15th Feb 2022
Is the explosion in NFT trading just a bubble, sparked by boredom during lockdown and blown up by hype? Or could it be a genuine emerging sector within the art world? That was the question that gripped last year’s Art Basel Miami Beach.
While inside the conference center the traditional art scene was getting back to business following the pandemic, the air outside carried the scent of change. The Times1, in attendance, described the event as being “like Woodstock for the NFT movement: a coming out party for cryptocurrency followers everywhere.”
“It feels like a real moment,” Robert Norton, founder of digital art verification company Verisart told The Times. “The energy reminds me of some of the early internet conferences. It’s also a huge, huge, huge free-for-all, with all the signs of a very inflated bubble.”
What are NFTs?
When Keanu Reeves was asked recently by The Verge2 about the huge demand for Matrix Resurrection NFTs – demand outstripped supply by 3-1 when they launched, causing the site to crash – he immediately made his feelings known. He laughed. Hard.
“Keanu Reeves doesn’t get the NFT hype either,” The Verge tweeted, seemingly also baffled by the trend.
The confusion is forgivable. Reeve’s interviewer was musing on the digital scarcity of “things that can’t be copied,” when Reeves cut in “That can be easily reproduced?” Used to a world in which scarcity equals value, NFTs seem to be bucking this trend. Why pay for something that can be copy-pasted for free?
So what are NFTs? Put simply, non-fungible tokens (NFTs) are pieces of digital content such as an image, video, music file or even a tweet, which are linked in to the blockchain. That means although there may be dozens or even millions of digital copies of an NFT, only one person can own the digital asset. This creates digital scarcity, and therefore value.
If any market is primed for an NFT revolution, it’s the art world. The question of where true value resides has obsessed the industry for well over a century. Why is the original Mona Lisa worth millions, where a skilled, faithful copy by an unknown artist would be worth a fraction of the price?
Placed in that perspective, the huge value placed in NFTs, such as the $69 million paid for Beeple’s Everydays: The First 5000 Days in auction at Christies in March, seems like much less of a laughing matter.
A revolution in the making
Crypto-enthusiast Brock Pierce is feeling sanguine: “It might be a bubble, but that doesn’t mean that the underlying reality doesn’t mean anything,” he told The Times. “Think of the internet in 1999. You had the crash of 2000, but did the internet matter? Did it make a difference? Of course it did. This is absolutely the future being written in front of our eyes.”
Other industry insiders agree, speaking enthusiastically (The Times described it as “messianic evangelism”) of a whole new world in the shape of the metaverse, with its own economy, social spaces – and art scene. What they are describing is nothing short of a revolution. (The metaverse refers to the immersive experience of interconnected virtual worlds that are facilitated by the use of virtual reality and augmented reality headsets. The vision encompasses a digital economy, social life, work and leisure taking place within the virtual or augmented realm).
As the SuperRare lab team wrote in August:3 “Unlike past artistic revolutions, this one affects more than the medium or style. It is a revolution of both form and function, curation and collection. The work itself is thrilling, dynamic and diverse, but we are equally excited about the opportunity unleashed by blockchain technologies: to put ownership in the hands of the artists, curators, collectors, and digital art community at large.”
Other platforms, such as Zora, frame their message more forcefully. Zora’s manifesto gives a flavor of the clamor among content creators to see real value from their artworks: “The platforms that hold our audiences and content hostage. The labels that lock down our rights. The galleries that hold our art ransom. The big brands that think exposure is cash. They have a monopoly on ownership, a monopoly on creativity and they have been robbing us of the value we create for as long as there’s been a creative industry.
“We need new infrastructure, something transparent, ownable, accessible, financially sustainable, where we can share the value we create, something for the community, something that’s ours…. This is Collective Creation.”
As artists reassert their right to benefit from the value placed in their art, and collectors flock to reward them, it seems that what we are seeing isn’t a mere fad. It could well be the next iteration of art.
The new market place
If NFTs are to pave the way to unfettered communication between creator and client, where can you go to buy NFT artworks?4
OpenSea launched December 2017, making it the granddaddy of NFT trading platforms in this squeaky-new field. In October this year OpenSea made it into the Alexa top 500 most visited websites5, ranking 428 worldwide and 172 in the US. All those visitors were busy, trading around $2 billion worth of NFTs per month.
After linking their crypto wallet on OpenSea, collectors can choose from art, music, game items, sports, alternative worlds, collectables and more. There are more than 150 payment options, including Etherium, USD coin, Dai, and even fiat currencies. Fixed price NFTs can be purchased directly from creators, or bids can be placed in auctions.
SuperRare is a peer-to-peer marketplace for single and multiple edition digital artworks only. Featuring exhibitions, events, auctions and market reports, in addition to showcasing new artists and championing collectors, the site aims to be a central hub for the digital art community. Etherium is the default currency for minting and transactions.
Foundation has positioned itself as the heir to art culture by bridging the current gap between the existing art ecosystem and digital art. Creators must be invited to join the community before they can mint new works, while collectors can build their own profiles by displaying their acquisitions in personal galleries on the site.
In October it launched its first collection of 45 digital works, created by artists who are already well-established in both the contemporary art and crypto worlds. The works were selected by Lindsay Howard, a curator with a decade of experience in digital art.
Transactions are carried out in Ethereum.
Nifty Gateway’s mission is to make NFTs (“nifties”) accessible to everyone, setting itself a goal of 1 billion people owning NFTs. The platform teams with established artists such as Beeple and Grimes to offer collections, called “drops”, which are released on the site around every three weeks. A new drop is only open for a limited time, after which NFTs in that collection are only available in the marketplace, where users can trade with each other.
Payment can be made by debit or credit card.
NFT showroom allows artists to mint their digital art, and collectors to purchase it. They offer two forms of contract: ‘private’, in which the artist retains the copyright for their artwork, and ‘limited reproduction rights’, in which the collector can use the art for commercial purposes such as printing t-shirts, website graphics and so on, although they cannot re-mint the NFT.
NFT showroom is unusual as a digital art marketplace in that it’s built on the Hive blockchain, with purchases made in a hive backed token called SWAP.HIVE. Hive coin can be converted to SWAP.HIVE within your wallet on the platform, for which there is a 1% fee.
As with other platforms, Mintable allows creators to mint NFTs for sale by direct purchase or auction. However, it has gone further than other platforms in adopting an ecommerce model, offering pro-users their own customized store and services such as marketing plans. Creations are “no gas,” meaning that there is no fee to mint them.
Purchasers can choose between art, music, videos, collectables, sport and more. Payments are in ethereum.
Zora is a decentralized auction house for a range of creative media, including art, text, music and video, based on the Ethereum protocols of the ERC-721 standard. NFTs are auctioned, with purchases made in Ethereum (ETH) or Wrapped ETH (WETH), a currency which allows users to place pre-authorized bids which will automatically be fulfilled at a later date without further action by the bidder. The two currencies are worth the same, and conversions can be made in your wallet.
Introducing NFTZ ETF
For many, the NFT trading market may seem like too much of an unknown quantity. After all, in a booming market barely a year old it’s impossible to know who the collectable artists will turn out to be in the long run.
But if you’re excited by the idea of NFTs and the possibilities of the metaverse, and the digital assets being created for it, you can gain exposure to companies in related fields via Defiance’s NFTZ. This ETF features a range of cutting-edge stocks with exposure to the themes of NFTs, cryptocurrency, and blockchain technology, each forming a vital part of the thriving digital ecosystem.
1 Miami art world flocks to join NFT bubble, but is it about to burst? December 4, 2021 https://www.thetimes.co.uk/article/miami-art-world-flocks-to-join-nft-bubble-but-is-it-about-to-burst-mwzzp7wjw
2 Keanu Reeves doesn’t get the NFT hype either. December 11, 2021. https://www.theverge.com/2021/12/11/22829383/matrix-nft-keanu-reeves-interview-carrie-ann-moss
3 Announcing the $RARE Curation Token and the SuperRare Network. August 17, 2021. https://superrare.mirror.xyz/fkGKcN1xVNRvfZk5OiY52-T_WNSndC4ve1DPDmvZQ6E
4 Not all these exchanges are held by NFTZ, for a full list of holdings see https://www.defianceetfs.com/nftz-full-holdings/
5 OpenSea Has Entered The Alexa 500 Most Visited Websites Ranking! October 15, 2021. https://cryptoticker.io/en/opensea-alexa-500-most-visited-websites/