NFTs Find New Credibility
Last year, during the initial wave of NFT- hype, we shared a post explaining all things NFT. Just over a year later, the NFT landscape has changed in a few ways -- the crypto market has seen surprising volatility and drops, while auction houses have shown incredible support for the niche field, and awareness about the environmental impacts of this field have become more widespread.
NFTs first became mainstream in 2021 and were advertised as “digital artwork” where buyers could purchase works electronically - never dealing with large canvases or installation costs. The piece would exist entirely online, with a blockchain link affirming that the piece was an “original,” not a screenshot or simple JPEG download. But controversy has surrounded the rapid rise of NFTs, with people questioning the artistic legitimacy of these ‘tokens.’ In one article, The Guardian described the most popular NFTs as “bright, cartoonish [and] closer to a two-dimensional Funko pop than to fine art.”
Still, traditional art auction houses such as Sotheby’s and Christie’s readily accepted cryptocurrencies, with around 5.5% of the houses’ contemporary art sales being NFTs, which can only be purchased through crypto, selling $65 million and $100 million at sales in 2021. Christie’s became the first major auction house to offer a “purely digital work of art” which went on to sell for $69 million, making the creator of the NFT, Beeple, “among the top three most valuable living artists,” according to the auction house.The piece, titled EVERYDAYS: THE FIRST 5000 DAYS, depicts a collage that’s the amalgamation of the artist’s project to create and post a new piece of art every day since 2007. Meanwhile, Sotheby’s recently opened the first NFT-only marketplace by a blue chip auction house, known as Metaverse. However, the auction house dealt with controversy earlier this year when an expected $30 million sale was canceled, with the consignor instead posting a meme on Twitter mocking the event.
The heavy investment from these blue chip auction houses is a bit shocking given the historically volatile nature of cryptocurrency; in 2018, Bitcoin and other tokens suffered a sharp decline in value after a “steep climb” in 2017. NonFungible.com’s Quarterly Non-Fungible Tokens Market Report also noted a 46% drop in profit from the previous quarter toward the trading of NFTs. This rapid decline coincides with the ‘crypto winter’ where currencies overall have suffered a shocking two trillion loss in value.
Some of these declines may be linked to increasing environmental concerns related to NFT sales. When an NFT is “minted” or authenticated, the process takes a large amount of energy and electricity, which contributes to carbon emissions. Sustainable alternatives have been proposed, but the conventional way - using Ethereum - does contribute to climate change. A single NFT transaction on the Ethereum platform emits over 330 pounds of carbon dioxide.
Despite this volatility, support for NFTs and cryptocurrencies at large remains strong. Some believe the format will become the future of finance, prompting investors to get in early for fear of missing a lucrative future opportunity, and Bank of America, has labeled the multi-billion dollar digital art industry “too large to ignore.” NFTs are clearly a new aspect of the art world that institutions will have to acknowledge.
“I do view this [NFT sale] as the next chapter of art history,” Beeple said after his multi-million dollar sale. “Now there is a way to collect digital art.”