NFTs Boom as Collectors Shell Out to ‘Own’ Digital Art

It started with CryptoKitties. In December 2017, the dopey-looking cartoon cats, created by Canadian company Dapper Labs, debuted as tradable collectibles, like Pokémon cards for the bitcoin era. Each image was associated with a unique string of digits—a cryptocurrency “non-fungible token,” or NFT—that could be traded on the Ethereum blockchain platform as a title deed granting the holder ownership of a particular kitty.The trading game quickly caught on among the crypto-initiated, so much so that CryptoKitties-related transactions clogged and slowed down Ethereum. That was eventually solved—and that was, for most people, the last they heard of CryptoKitties. But the process the goggle-eyed cats set off did not end there. Its end point is an auction that started on Thursday, in which a token associated with a digital collage of 5,000 images by graphic designer Beeple went under the hammer at auction house Christie’s. Cryptocurrency payments were of course accepted.
NFTs are selling like hotcakes, and this time the Ethereum network, which has been upgraded since 2017, is better equipped to deal with the endless sloshing. One recent report by NonFungible.com, a company releasing market insights on NFTs, says that in 2020, NFT trading was worth over $250 million, an increase of almost 300 percent from the previous year. On online platforms such as Rarible, OpenSea, and Nifty Gateway (backed by twins Tyler and Cameron Winklevoss), people are shelling out big sums of cryptocurrency and legal tender to buy tokens representing ownership of digital objects, which are then often reauctioned at higher prices. Some of these NFTs are stand-ins for collectibles in the tradition of CryptoKitties—like Non-Fungible Pepes, a postmodern bid to reclaim the meme frog from the alt-right; others are objects intended to be used in video games. But more and more they are linked to pieces of digital art designed by honest-to-God creators such as Beeple—who, two months ago, sold a token for $777,777 on Nifty Gateway.
If all of this sounds bizarre, that’s because it is. The idea of paying for the symbolic ownership of a digital image that lives somewhere on the web and can be captured on a screenshot or right-click-download within seconds, is so alien it seems either idiotic or ironic. Yet NFT proponents purport to be solving exactly that problem: the near-impossibility of monetizing digital artworks. “As a mechanism, NFTs make it possible to assign value to digital art, which opens the door to a sea of possibility for a medium that is unbridled by physical limitations,” says Noah Davis, a specialist in postwar and contemporary art at Christie’s.
Currencies and cryptocurrencies (like the US dollar or bitcoin ) are by nature made up of fungible—that is to say, interchangable—units: My two bitcoins are worth the same as your two bitcoins, and if we exchanged them, neither of us would feel stiffed. Currency and cryptocurrency units are also, usually, fractionable into smaller units—dollars can be broken down to cents, bitcoins to particles called satoshis—which can be spent separately. On the contrary, NFTs—cryptocurrency assets developed according to special Ethereum standards ERC-721 and ERC-1155—are unique and indivisible. Where a bitcoin is comparable to a dollar bill, an NFT can be likened to a cat, a sculpture, or a painting: You can’t sell part of it without spoiling the whole, and its value is rather subjective. Those characteristics render NFTs a good metaphor for art. Now, the crypterati and a waxing portion of the art world are asking us to take a leap of faith and believe that by buying an NFT we should feel like the owners of whatever artwork an artist has decided to link with it.
This cannot credibly apply to physical artworks. If you are after a Jeff Koons balloon dog sculpture, you will likely not be happy with a cryptocurrency token. But when it comes to intangible digital art, NFTs might just do the trick. Sure, everyone can download Beeple’s images from his Instagram feed, but that is missing the point, says Vincent Harrison, a New York gallerist who counts the Winklevosses among his clients and is helping Nifty Gateway attract more established artists onto the platform. “Anyone can see pictures on the internet of the most expensive artworks; posters are sold in museums,” he says. “But it's the ownership that creates value. So with NFTs, not only do you have ownership, you have ownership on the blockchain, you have ownership that is transparent for everyone to see.”