The hype around crypto-art will be put to the test next week when two of the world’s leading auction houses launch their first sales of digital tokens.
Sales of digital artworks have soared in recent months with surging demand for non-fungible tokens, or NFTs. These are unique, traceable digital files that capture anything from images, art, video clips or music.
A work by the US digital artist Beeple was sold at Christie’s auction house for more than $69m last month. It made its creator, whose real name is Mike Winkelmann, the third most valuable living artist at auction, after Jeff Koons and David Hockney.
Next week’s online auctions will be closely watched as a signal of buyers’ continued appetite for digital works. In partnership with NFT marketplace Nifty Gateway, Sotheby’s will offer works by Pak, one of the best-known and highest-selling digital artists, whose identity remains a mystery, while Phillips will sell an “NFT experience” by Michah Dowbak, who goes by the name Mad Dog Jones.
NFTs have become the preferred mode of ownership for digital art. They are held on the blockchain, the digital ledgers that underpin cryptocurrencies, which build in a permanent record of ownership. They can also be encoded with other functions, such as a percentage fee for the artist every time a work is resold.
Interest in NFTs was until recently confined to a niche community of digital artists, illustrators, technologists and cryptocurrency enthusiasts. But as the prices of leading cryptocurrencies have soared since late 2020, so have the prices fetched for these digital works, creating intense interest in the mainstream art world.
It has drawn in not just the established auction houses but prominent artists, among them Turner Prize winners Damien Hirst and Jeremy Deller, who have announced or launched NFT art projects.
Louise Williamson, an associate in the art team at Withers Worldwide, said her law firm had seen surging NFT interest from a range of clients. “We’re receiving instructions in New York, Singapore and London from people who want to buy — charities and investors, tech people who want to understand it as an investment and artists who want to branch out into NFTs.”
The market’s detractors point to the potential for scams and technical difficulties in transacting, as well as huge swings in volume and price for different categories of digital art.
Many traditional artists also remain sceptical. Although he has embraced the creative possibilities of iPad art, the 83-year-old Hockney last week denounced NFTs as a market for “international crooks and swindlers”, in a podcast hosted by Bendor Grosvenor, the art historian, and critic Waldemar Januszczak. “What is it that they’re owning?” he asked.
Charles Stewart, Sotheby’s chief executive, saw a role for the established auction houses in helping the market become sustainable, by building confidence among buyers and sellers that transactions were carried out “correctly and fairly”. “I’m not sure that’s the case with what we’ve seen so far with a lot of these NFTs,” he said.
Matt Hall and John Watkinson, co-founders of Larva Labs, became pioneers of the NFT movement in 2017 when they created and freely gave away 10,000 unique “cryptopunks”, highly pixelated portraits of characters with the look of an early computer game, each slightly different from the other. The pair launched the tradeable collection on the ethereum blockchain, on which nearly all art-related blockchain activity now takes place.
Watkinson said transactions “burbled along” for several years before the financial stakes rose dramatically. On the same day as the Beeple sale, two of the punks sold in quick succession for 4,200 ether ($7.5m) each.
Although average prices for the tokens have fallen back to about $45,000, according to data site Nonfungible.com, Watkinson said NFTs had proved their credentials as an art trading and ownership mechanism.
“It’s been a coming-out party for showing how well the tech works. I think we’ve gone through a one-way door where, regardless of any market swings, this will survive. It’s a useful tool for the digital art market,” he said.
While some artists use NFTs simply to sell their digital artwork, others are using the medium to pose conceptual questions about the value of art, or to provoke critics who label the trend as pure financial speculation.
One work in the Pak sale, for instance, turns the non-fungible into the fungible by offering buyers an unlimited number of spinning geometric “cubes” at $500 each. Every cube will be identical, but buyers will be issued with a unique NFT. What is the incentive to buy more than one cube? Pak’s answer is that the top 100 purchasers automatically qualify to receive a subsequent “drop” of NFTs from the artist.
While many in the traditional art world scratch their heads over such innovations or plainly disparage it, digital artists previously on the periphery of the market have welcomed the ability to make money from their work.
“A lot of people have crypto and want to be able to invest in something,” said Zaiba Jabbar, an artist, curator and founder of studio Hervisions. “It’s leading to a new type of collector and a democratisation of collecting.”