The Art of NFTs

besancia

2019-10-01

What is digital art? What is the place of Art in the NFT ecosystem?

Introduction

The definition of the Non Fungible Token standard (ERC-721) on Ethereum obviously benefited the crypto-collectibles industry first. CryptoKitties is a good example of crypto-collectible pioneers, these cute kitties helped spread the word about this new standard towards game developers and the mainstream.

Although CryptoKitties was among the first famous projects to use the ERC-721 standard, it is important to point out that this standard was inspired by a digital art project: CryptoPunks

The Larvalabs team created 10,000 unique ERC-20 tokens, each of them looking different from the other. These digital punks could be claimed for free, you only needed to request one and have an Ethereum wallet to receive and store it. No need to mention that all of them were sent quite quickly!

The CryptoPunk-experience was a large success, and is still today one of the major milestones of the non-fungible token ecosystem on Ethereum, and kicked off two major use cases: collectibles and digital art.Collectibles are pretty popular thanks to projects like Cryptokitties, Blockchain Cuties, MLB Champions and trading card games: Gods Unchained, Mythereum, Dark Winds…

But what about art? Has the blockchain art ecosystem had the same growth?

How to value Art?

Before looking at the statistics of this universe, it is important to define the evaluation criteria of this market. Indeed, for video games it is the use of NFT in the game that will determine its value. But with art, valuation appears to be a little more tricky.

Here is a non-exhaustive list of criteria that can determine the value of a digital piece of art:

The usefulness of a piece of art has been debated since the notion of crafts and art was separated in the 18th century. We will come back to this later but usefulness is taken into account when buying today.
Scarcity also comes into account. Minting a limited number of a piece of art usually generate Fear Of Missing Out (also called FOMO)
The characteristics of an artwork can be evaluated from a technical point of view. For example, an artwork can be made of different materials (wood, metal, paint, ink …) but in the digital world it changes even if some projects propose to send the work physically for the purchase of the NFT which corresponds to it. The criteria will be the blockchain chosen and the ease of displaying his work in the digital space.
Beauty is so subjective that it is impossible to define. This criteria is really hard to measure and can change over time.
The artist who created the work has definitely an impact as well. Style, identity, vision, and the message communicated … all these elements will participate in defining the value of the piece of art.
The price. There are so many possible combinations between the different factors that it has always been complicated to estimate the value of Art. All these criteria can evolve over time, according to the artist’s career,reputation, trends, …

Estimating the value of Art has always been a tough exercice, and it is still the case with digital Art and NFTs. This (non-exhaustive) list provides some hints about the complex mechanisms that define the value of an artwork.

NFT Art Market

What is the position of Art market in the global NFT space?

Focusing specifically on digital art trends, we have based our analysis on 9 projects issuing art or directly related to the art ecosystem. Our goal here is to measure the importance and impact of the Art industry in the NFT ecosystem.

We identified that about 44,075 unique active addresses interacted with non-fungible tokens since January 2019.

Only 4,770 of them traded artworks, so about 5%

On a little more than 750,000 transactions, there are 41,031 related to the art market.

The volume of digital art market stakeholders and transactions is still pretty tiny compared to the global NFT market.

We based our analysis on the data of these 9 projects:

Not all projects work the same way. While some are backed to physical artwork that need to be sent, others will only represent digital assets.
It is also possible to sell the work only once or obtain a reproduction (which will also have a unique identification).

To understand the differences between these projects, here is a quick explanation of each one of them:

A creator on MakersPlace will be able to sell the same digital artwork several times and this explains the high number of transactions despite a relatively low number of active addresses.
SuperRare and KnownOrigin will focus on unique digital works and benefit from the advantage of seniority. So they already have a significant number of artists and users who publish their work on their site
Josie is an artist already well known in the Cryptosphere, she produces physical artwork you can purchase and physically own.
Digital Art Chain proposes to transform any image into NFT and it is possible to see your creation on socks or mugs (for example).
CryptoArte creates a work with each mined block. So you can have your favorite Ethereum block on canvas in your living room or just have it digitally in your wallet
Codex Record proposes to verify or secure the authenticity of your work
Blockchain Art is a digital art work exchange
Autoglyphs is the latest project from the creators of CryptoPunks, based on the same model.

Conclusions

The evidence of this small percentage of transactions and active addresses reflects the criterion that is not part of art: the usefulness.
Art is not meant to be “useful” in the strict sense of the word, but simply – to be.
The interest of this article lies in the place that the art market takes in relation to that of video games and not in the performance or popularity of the projects that emerge in this sector.
When we buy an NFT, we expect it to be useful, but let’s not forget that speculation about works of art is a very recent concept in the history of art.
To encourage the artist by buying his work without going through a trusted third party, is to continue to encourage creation while yielding to the pleasure of having fun.

“In the arts nothing lives but what continually gives pleasure” – Stendhal