NFTs are set to take over the art world

A webinar organised by Abu Dhabi Art last week brought together different players from the worlds of art and finance – journalist and author Georgina Adam, Director of Cerno Capital Edward Bonsor and artist, curator and professor, Kenny Schachter. The discussion aimed to shed light on non-fungible tokens (NFTs) in the context of the art world.

These NFTs are essentially a means of commodifying digital assets on the internet, such as photos, videos or social media posts, by using blockchain technology to mark them as unique. If a certain digital asset – say, a prominent tweet – is certified as an original, unique asset with an NFT, it can be bought and sold like an antique or a piece of art.

What quickly became apparent in our discussion was that, across industries, we are only at the beginning of understanding the potential transformations coming our way.

Given this state of flux, a longer lens can offer useful perspective. In particular, a specific period in European history comes to mind, characterised by what could be argued to be a comparable marriage between art patronage and new modes of accounting and transaction. During the Renaissance in Italy, the Medici family developed what is now standard practice in present-day book-keeping, the double entry. This is a system for tracking debits and credits against each other on a general ledger. It was a useful error detection tool, if the debits and credits didn’t match, there had been an error. The double-entry system helped the Medici convince merchants that they were reliable, efficient and trustworthy.

A further innovation that the Medici Bank drove was trade in foreign currency; they created the “nostro” account book, which contained two columned entries, showing amounts of foreign and local currencies held across partner branches in Europe. Merchants would then travel across Europe with a letter of credit issued by the bank, which would guarantee funds to a seller after the period of time prescribed for shipment of goods. This was safer for traders than a voyage across the continent carrying money that could be stolen.

The Medici grew wealthy thanks to the exchange rates in these transactions. The Medici were, of course, the most prominent patrons of art in the 15th century, a Florentine family that rose to wealth by amassing a fortune in banking and rose to power through spending their wealth politically. Notable patrons such as Lorenzo de’ Medici and Cosimo de’ Medici visibly manifested their position through the funding of religious art in which they were often featured. They publicly legitimised their position as powerful leaders through the commissioning of works from artists now beloved worldwide, including Leonardo da Vinci, Michelangelo and Botticelli.

This confluence of financial, political and artistic structures of power springs to mind amidst the current flurry of public interest around the digital artist Beeple's work Everydays: The First 5000 Days, which sold for the equivalent of $69.3 million at Christie's in March, paid for in crypto-currency by a new, self-styled patron of art. Of course, I am not comparing Beeple to Botticelli, or the buyer of the work, MetaKoven, to the Medici. Rather, I am suggesting that Florentine banking and its relationship to Renaissance art bears consideration here.

The crypto innovators profiting today need to ensure diversified trade takes place on their preferred platforms. After all, if nothing can be bought with crypto, it becomes less valuable. Enter the 255-year-old, publicly esteemed auction house Christie’s, the trusted custodian of art records for the market, as the new platform for the sale of an NFT. The contradiction here is that if Ethereum (the cryptocurrency and dispersed ledger system for the sale) becomes as mainstream as people think it will, the auction houses may well be cut out of such big-ticket art deals in future. This is because Ethereum replaces the traditional account books the Medici bank would have used, in being a reliable, dispersed, trusted depository of transactions. This extends to replacing the need for an esteemed auction house to validate a work, register a buyer and take commission on a sale.

The smart contracts Ethereum can deliver, which include paying an artist royalties for all future sales of their work, verifying authenticity, holding debt or transferring assets on fulfilment of certain conditions in future, have the potential to replace the traditional middlemen in such transactions. At present, those that stand to benefit most from this are the holders of crypto-currencies and founders of blockchain, not (yet) the art world seeking its next generation of collectors and considering how it can do business more efficiently with blockchain.

Turning back to the work sold by Beeple in March, Christie’s reported knowing only three of the 33 bidders, which would be, on paper, a good outcome in signalling new buyers. Sold for an inordinate amount, the work was purchased in cryptocurrency by Vignesh Sundaresan, a programmer based in Singapore, also known by his pseudonym MetaKoven, who claims to be a co-founder of Bitcoin. Mr Sundaresan is also the founder of MetaPurse, a crypto-exclusive fund that already owns 20 Beeples, acquired in December 2020.

In January of this year, MetaPurse grouped these Beeples, alongside 4 metaverse Beeple museums together in a bundle and fractionalised ownership through a new token called a B.20. MetaPurse owns over 5 million of these tokens. The March 2021 acquisition of Beeple’s work for $69.3m could reasonably be seen as an effort to bump up the value of B.20, by making cryptoart history with the sale. The underbidder for the Beeple work sold via Christie’s in March, was TRON (TRX) blockchain founder Justin Sun.

Crypto investors such as Mr Sundaresan or Mr Sun stand to benefit most from these value changes. Is the art world merely the front show for the latest crypto speculations or are more seismic changes happening here? Within this context, as the market for the consumption of crypto assets builds through headline grabbing events such as the sale of Beeple’s work, is it possible, as in the time of the Renaissance, for great art to flourish?

NFTs certainly sit well with a younger demographic, many of whom are hooked on gaming and comfortable with the idea of values existing purely online. Given the need for the art market to find its next generation of art collectors, paired with the intervention of crypto-investors in the industry, this could perhaps be an inevitable path. I can’t claim to be entirely in favour of these developments or the quality of art offered up to date. Neither can I deny, however, that change is inevitable. While painting or sculpture can never be replaced, there is space for digital artists to continue to create and innovate, and this is one further platform for them. Whether these crypto investors really are the legacy-making art patrons of the future, however, remains to be seen.

Dyala Nusseibeh is director, Abu Dhabi Art, Courtesy of The Department of Culture and Tourism – Abu Dhabi

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