Over the last several months, there has been increased media coverage on NFTs and cryptoart. NFTs and cryptoart are not new things— in fact, the first NFTs were used in 2017. As for cryptoart, this is an iteration of digital art or computer art (a.k.a. “new media”), and artists and art critics have been dissecting these pieces since the early 1950s. Cryptoart is simply digital art that is integrated into blockchain technology.

So if these things have been around for a while, why is everyone making such a big deal about it now? The short answer is that people have been spending a lot more time on the internet because of the pandemic. And also, a digital artist named Beeple created a piece called “Crossroad” that changed with the results of the presidential election. It recently sold on the secondary market for 6.6 million dollars. When things sell for 6.6 million dollars, people start to pay attention. So much so that Christie’s Auction House hosted the first-ever auction that accepts cryptocurrency in which Beeple’s work “Everydays: The First 5000 Days” sold for $69.3 million.

For art lovers that have solely collected corporeal art, cryptoart can be a little mind-boggling. Understandably, you might be a little confused about how can someone own a work of art that anyone can view on the internet at any time? And the next questions are usually is this a fad or a good investment? And, how does it all work?

HOW DO CRYPTOART AND NFTS WORK?

Cryptoart uses NFTs which stands for non-fungible tokens. Non-fungible means that the token cannot be exchanged for something of equal value. NFTs are units on the Ethereum blockchain. A blockchain is an ongoing record (think checkbook ledger) of transactions where the data for the transaction (like the timestamp) is coded into a “block.” If one block is changed, all the subsequent blocks in the chain will be changed. This inherent resistance to modification means that blockchain technology is incredibly secure and the blockchain serves as the provenance for the piece with all transactions and owners of the token documented.  

If I say Ethereum and the Marvel Universe is coming to mind, reel it back in. You are thinking of Vibranium and that is an incredibly valuable fictional element mined in the fictional country of Wakanda. Etherum is an open-source computing and operating platform. Think of it as a digital country (est. 2015) with its own language (code) and its own currency called ether (ETH).  At the time of writing the exchange is currently 1 ETH to $1,748.67 USD.

NFTs are used to represent ownership of a unique digital item (e.g jpeg or mp4 file). The NFT is what legitimizes and authenticates the artwork— essentially a digital signature from the artist or creator. The NFT lives on the internet, however, in some instances, a corporeal piece will accompany an NFT.

With the growing popularity of cryptoart, the paradigm of ownership and traditional display methods must shift. Even though someone can screenshot the image of a piece, that does not mean they own the piece, only the person with the NFT is the owner. This creates digital scarcity, which is important for increasing the value of a piece. In fact, having an image of your piece shared repeatedly could increase its value, which is what any NFT holder would like to see.

IS IT FAD OR IS CRYPTOART A GOOD INVESTMENT?

The quick answer: this is not a fad, but whether or not it is a good investment will have to be answered on an individual level. Cryptoart solves a lot of problems that have been plaguing the art industry for decades. For example, artists getting compensated when their pieces sell on the secondary market. Additionally, it creates a way to authenticate digital works and solidifies the means by which they can increase in value. New technology allows artists unparalleled methods to express their concepts, and we have seen this happen time and time again in the history of art (e.g. Impressionism and tubed paint).

A key indicator that cryptoart is not a fad is that it has been legitimized by high-profile contemporary artists, and also respected art institutions, specifically Christie’s. Right now, there is a bubble that is inevitably going to burst. All eyes are on NFTs, everyone is really excited about it, but the current growth in the market is probably not sustainable at this rate. At this time, invest at your own risk, but keep reading to learn why cryptoart has staying power.

Cryptoart is also here to stay because Millennials are increasingly buying art and becoming new art collectors. Millennials are digitally native: this means that computers and the internet are ingrained in our development and we are typically more accepting of new digital platforms. Millennials came of age during a time that emphasized collecting things (Beanie Babies, Pokemon, Baseball Cards, Surge Points) so the collectible NFTs, like this, will be exceptionally appealing to Millennial buyers. 

Furthermore, the subsequent generation, Gen Z, is also digitally native. Skinny jeans and hair parts aside, there are several things Millennials and Gen Z have in common, especially when it comes to how we spend our money. One such commonality is a tendency to prefer experiences over material things. Companies like Artcels are doing neat things like selling shares of works. This opens up a world of possibilities of how pieces are displayed, and also creating communities within artworks. So I believe an emphasis on the experiential versus owning a tangible piece would not deter Millennial and Gen Z collectors.

The NFT marketplaces might encourage increased transparency within the art industry, which can be utterly opaque at times. Millennials and Gen Z are more likely to make purchases from companies, galleries, or artists based on values they can support and both generations have a track record for boycotting companies based on disagreements with their values. Increased transparency and direct interaction with creators will appeal to these up-and-coming generations.

One major point to consider though, both Millennials and Gen Z heavily value the environment and sustainability, and cryptoart is not environmentally friendly. It’s actually quite terrible for the environment. This will be a significant deterrent for these two generations if there is not quick and significant action to mitigate the environmental impacts. Individuals in power with a vested interest in the growth of NFTs should be hustling to implement renewable energy resources to directly support cryptoart.

When I surveyed working artists about cryptoart, there was an interesting divide between those working in traditional mediums and those already working in digital mediums. Those working in traditional mediums indicated the buzz surrounding NFTs was not going to greatly affect their processes, but they could see how it would be beneficial to be compensated when their pieces sell on the secondary market. The artists I spoke with who were already working in digital mediums were champing at the bit to mint their NFTs. So the takeaway here: new corporeal art is not in any danger, but digital artists are likely to dive into the bubble and use NFT marketplaces as a means to exhibit their pieces.