Next week the venerable British auction house Christie’s will set a precedent: It’s conducting the first ever auction of a digital artwork. And just to spice things up, there’s a crypto component to it all.
The groundbreaking Christie’s auction will feature the work of an artist calling himself Beeple. The artwork being sold is a massive digital collage of five thousand pieces of work Beeple has released on the internet daily over 5,000 days.
That art is delivered in the form of a plain old JPG, of the sort that you might encounter on any website. The crypto twist is that a unique digital token on the Ethereum blockchain (you can see the code here) was “minted” by the artist, connecting it to the JPG file. To be precise, a cryptographic hash of the image is embedded in a smart contract on the Ethereum blockchain. It’s sort of like painters of yore signing a canvas, except this takes place cryptographically, and on a blockchain. These are called non-fungible tokens, or NFTs.
The Christie’s auction is eagerly awaited. The auction house had earlier dabbled in crypto art with the October 2020 sale of a physical installation linked to an NFT called “Block 21”. That piece fetched $130,000 or almost 11 times its low estimate.
But the upcoming Beeple auction could bring in much more. Beeple earlier sold $3.5 million worth of digital tokens in a single weekend in December, a landmark amount in the burgeoning field of crypto art. These sales happened on crypto focused marketplaces, so the Christie’s event is expected to expose the artist to a whole new crowd, as Art News has reported.
Indeed, Christie’s alludes to this in its prospectus accompanying the auction. The earlier sales make putting a price estimate on the upcoming event “impossible to predict,” the auction-house says. “Your guess is as good as ours,” said Noah Davis, the Christie’s specialist overseeing the sale, in the prospectus.
Here Come the Tech Moguls
Christie’s isn’t alone in recognizing the potential — and chasing the returns — on crypto collectibles. Tech moguls appear to be enthusiastic about the trend. Mark Cuban kicked it all off at the end of January when he wrote a blog post praising “the store of value generation,” a new cohort of people who understood that digital objects on a blockchain could hold their value just as well as a fine art painting, vintage car or rare baseball collection.
“This generation knows that a smart contract and the digital good it reflects … are a better investment than old school see, touch or feel uses,” the Shark Tank star wrote.
Cuban’s fellow tech elites have followed his lead. The billionaire Chamath Palihapitiya told Bloomberg a few days ago that he has been building a “fairly sizeable” collection of digital art and other NFTs. “These may sound crazy to some, but I do think that that’s the next frontier of digital currency and digital assets,” he said. Palihapitiya is a long-time Bitcoin bull, and rumored sightings of the crypto whale had trickled through the Ether for weeks. “Is that you, @Chamath?” became a punch-line in NFT circles.
Yesterday, the wine entrepreneur turned tech investor Gary Vaynerchuk took to CNBC to extol the virtues of NFTs and other alternative investments, including trading cards. He had been steadily increasing mentions of crypto tokens on his Twitter feed, where he talks to 2.2 million followers, over the last week (he also started following me, for some reason!). Here he is on Wednesday: “My current situation - I’m trying to trade cases of Chateau D'Yquem for #NFT. 2021 life, lol”
The tech millionaires and Christie’s are on to something. According to the data site CryptoArt.io, the value of all crypto art that changed hands in January was nearly $12 million. Twelve months ago, that figure stood at $160,000, representing growth of over 100 times over 12 months. February’s volumes have already topped January’s, and we’re only 18 days in.
A report from data site NonFungible.com and L’Atelier, a unit of the French bank BNP Paribas released this week says that crypto art now represents 24% of the entire NFT marketplace by value, accounting for the biggest ticket sales. The art segment lags only NFTs associated with “metaverses” or virtual worlds where users can buy pieces of land, outfits and other items that are secured by a blockchain.
The dark side of crypto art
As investors pile in to crypto art, and artists make millions from their sale, surely the utopian vision of a blockchain cutting out intermediaries and rewarding creators has been realized? Maybe not, as it turns out.
Beatriz Helena Ramos is the founder of a pioneering crypto art platform called Dada. An artist herself, she has worked on everything from editorial illustrations for the New York Times to animations for Disney and MTV. To hear Ramos tell it, the surging crypto art market has become successful—at the wrong thing.
“What’s happening in the space is that the technology is very innovative, yet all of the social layer and the economic layer is just a repetition of everything from the legacy, default, world,” she says. “What we see with NFTs is that it’s producing the exact same outcomes that we were trying to disrupt.”
What are those outcomes, exactly? Ramos says the market remains tilted in favor of investors, and the vast majority of artists aren’t going to sell their work for millions the way Beeple has. Instead, they will toil in the long tail of art, replicating the star system of the current art market.
A study by Massimo Franceschet, a computer scientist at the University of Udine, on the largest crypto art platform Superrare shows that the crypto art market has more wealth disparity among artists than any country in the history of the world. Some 80% of sales go to the top 25% of artists. While artists on Superrare at present earn the lion’s share of sales volume, but as artworks get resold on secondary markets, Franceschet expects collectors to start earning more than artists by next June.
Ramos says she sees the human side of these statistics often. “We see the casualties coming to us all the time. Tons of people who leave the space because they never sold anything, because they have to shill, because collectors actually harass artists on these chats and Discord channels. We’ve heard some horror stories, and there’s no accountability for anything,” she says.
While blockchains hold out the possibility of tokenizing anything, they also quickly run into the limits of this reductive logic. As Ramos says, turning everything into a market leads to “perverse” incentives, like an artists’s work rising after her death, ensuring the supply of work is limited. “Markets can’t account for anything that isn’t quantitative,” she tells me.
Still, the lure of a blockchain’s ability to shift paradigms holds Ramos in its sway. She and a community of artists and technologists at Dada are working on a system that they believe will create fairer outcomes for artists and participants. They are focused on the social implications, and how the system might be governed.
“You can have huge networks with network effects, coordinating people with each other and creating things. You don’t need structures like companies and things like that,” she says. “Imagine the quality and broad value that can be created. All you have to do is coordinate them. And so blockchain comes again.”