, new collectors and extra revenue.
This expansion represents an injection of new energy, additional resources and market activity that is good for the market as a whole.
2. Trading behaviour
Thus far we have seen these new collectors behaving very differently from traditional collectors. In the past collectors seldom sold their works and typically held onto them for more than ten years. Galleries frowned on collectors ‘flipping’ works to the extent that they might blacklist those who did it, in consequence making it difficult for those collectors to acquire desirable works in the primary market.
With NFT’s, ‘flipping’ is commonplace, often within days of purchase, this trading being part of the whole experience for some. This broken-rule in the NFT space will influence the acceptability of the behaviour in the traditional space over time, and that in turn will change the way value is built, and the players involved in building it.
3. Artist royalties
NFT’s introduced the artist royalty in the smart contract, providing artists a percentage of the revenue of every sale in the secondary market in perpetuity. This provides for a sharing, with the artist, of the rewards of market value growth.
This is extremely attractive to artists and is likely to create pressure to introduce the same for the resale of physical art in the secondary market.
An advantage, or disadvantage, depending on your point of view, of the NFT smart contract is the transparency of everything on the blockchain. Every edit and transaction is recorded and visible. This facilitates the verification, provenance, and tracking of digital art.
This will also cause pressure to improve transparency in the world of physical art. At first, artists may create digital twins of physical works to act as ’on-chain’ certificates of authenticity. The challenge with this is that it requires the digital and physical to stay together. Over time different reactions and solutions will emerge.
Though we may not know yet what all the implications will be, art NFT’s will impact the art market in multiple ways. As with anything new, time till tell, but time also rewards those who get involved early. So explore the opportunities, research and be cautious to avoid scams and bad practices, and most of all educate yourself about this and other technologies that may impact your business and future.
In line with our mission to help make it easier and faster for businesses to succeed in the artworld, Artfundi is launching an NFT Marketplace to support artists, galleries, collectors and institutions wanting to get into NFT's sensibly.
We are proud to introduce two innovations in our smart contract:
- Gallery commissions in the primary sale, allowing for the artist to include a commission for their gallery, if they are represented, when minting their NFT, and
- Copyright assignment, allowing the artist to reserve copyright, or transfer it to the buyer. This is an area of current confusion, and it will provide much-needed clarity and comfort in the contract for both artist and collector.
Sign up for our newsletter on our website to be kept informed of our news on this exciting development, as well as more informative posts on the topic of art+tech and NFT’s in general.