Soaring NFT sales redraw the art market | FT Film
The market for non-fungible tokens, or NFTs, is soaring, reaching $10.7bn in the third quarter of 2021. For the art world it's a new frontier, where ownership of digital assets is encrypted on the blockchain. The FT talks to artists, auction houses and collectors about how NFTs are bringing in new buyers and setting records for sales of digital works, and we follow a painter making his first NFT
Produced, directed and edited by Gregory Bobillot. Filmed by Gregory Bobillot, Petros Gioumpasis and James Sandy. Animation by Rebecca Hendin. Written by Gregory Bobillot and Joe Sinclair
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REPORTER: NFTs, those non-fungible tokens.
(SINGING) What the hell's an NFT? Apparently cryptocurrency.
SUBJECT 1: What's an NFT? This is a really good question.
SUBJECT 2: A unique piece of content that's been created by an individual, obviously digitally.
SARAH MEYOHAS: An NFT is a token that holds some information.
NANNE DEKKING: This technology makes information unalterable.
ROBERT ARMSTRONG: What I am sure of is that sales of non-fungible tokens have soared this year, shaking up the traditional art world. Sales of NFTs have also drawn attention to digital art.
REPORTER: A digital artwork by a relatively unknown American artist known as Beeple--
REPORTER: It sold Thursday in an auction--
ROBERT ARMSTRONG: For $69.3 million, making him one of the three most valuable living artists.
SUBJECT 5: Sotheby's sold a crypto pop, a pixel avatar for some $12 million. Neither artwork exists the physical world at all, having been created entirely with digital technology.
JASON BAILEY: I think the most talented artists in my opinion of our generation are digital artists. And in the beginning, I think that very few people ever collected digital art. No one really took it seriously because it was like I can see it for free. Why would I buy this?
KEVIN MCCOY: In the context of markets, there's a traditional notion of unique property, a unique thing that's exchanged for value-- that swapped for value, and that's the basis of the art world. A painting is a physical object. It's rare. It's scarce. There's only one thing, and that can be a carrier of value.
SARAH MEYOHAS: Photography is endlessly reproducible, but in order for the traditional art market to give it some sort of financial value, you need to sell a limited number of them, you need to make an edition, and they need to be physically printed. Digital art even more than photography is not meant to be printed. So it's not that value didn't exist in digital art. It's just that it couldn't be-- it couldn't accumulate financial value.
GEORGINA ADAM: And until now, there was a problem with these works of art because you couldn't actually trade in them because you didn't have any way of proving that you owned it.
ROBERT ARMSTRONG: The ability to verify, the provenance of a work of art, has always been essential to the market. But how can you confirm ownership when the artwork doesn't exist in the physical world? That's where NFTs come in.
NANNE DEKKING: The valuable artworks are the artworks where there are no red flags. It's not rocket science because if you've been a dealer like me, I know exactly what the attributes are that create value for an artwork. So clear title is crucial. Authenticity is very important, of course. Scarcity, that helps as well. You want to know how many paintings like this were actually painted by the same artist or where does it stand within the art historical field.
JASON BAILEY: So these digital artists, who I think are brilliant, had no real system of patronage and were undervalued. And what we did back then is we started looking at Bitcoin, and we said, well, if Bitcoin can prove that you can have something that's not tangible, doesn't exist physically, but it's limited, there's a scare-- a provably scarce amount of it, and you can prove that there's ownership to it, can't we apply that to digital art?
GEORGINA ADAM: An NFT was sold by Christie's by the graphic designer Beeple for $70 million, and all of a sudden the art world woke up, looked around, and thought what on earth are NFTs?
ROBERT ARMSTRONG: An NFT is a non-fungible token. When you buy a house, you get the deeds. When you buy a Picasso, you get a certificate of provenance.
In this new world, when you buy a work of art, what you're actually buying is the NFT, proof that it belongs to you. The proof is written in the blockchain. It's a virtual ledger that records the transaction and cannot be altered. But an NFT can be traded, and these crypto certificates are changing the art market with digital creators selling their works for huge sums.
ALEX ATALLAH: Because now for the first time on the internet, you can really own something and you can trade it on any market you want to including ours. So currently we're seeing a lot of really exciting activity around digital art, and it's forming a brand new market that never really existed. But NFTs go far beyond that. So things like event tickets, game items, domain names all could potentially be turned into NFTs.
GARY VAYNERCHUK: Anything you want. An artist can make an NFT and put in the contract that if you buy this piece of art, it allows you to have dinner with me. It allows you to come to my studio and I'll do a self-portrait. It allows you to get the paint buckets that I used. I'm sure if NFTs were around when Jackson Pollock was around and you could get the empty paint buckets that those paint buckets today would be worth just as much as the damn paintings. This is a game-changing technology because of the contract underneath the collectible.
ROBERT ARMSTRONG: So it's not just digital assets. You can use NFTs to trade full or part ownership of physical assets, too, anything from paintings to sports highlight reels to sports cars.
GREGG EMERY: So I'm up on the second floor. Yeah, I've been very lucky to have the space through the pandemic.
I'm very curious about NFTs. What I like about NFTs, my personal romantic vision of it is it's the Wild Wild West. For me, I'm very curious to see what artists do with it. It's still in its early days.
Can a poet read a few lines of their poem and have their voice be embedded in that NFT? Can I incorporate parts of my process? Can I incorporate parts of my inspiration in a video form like some of these colours are inspired by graffiti work I've seen around my neighbourhood. Is there a way to incorporate some of that people don't get when they just see my painting? That's what I'm most excited about.
I had a discussion with my students recently about NFTs. They're very curious. It seems like many of them don't know much about it. But in terms of art making, if you're 15, you have a voice. You have things you want to say, and you can say them. And an NFT may give them a wider platform just like social media has given them a wider platform.
GARY VAYNERCHUK: An artist who's young today is going to get educated. They're 25 years old. There was no option for them not to use the high market art world infrastructure-- a gallery, an auction house. I believe this gives them options.
NANNE DEKKING: I've always felt when I was in the art market that we were excluding so many people. It was not an inclusive market. We built these little temples for art. We create art fairs with only champagne and caviar. It was not a very inclusive world.
GREGG EMERY: Hey.
LISA LEDSON: Hey. How are you?
GREGG EMERY: Good. How are you?
LISA LEDSON: Good to see you.
GREGG EMERY: Nice to see you in person.
LISA LEDSON: Yeah, I know. Thanks for meeting.
GREGG EMERY: And we showed together in Times Square.
LISA LEDSON: We did. So you were part of Cube's--
GREGG EMERY: Yeah.
LISA LEDSON: Art fair show. How crazy was that? It was amazing.
So since the campaign, a number of my clients talk to me about how I just literally needed to put everything else on hold to focus on NFTs, and I was like I'm busy enough as it is. That's not even possible. But then once I brought in this mentor crypto sensei and he started just showing me what I could do with it, I was like, oh, OK, actually.
GREGG EMERY: So are you my crypto sensei? Is that--
LISA LEDSON: I guess I could be your baby sensei or something. I'd have to ask crypto sensei.
Do you think you'll be ready to--
GREGG EMERY: That is the plan. I haven't said it out loud yet.
LISA LEDSON: Yeah? Let's do it.
GREGG EMERY: That's the plan.
LISA LEDSON: Awesome.
GREGG EMERY: Oh, come on-- come here for a second.
WOMAN: --clear some of this out.
LISA LEDSON: So honestly, probably the most confusing part wasn't even the minting and listing part, it's really just understanding how to set these initial things up.
GREGG EMERY: Sure.
LISA LEDSON: How to resize your images so that they fit the requirements say for like OpenSea. But once I show you, you'll be like it's not that bad.
GREGG EMERY: OK.
LISA LEDSON: Yeah. So let's say now we've-- we have $400 of eth in your account, and you're like I want to go mint three NFTs tonight. Now one of the things you have to keep in mind is with your images, you need to have-- every platform has its own size requirements for the files or the NFTs that you're selling. So the platform that we're going to be using in this is OpenSea. Thank you.
Here's a couple. So like this is one of the pieces that I'll be dropping in the coming weeks.
GREGG EMERY: Random thought. I've heard a lot of people talking about where the NFTs might go, and even cryptocurrency, too, and then I have a lot of friends who push back being pretty traditional artists and even students who say it's just a fad. This is dumb. It's not real art.
LISA LEDSON: I think it's super powerful in that it really-- like traditionally in the art world and the artist gallery relationship is one where the artist is on the periphery of a transaction. We talked about that. We'll sell a painting through a gallery, and we often don't know who it's sold to for how much. And then as it's sold down the road, that information isn't-- we don't have access to that. This gives artists the ability now to be at the centre of the transaction and have control and oversight their work in ways that we've never had.
ROBERT ARMSTRONG: For an artist, earning a steady income isn't always easy. But what if you earned money not just the first time you sold your artwork but every time, a royalty payment triggered by each secondary sale built into the NFT?
JASON BAILEY: Every time there's a secondary sale-- today the standard is about 10% of that sale-- goes back to the original artist, which is amazing because all my art friends-- as a failed artist and all my art friends in 40 years, I had never knew-- I knew one artist who actually lived off of just making art. All the other ones were either teachers or did something else.
GARY VAYNERCHUK: Every time that piece of art sells, the artist is going to make money, so they're winning on two new fronts, a bigger percentage of the upfront sale and the ability to make royalty on every concurrent sale in perpetuity.
DOUGLAS A BONEPARTH: I think we're going down the road of more content creators monetizing their skills and their talents and finding ways in which that they can be paid for that, and here's a verifiable way to do that. So it's very intriguing.
ROBERT ARMSTRONG: So NFTs are making the art world more accessible, and that's a good thing. But I'm still struggling with the idea that you can spend millions of dollars on a work of art that you can't actually touch with your own hands, that can be reproduced endlessly at the touch of a button, and that everybody else can see any time they like.
SARAH MEYOHAS: I really don't think there's a difference between someone buying a Gauguin and putting that-- putting it above their couch and someone buying a Beeple and posting on social media that they own it. It's the same. Ownership is a stronger claim over something than a like.
GARY VAYNERCHUK: Social currency, it's why Mercedes and Nike matter. It's also how you express yourself. When you buy a very expensive painting and you put it in a warehouse in Morocco for tax reasons, how many people are you showing that you have it? I love this farce that you have the physical. Most valuable stuff sits in warehouses. What are we talking about? When you do it digitally, everybody knows.
AUCTIONEER: Now, ladies and gentlemen, comes the opportunity to purchase--
ROBERT ARMSTRONG: So who's buying? Art lovers or speculators?
KEVIN MCCOY: Who knows what motivates buyers? Lots of things motivate buyers. And so far in this market, buyers that aren't so much concerned around what it is that they're owning because the utility of the piece is to transact with other people.
GEORGINA ADAM: The majority of buyers are paying with cryptocurrencies. And, of course, when the Beeple sold, Christie's accepted cryptocurrencies. They accepted either Ether or Bitcoin as payment.
DOUGLAS A BONEPARTH: So most of my clients span the ages of 28 to 42. So we're talking pretty young for as a relative measure to where most of the wealth is concentrated with baby boomers and older individuals. So blockchain technology, cryptocurrencies, now NFTs, which is built on blockchain, is right up their alley as folks looking for new asset classes and new ways to invest.
ROBERT ARMSTRONG: Everydays-- The First 5,000 Days, sold at Christie's for $69.3 million. That's a hell of a lot of money for a living artist.
MIKE WINKELMANN: The money is crazy and awesome, and I think it's going to do a lot of good--
ROBERT ARMSTRONG: Huge sales generate a lot of publicity, but are NFTs are really here to stay or a bubble ready to burst?
SARAH MEYOHAS: We're in a hype cycle that right now NFTs in their design are ripe for speculation because now that the art is not even physical, that you don't even have to deal with storing it, that it's just a JPEG and all of the innovations around NFT are around their exchange, we have gotten to a point where we're essentially day trading culture.
ALEX ROTTER: People are going to try to take advantage of it. That's our DNA, or that's many people's DNA. So will people come up with things and throw everything in the NFT space, and will there-- I think-- will there be a cleaning the house? Probably yes. I would think so. I don't think anything that is NFT is pure gold.
GEORGINA ADAM: Also people who own cryptocurrencies, they don't have an enormous number of things that they can spend it on. It's not-- you can't use m it as easily as you can use Fiat currency, which is i.e. dollars, euros, pounds, whatever. So I think this has had quite an influence on driving up the market for NFTs recently.
GARY VAYNERCHUK: I think you're looking at is a 1999 internet moment. Let me explain. I'm going to give you the prediction right now because I'm old and I see the patterns.
This next six to 12 months, greed will take over. Everybody will put out NFTs. People will buy, trade, sell, steal, rip off, try to trick you and do the wallet. There'll be so much happening. Some people will make fast money.
It will collapse. There is an absolute guaranteed NFT winter coming. And what's going to happen? I'm going to be buying NFTs during that time, building NFTs because I know behind it is exactly what happened with the internet. Behind it-- and this happened with personal computers. Apple had these moments in the early '80s. This is what always happens with the biggest technologies.
ROBERT ARMSTRONG: Overall sales of NFTs surged in the third quarter, reaching $10.7 billion. That includes art but also videos, collectibles, and even assets in virtual worlds. It's easy to be a believer when you're making money but we should also remember that this technology is still young and there are bound to be challenges.
JASON BAILEY: When that big Beeple sale came in and all the attention came in, people were like, wait a minute, this stuff's really hard to use. I thought it was supposed to be democratised and I'm confused and I can't figure this out. The big things today are just getting cryptocurrency takes a long time. You have to hook up your bank to something like Coinbase and get some currency.
IZABELLA KAMINSKA: So a lot of people compare NFTs to buying an asset or a right to a copyright, but actually there are no copyrights associated with an NFT. There might be in the future, but at the moment, there is-- it is essentially a contract between you and the artist.
JASON BAILEY: Then you have to get your head around when I want to send this currency somewhere, there's a gas fee, so some of your money starts to disappear and you're not really sure why.
GEORGINA ADAM: You have to be careful. This is a speculative [? work ?] market. It's very linked to cryptocurrencies, and it's going to be volatile.
JASON BAILEY: And then you need to instal a metamask wallet if you're going to collect these Ethereum NFTs. This is like a lot for most people. Then you have to memorise, make sure that you don't ever lose your code because there's no help line. If you lose this code, you're not ever-- you own these things, and if you lose the code, you're in trouble.
LISA LEDSON: Good morning.
GREGG EMERY: Why, hello there.
LISA LEDSON: Good. How are you?
GREGG EMERY: I'm good. I have some news.
LISA LEDSON: What?
GREGG EMERY: I sold my first NFT.
LISA LEDSON: What! Congratulations!
GREGG EMERY: Thank you. Three days.
LISA LEDSON: Awesome. Isn't it like once you've done it, you're like whoa as it clicks in?
GREGG EMERY: My mind is completely blown. I figured this one would be like-- I don't know-- maybe I'd go beg someone. Mum, come on, get a crypto wallet.
This is a guy who bought a couple of paintings a couple of years ago, but I had a bunch of other people reach out that I've never met and other collectors who are interested. And it's been good.
LISA LEDSON: I think this whole thing, this whole movement-- NFT movement-- is like empowering artists economically. And so I feel like we're just really are at the beginning of NFTs, and then we're also at the beginning of this wave of artists from the traditional art role coming in.
GREGG EMERY: Correct. Yeah. Well, I love seeing what you're doing. You have more dropping, too.
LISA LEDSON: Thank you. Yeah. So I'm thinking of just doing some small drops, but then December 1st, I'm going to do a big drop at Art Basel.
GREGG EMERY: I'll see you in Miami.
LISA LEDSON: We'll have to celebrate in Miami.
GREGG EMERY: We'll celebrate Miami.
ROBERT ARMSTRONG: A lot of people are in the NFT market to make money. New markets attract speculators. That's nothing new. But you must remember where there's money to be made, there's money to be lost. For the artists themselves, however, this new technology is opening doors. It's just not clear yet where those doors will lead.
GREGG EMERY: So there's a huge update for me. The person who bought ourobouros, my first NFT, re-listed it for a lot more money. It was sold for one Ethereum, one eth, at the time about $3,900, and now it's listed at 101 eth, which is 380 something thousand dollars. So, yeah. It blew my mind a bit again.