It’s hard to fathom why, and how, 15-second clips of NBA stars throwing down slam-dunks or artworks that exist only in the digital ether are generating hundreds of millions in sales in newly emerging markets that are close cousins to Bitcoin and other cryptocurrencies.
Especially when you learn that most of that same content remains widely available to anyone else who wants to view or copy it even as “ownership” is transferred to a person and certified by a unique digital identifier known as a nonfungible token.
Welcome to the world of NFT.
An enormous amount of money is being generated by NFTs, and a slew of mega-sales in just the past few months are driving headlines and investor interest alike. Digital artist Mike Winkelmann, who works under the name Beeple, snared $69 million in an auction for one of his digital collages; Twitter founder Jack Dorsey’s first tweet sold for more than $2.9 million; and pop musician Grimes snared over $6 million for a group of works that included music videos and digital art.
Like cryptocurrencies, NFTs live on a digital shared-ledger, or blockchain, platforms that embrace a transparent, crowd-verified system for record keeping and work to make tracking, validating and transferring certain kinds of assets fast, seamless and outside the control of any single entity. Besides high-end digital art, NFTs are also backing a host of more mundane collectibles, including short clips and images of sports stars doing their thing or new takes on cutesy items (remember Beanie Babies?) that include low-res digital images like CryptoKitties or CryptoPunks.
A question remaining unanswered for the moment: Are NFTs just the latest digital investment craze following in the footsteps of Gamestop, Dogecoin and others, or is this new world of virtual assets headed for something bigger and more substantial?
Trickle down democracy
Tech entrepreneur and cryptocurrency innovator Justin Sun told the Deseret News there’s a lot more at stake with nonfungible tokens than meets the eye, and he sees their emergence as a step toward democratizing these assets both from a collector’s viewpoint and, perhaps more importantly, on behalf of creators and artists.
Sun was the losing bidder for Beeple’s “Everydays: The First 5000 Days” collage that was sold by art auction specialist Christie’s during a March 11 virtual event. Even though Sun missed out, he isn’t bitter about the outcome and just a few weeks later scored his own Beeple NFT, paying $6.6 million for a work called “Ocean Front” in a charity auction for climate change group Open Earth Foundation.
“Ocean Front” is now also the first work tokenized in a new fine art-focused investment fund launched by Sun called Just NFT. He also plans to create NFT certificates for real-world art pieces he’s recently purchased that include a $20 million Picasso painting titled “Femme Nue Couchée au Collier (Marie-Thérèse)” and a $2 million work by pop artist Andy Warhol, “Three Self Portraits.”
Sun founded cryptocurrency platform Tron in 2017 and is also the CEO of Rainberry, the parent company for the BitTorrent peer-to-peer network innovator Sun purchased for $140 million in 2018. The lion’s share of digital art and collectibles transactions thus far have occurred on the Ethereum blockchain platform, but Sun and his team have recently adopted an NFT protocol for Tron. Sun has become a player in the rarified world of fine art speculation but he says the multimillion-dollar investments are about turbocharging the NFT market and playing a long game that will have the effect of leveling the playing field and creating new opportunities for artists at the other end of the ecosystem.
“Basically our idea is in the future everybody can sell and receive payments for their artworks for almost zero transaction fees,” Sun said. “This enable lots of possibilities. Great art work will come from those who are now creating small artworks. With a million new creators who can access markets, there’s going to be another Picasso. It’s about building a very friendly environment for those creators to grow.”
He also sees an NFT-driven art world as one that could provide a much needed update to roles galleries and auction houses play on behalf of creators.
“I think galleries and big auction houses have their value,” Sun said. “But their advantage is no longer trying to be the middle man ... they need to contribute real value. It should be about improving efficiency and the content creators need to feel empowered by those giants, instead of being taken advantage of.”
Sun is a rock star in his native China, a protege of Jack Ma, the founder of Chinese e-commerce giant Alibaba and a graduate of elite Chinese and U.S. business schools. He has worked as tireless acolyte on behalf of NFT/blockchain art transactions and future applications that could open up opportunities for more common folk, including a heavy volume of postings to his 2.5 million or so Twitter followers. But his business conduct has also earned a lot of attention, and much of it is controversial.
An expose published by tech news website The Verge last fall detailed a litany of issues raised by current and former employees, including allegations of a hostile work environment and questionable business practices. Adding fuel to that fury, a $15 million lawsuit was filed last October against Rainberry, Sun and another Tron executive by two former BitTorrent employees that includes allegations of workplace harassment and other “sordid and unethical” business practices.
Are NFTs the new California Gold Rush
Curtis Morley is a veteran entrepreneur and current director of the Kahlert Initiative on Technology, a program at the University of Utah’s David Eccles School of Business aiming to amp up digital skills for students, regardless of their field of study.
Morley said he’s been watching the rise of NFTs and believes the furor — and giant checks — surrounding the sale of art and collectibles is likely a bubble, but it’s one with an underlying technology that could prove to have much broader applications.
“Right now, in my estimation, the NFTs are kind of like the California gold rush,” Morley said. “There’s a lot of FOMO (fear of missing out) going on. Creative endeavors work very well as NFTs because a lot of art, memorabilia and collectibles can live in the digital world ... and I think music is going to be the next big wave.
“But I think the rush will calm down and this will morph into a broader world of digital rights management,” he said.
That world, Morley mused, could include bringing blockchain and nonfungible token technology to bear on preventing, say, government corruption by tracking the collection and disbursement of public funds in a way that thanks to blockchain’s structure, allows point-to-point tracking in a very public and easily auditable arena.
He also believes, like Sun, that NFTs could be used to create digital transaction models that involve physical, “in real life” objects of value.
“In the physical world, you have the asset of your home or any other kind of collateral that has the potential to live on the blockchain as an NFT,” Morley said. “I think things could shake out in a way where the digital world starts to mimic the physical world in new ways.”
Another potential migration from the physical to digital world could, Morley said, involve how we certify, manage and control our personal digital information, so-called sovereign identity, and the role that could play in a new, blockchain-based election system. It’s a system that has the potential to address many of the concerns, founded or otherwise, that can crop up in the current election system, issues indelibly highlighted in the 2020 U.S. presidential cycle.
“In the last election the country was torn apart, literally ripped in half with allegations of voter fraud,” Morley said. “A sovereign identity protocol and blockchain-based election system has the potential to give you and outcome where you can say this is 100% accurate, with no way to fake or spoof it.”
And Morley provided a current, grassroots use case citing makers of high-end wines and cheeses — both of which are widely targeted by counterfeiters — are already using NFTs as a way to certify the real deal. It could be that when you order that next bottle of pricey Merlot at dinner, your server will present the bottle and a QR code that you can scan with your smartphone to ensure that you are, indeed, getting what you’re paying for.
Made you look
Senior curator for the Utah Museum of Fine Art, Whitney Tassie, said the idea of digitally based transactions somehow taking the elitism out of the global fine art market is an admirable goal but, so far, she mostly sees the world of NFT-backed transactions and speculation as one carrying forward some of the worst aspects of the analog version.
“(NFTs) might bring equity or more democracy to the art world and that part of the conversation is certainly an interesting concept,” Tassie said. “But it feels similar to the radical hope associated with blockchain and cryptocurrency to find a system that’s more equitable than capitalism.
“Currently, there’s evidence against that. ... The NFT market appears to be replicating some of the existing problems in the art world. The people involved, both creators and consumers, are largely white, male, European American and privileged. And the technology itself is not globally accessible, which serves to perpetuate ... elitism and barriers to participation.”
While Sun’s vision of a near-future art world driven by NFTs is one in which galleries and auction houses could be subsumed by a system that easily accommodates direct sales and exhibition by artists, Tassie said the role of galleries is one that shouldn’t be so easily dismissed.
“The relationship that artists have with galleries is not parasitic, it’s a partnership,” Tassie said. “As someone who used to work at a commercial gallery, and who is currently buying works from galleries as well as artists, there’s a valuable relationship there. Galleries do a ton to make the works of artists visible, hustling, talking to curators and getting the artists’ work out there.”
While Tassie sees plenty of early issues with the nascent NFT art market, she remains cautiously optimistic about how it could evolve to bring some new tools to bear on the work of artists and the galleries that exhibit, and promote, their work.
“This is emerging technology and it still feels early,” Tassie said. “What (NFT innovators) are doing might totally flop, but one element out of that project might influence the way the art world works. The 2.0 version might be a little more useful and it’s definitely exciting to see how it might change the landscape.”
