NFTs: Commodifying Art in a Digital World
NFTs, or Non-Fungible Tokens, have made headlines around the world with artists, celebrities, and everyday people making millions of dollars selling seemingly unassuming digital media. In 2021, “Everydays: The First 5000 Days”, a collage of 5,000 images produced by Mike Winkelmann, a graphic designer, was sold for $69M USD at Christie’s, an acclaimed art auction house.
NFTs have also attracted musicians like the Canadian artist, Grimes, who sold a 10-piece NFT collection of artwork and music videos for a total of $6M USD.
NFTs are not exclusive to artwork, however. The famous Nyan Cat meme, based on the 2011 YouTube video, was sold as an NFT for $580,000 USD.
The advent of digital currencies such as Bitcoin and Ethereum have created a new class of digital assets, namely NFTs. NFTs are one-of-a-kind online commodities whose value is determined by the uniqueness of their properties. In this regard, NFTs are highly similar to artwork itself, since their value is not objective. In contrast, digital currencies like Bitcoin are fungible tokens whose value is both objective and constant. The ownership of NFTs is recorded on a blockchain, which is the same technology used to buy and sell cryptocurrency. Consumers can purchase NFTs using the NFT-supported cryptocurrency Ethereum, but the portfolio of usable currencies is growing. NFTs occur in multiple forms like digital artwork, video files, and audio files. However, there is a particular market that NFTs are revolutionizing: the art market.
There are two major categories of NFTs for digital artwork, one-of-a-kind NFTs and NFT collections. One-of-a-kind NFTs consist of one individual NFT, while NFT collections can include thousands of individual NFTs, all of which have a basic template with alternating properties. A notable NFT collection is the “The Cryptopunks Collection”, which consists of 10,000 NFTs created by a number of artists and developers in 2017, and was sold for $530M USD in 2021.
Before discussing digital art NFTs, it is important to address another burgeoning NFT-type, the meme. Memes are an invaluable part of internet culture. Because of this, memes have become subject to a much larger debate on their role as art and consequently how they can be commodified. However, when discussing the commodification of digital media on the internet, problems arise due to the clear lack of property rights. For example, there is no clear distinction between the original owner of a piece of digital content and a reproducible copy made by another internet user. There are some mechanisms in place to enforce the property rights of digital content like through copyright claims, but this does not fare well in the age of viral media. An example of this is the Harambe meme, which spread across various platforms calling to avenge the unjust death of a gorilla. Jeff McCurry, the owner of the original photo of Harambe, did not see a large portion of the expected profits for the use of his image across publications, consumer products, and artwork despite owning the copyright. In order to fully be compensated by each individual entity, McCurry would have had to request for the removal of the content or choose to pursue a lawsuit for unfair use, which would be both inefficient and costly.
NFTs offer a promising solution to this problem by creating clear property rights through their explicit record of ownership in the blockchain. In this regard, the owner is able to claim the NFT as theirs, and can retain their copyright and reproduction rights. If the owner wants to sell their NFT, they will continue to receive a percentage of the sales as the NFT is bought and sold in the market. NFTs effectively create the regulations needed to own, buy, and sell digital media without the owner’s financial exploitation. Jeff McCurry was able to sell the original photo of Harambe as an NFT for $500,000 USD. Memes are now “cave art” for the internet-age, and as a result, fine art collectors and investors share the immediate goal of purchasing the original photos and videos that spawned the most legendary memes of the decade.
The market for digital art (memes and all) also has significant consequences for the physical art market. NFTs are directly positioned against the physical art market because they provide the same service while cutting out various roadblocks that adversely affect both buyers and sellers of art. In fact, NFT art sales effectively render art galleries and art auction houses obsolete. This substantially benefits artists since the majority of art market profits are absorbed by these intermediaries. It also allows unrepresented artists to be able to sell their artwork more easily. As mentioned before, NFTs can also guarantee copyright, reproduction rights, and sale percentages for their artists, thereby also offering better compensation. This does not mean that art galleries or auction houses have not embraced NFTs and digital artwork in general. Christie’s and Sotheby’s, two of the most successful art auction houses in the world, have begun hosting extremely successful NFT sales.
In addition to benefiting suppliers of art, NFTs also greatly benefit potential consumers of art. Acquiring artwork in the physical market requires pre-existing relationships with art galleries, which restricts a large number of potential buyers. NFTs circumvent this issue by opening up the market to a larger number of buyers (with and without art connections), making artwork more accessible. In this regard, the digital art market directly supersedes the logistical and social issues that underlie the physical art market.
NFTs are an exciting and innovative means of commodifying digital content. When considering their ability to offer people opportunities to be compensated for their artwork, music, and photos, NFTs are not entirely without fault. They are still in their nascent stage and as a result, are largely unregulated. They are also a large energy consuming technology and emit large amounts of carbon dioxide. However, NFTs are here to stay, and are a clear symbol of the evolution of the market for digital content.