The NFT Impact on Artists

Remember visiting a museum as a kid, looking at a blue-painted canvas, and thinking to yourself “well, I could do that. What’s this doing in a museum?” Then we learned about the context of the blue canvas, the artist’s life, and the art scene at large and were told it made sense. Still , for some of us, a lingering distrust of the equation might have stuck. Add to that the notorious diversity problem and snobbish gatekeepers of the art world. I might enjoy a museum or gallery exhibit featuring paintings worth millions just as much as the next person, but not without a tinge of skepticism. 

Now then, what are we to make of the sudden explosion of the NFT marketplace for artwork penned–rather, digitally encrypted– by an artist named “Beeple” or featuring mashup images from Sponge Bob Squarepants and Michangelo’s David?

The acquisition of assets using NFTs reached nearly $2BN in August, with an all-time high of $1BN in the last week of the month.  Cryptopunks, the 24x24 pixel art images, generated algorithmically and featured as the current twitter pic for Jay Z, have reached total sales of $1.15BN.

What is an NFT?

It’s a non-fungible (as in unique, irreplaceable) token or digital asset which uses the crypto blockchain. It can be associated with anything digital but the current focus is on digital art, like the Gucci ghost, anything by Beeple, or even a signed tweet by Twitter’s founder. The question is, if these assets are digital, and anyone can download them and have them, what is the point in paying millions for them?

For Artists

Many headlines have cropped up about how previously “starving artists” are now making 6-figures selling their art as NFTs. Even as their digital assets are resold, artists can benefit from secondary sales via royalties. For artists who are hip to the world of NFTs, and willing to swap their oil paints for code, the opportunities feel like the Wild West of art. NFT artist Beeple–who, by the way, in his polo and crew-cut hair, looks more like a software developer than an artist (which might be the point)–in trying to explain NFTs says it’s “hard to grasp...it’s sort of up to the rules–there are no rules because it's art.” (For an Atlantic sized report on the topic, check out this article)

The Wild West and the SEC

The “no rules” world of art and the Feds have a long history of challenging one another in determining the value, transparency, and regulation of the art market. Questions remain as to whether an NFT owner owns the copyright, how money is exchanged, and how to protect against money-laundering in a scene so flush with crypto. There’s also a negative environmental impact to all these digital assets flourishing. 

The Art Market

For now, the art world is largely welcoming of the digital asset category of high-priced artworks (though art insurers might not be). Stalwarts like Christie's and Sotheby’s are partnering with NFT marketplaces to auction the assets. And venture capitalists and angel investors are getting on board, with major investments into NFT marketplaces. MakersPlace, based out of–you guessed it– San Franciso is a leader in the space and recently raised a $30MM Round A led by Bessemer Venture Partners and repeat investor Coinbase. Their seed round had Facebook, Pinterest, and Zillow participating. New York’s OpenSea reached a $1.5BN valuation with their $100MM Round B lead by A16Z, with angels Ashton Kutcher and musician Shawn Mendes participating.