A handful of auctions this month tested the appetite for a type of investment known as NFTs that seemed likely to perpetuate a new fashion for business ownership that only exists in the digital world. However, the privileged collectors who typically drove the art market sales were missing from those transactions.
Industry experts note a growing wedge between a new generation of digital speculators and an older school of art collectors who say their concerns about the quality, ownership, and authenticity of NFTs are not resolved, even as their concerns about legal challenges grow.
Over a dozen collectors interviewed for this article said that NFTs raise copyright and other issues that sellers and buyers had not fully thought about. “None of my clients ever buy NFTs,” says Lisa Schiff, a technical consultant in New York. “I have curious people, but we’re just waiting to let the dust subside first.”
NFTs, or non-exchangeable tokens, took off in music, art and sports, and were created and sold in the markets for commodities cryptocurrencies with names like Rarible and OpenSea, or in association with auction houses. Sotheby’s made its initial push to the market this month with a three-day auction of NFTs by an anonymous artist known as Pak. A wave of blockchain bidding pushed the total price to nearly $ 17 million (£ 12 million) – pushed through the digital platform Nifty Gateway with Ethereum cryptocurrency and credit cards – for 6,150 NFTs. One work, One Gray Pixel, has sold for more than $ 1.35 million after a drawn-out bidding war.
Phillips also recently sold the first NFT of artist Misha Dobak, named Mad Dog Jones, for $ 4.1 million, including premiums, to a new anonymous bidder at the auction house.
Those sales were a significant drop compared to Christie’s selling NFT to artist Beeple in March for approximately $ 70 million. But Max Moore, the Sotheby specialist who led the Buck deal, argues the mission was “about establishing connections with this new audience about NFTs.”
“They are basically younger and more digital home than other collectors,” he explains. “We wanted to create an understanding of what defines their taste and style of collection.”
With over 3,000 participating buyers, Moore declared his trial a success. But the legions of traditional collectors who have defined the vagaries of the contemporary art market have retreated.
Some collectors question the idea of owning art without exclusivity. “Why are we paying $ 69 million for something that anyone can see on the Internet?” Says Peter Krause, chairman and CEO of Aperture Investors, a New York-based consulting firm that brings together with his wife, Jill, the custodian of the Museum of Modern Art. Their holdings include one of six extant copies of the clockChristian Marclay, 24-hour video collage showing thousands of clips from movies throughout history.
“Rarity is worth something; it’s about owning something that you think is beautiful and unseen in anyone else’s home,” Krause adds. “There should be some clarity about what you own as a collector.”
Belgian investment banker Alain Servais has acquired works by digital artists, including Rafael Rozendaal, which are usually featured on buyer’s websites. On the one hand, with NFTs, business control is usually decentralized on the blockchain, with the buyer receiving a digital receipt called a token – but the rest of the world can still see it.
Servais criticizes NFTs for “massive unresolved copyright issues and security challenges” in the market and points to two recent setbacks that highlight the uncertainties about collectors’ NFTs.
The first happened this month when celebrity artist Takashi Murakami – who had rushed to embrace NFTs after selling Beeple by launching a line of pixel works based on his signature smiley flowers – announced to Instagram that he was pulling NFTs out of OpenSea at the time. It is “to continue exploring the optimal shape” and to ensure that “business collectors are satisfied and feel secure in owning a business”.
Analysts say Murakami may have been smart about taking the time to re-examine how NFT artwork affected collectors of his earlier paintings and sculptures. William Goetzman, professor of financial and management studies at Yale University, says established artists must balance exposure with exclusivity.
“I can see a danger to well-known artists exposing themselves to this new market where the rules are unclear,” says Gotzman. “If NFTs prices falter at fairly low values, that will scare people from amassing your other business.”
Around the same time, vulnerabilities in the NFT market were tested by a hacker operating under the pseudonym Monsieur Personne, who produced the “second edition” of Beeple’s record selling work. The hacker recorded the fraud with the blockchain as if Beeple himself had minted it. NFT was included in Rarible and OpenSea, both of which ultimately deactivated posts.
Legal experts are quick to point out that questions regarding copyright and fraud in the NFT market have not been tested in court, resulting in an unknown risk element to coin collectors.
“It’s the Wild West,” says Nelson Rosario, a Chicago-based intellectual property attorney who specializes in cryptocurrency exchanges. He adds that NFT buyers often receive different rights to an image than they might expect from a traditional painting or sculpture. The international nature of blockchain networks, which often contain nodes – validation machines – located around the world, has raised questions about whether countries will recognize copyright rights enshrined in the NFT terms of sale.
“If you want a high degree of confidence, you have to pay a lot of attorneys,” Rosario says. “Many NFTs are stored on the Ethereum blockchain, which contains nodes in nearly every jurisdiction on the planet.”
With the scope of risks unclear and the future of the market uncertain, Servier worries that the digital artists he has gathered for years may “end up looking like the bad fashion trends of the past year” and diminish the value of their past work if they embrace NFTs.
He and the other collector are also concerned about NFT’s reliance on digital platforms that are still considered startups. If these companies disappear at all, the links to the NFTs they host might also disappear. “If you enter a middleman between you and the blockchain, and the middleman goes down, you are in trouble,” Service says.
Oddly, the artists do not share these concerns. Rozendaal, who started his career in the early 2000s by turning websites into art items and selling their domain names, now sees NFTs as the logical next step.
With NFTs, “the big attraction is the digital permanence,” he says in an email. He and others point to the disappearance of the art created in the 1990s as previous internet hosting systems became obsolete. By stopping his business in non-exchangeable tokens on the blockchain, Roosendaal says he is no longer spending his days worrying about server maintenance and domain access. It also helps scanning NFTs be incredibly fast, taking only about 10 minutes.
Released four acts over the past month, and earned nearly $ 360,000 in cryptocurrency for the best-selling lot. Dark blue A far cry from the $ 10,000 he usually earns per job.
“The Internet is evolving and the blockchain is the next step,” says the artist. “I can’t predict the future, but as I see it now, I’ll be making NFTs for decades.”
Roosendaal did not collect any of the NFTs himself. There aren’t many other artists silencing digital codes but are cautious about investing themselves in what they admit may be a fad. And in such a new market, some collectors argue that the art displayed through NFTs is too low-quality to obtain.
“There is no challenge whatsoever in NFT art,” says Pedro Barbosa, a Brazilian collector accustomed to buying conceptual artwork that sometimes has no physical form.
“The ideas that Buck explores, for example, have been around for more than 100 years,” says Barbosa. “The geometric abstraction that he sells has already been explored by artists such as Joseph Albers, Laszlo Moholy-Nagy, and Marcel Duchamp.”
But some industry watchers argue that Beeples today could be the Warhols of tomorrow.
“I remember my parents were fascinated when suddenly low-key popular imagery was treated as art or collectibles with the rise of pop art,” says Goetzman, the professor. “We might be seeing a similar phenomenon with NFTs – but it could be a bridge too far for people who have groups in other media.”
Meanwhile, artists and their merchants are forging ahead with plans to conquer the new digital market.
This month, Urs Fischer sold his first NFT for $ 97,700; Pace will facilitate future drops of the artist on the blockchain in May after merchants at Gagosian Gallery declined to participate. Mark Glimcher, CEO of Pace, says through a rep that he believes non-financial business teams are here to stay. The gallery plans to accept cryptocurrencies for physical artwork in the fall and is working with more artists on NFT collaborations in the future.
Volta Art Fairs also has plans for NFTs to program it. Kamyar Maleki, who runs the company, says he expects it to be one of the first art galleries to display non-exchangeable icons at an exhibition to coincide with the Art Basel exhibition in September.
“There is a feeling that a parallel art market is emerging with a new group of artists and a new group of collectors,” says Tina Rivers Ryan, curator of Albright Knox Art Gallery in Buffalo with expertise in digital art. “But the question of $ 69 million is whether this will become another propaganda cycle like virtual reality in 2016 or as Net Art was before the dotcom bubble burst in 2001.”
The art advisor, Schiff, says the widening gap between collectors of traditional art and new speculators for non-exchangeable symbols could be a good thing: NFTs may attract speculators away from the contemporary art market, where they are often criticized for reselling quickly. Work for an easy return on investment.
“It is best for everyone if you can get the speculators out of material art and into the NFTs,” she says. “They don’t have to lie. They don’t have to stock up on art. They won’t be yelled at for auctioning after a few years. It can be a good way for the market to settle itself.”
© The New York Times