Part 3: NFTs — A Non-Fungible Renaissance

Art, Culture, and Tech

This is the third and concluding part of our series on deep dive into NFTs which we believe to be the bricks in the walls of Web3. We have talked of their essence in part 1 and utility in part 2 and in this article we explore the current and future applications in art.

Dusty history books often refer to the Dark Ages, a time ruled by barbaric conquests and intellectual darkness in mediaeval western Europe. Thankfully for us modern folk, a movement called humanism started to grow its roots in 14th century Italy. Centred around the individual potential and free agency of every human, it called for a celebration of intellectual achievement. The powerful Medici family, rulers of Florence at the time, embraced the movement and led a charge by the Italian bourgeoisie toward backing the arts and culture. Coupled with the invention of the Gutenberg printing press, this period saw the Renaissance: the vivid rebirth of European art, science and culture.

The blockchain and NFT space is primed for an artistic and cultural explosion.

Let’s flip the claim that NFTs are a plaything of the rich. The truth behind that statement comes from the fact that the incredible wealth of crypto-whales cannot be easily spent due to the nature of investing, the pains of fiat conversion, and the lack of crypto point-of-sales systems. A caveat is needed here: it is a massive pool of money that cannot be easily spent on much — other than NFTs. That’s not necessarily a bad thing — every cultural revolution needs its own wealthy Italian backers. The NFT space is the first time in history where we see an intersection of art, community, bleeding-edge technology, and exposure to such a colossal amount of free liquidity. In this environment, the perfect artistic and cultural storm is brewing, a modern-day Renaissance of our own.

Why do people buy art, and why do they buy NFTs?

A common pejorative against art NFTs is that they hold no value other than what the next person is willing to pay for it. Assuming this statement is true, the person who spent $69.3 million on a Beeple piece holds the record for the worst deal ever. But the same criticism holds true for traditional art too. How did Leonardo da Vinci’s Salvator Mundi sell for $450.3 million, or Andy Warhol’s Shot Sage Blue Marilyn sell for $195 million?

Michael Findlay, in his book The Value of Art: Money, Power, Beauty asserts that it’s all about supply and demand.

“Real or imagined, rarity is the net plus ultra when art is sold. Not only does it justify the price, it also suggests an exclusive club of ownership.”

In the same book, Findlay recounts a conversation with veteran art dealer William Acquavella, who tells his clients “You can remake your money, but you can’t remake the painting.” Findlay translates it bluntly. Opportunities to buy the work at that price exist only once, when it’s gone — it’s gone.

Now, these two themes will be familiar to any NFT trader. The phenomenon of FOMO (Fear Of Missing Out) has led many a trader to purchase overpriced NFTs, believing that it’s their last chance of buying it before it quickly becomes unaffordable. For the rich, rare and expensive art has also long been a status symbol. The satisfaction that an old English lord gets from guests admiring his Monet above his fireplace is the same as that of a crypto-whale (an informal term used to classify those holding large amounts of cryptocurrency) when setting his Twitter profile picture to a rare BAYC.

As such, collectable NFTs can be classified as Veblen Goods. Veblen Goods are goods where demand increases whenever prices increase. Products like designer jewellery or Rolexes, which are highly coveted as a status symbol, due to their mind-boggling price tags, are good examples.

Of course, art and NFTs are both purchased for other reasons. First, people do buy art for art’s sake — they appreciate the beauty or craftsmanship behind it. Secondly, they may do it to support the artist or the cause it may support (charity auctions come to mind).

We have established the legitimacy of the value of art NFTs through a comparison of the psychological and social motivations for buying fine art. It is clear that demand for art NFTs do exist, and will healthily continue to do so. Buyers can spend their money securely, and creators may continue to integrate blockchain technology into their work.

How do NFTs benefit artists and allow easier creation?

The idea of a starving artist is so entrenched in our society that it even has its own Wikipedia page. Unfortunately for artists, average salaries for art graduates often come in last, averaging $40,000 for visual and fine artists as well as musicians (compared to an average of $100,000 across engineering fields). It is a woeful fact that while art collectors and dealers often lead luxurious lives, most artists are toiling in poverty.

In our previous article, we touched on how NFT technology can help artists enjoy a portion of their secondary market sales through in-built royalties. The artist, when minting the NFT, might include a smart contract in the code that sends a percentage of the resale to their designated wallet.

While a simple point, the benefit that this gives artists is tremendous. The collection of royalties traditionally is opaque, and administratively costly and cumbersome.

The Ivors Academy reports that poor data from streaming services had cost artists over USD 600 million in 2020.

In the United Kingdom Parliament, recommendations to the government were made that metadata would be attached to songs, to establish a minimum viable data standard and to audit “black box” royalties. This drives home that loss of income through current royalty standards is critical for the arts.

Even with complete transparency, musicians earn but a small portion of the revenue their music brings. The bulk of the money goes to middlemen like streaming services and record labels. The streaming platform Spotify keeps 25% for itself, and pays record labels 59.9%. The record labels, responsible for marketing and publishing (amongst others), then pay out the remaining sum in accordance with the contract they have with the artist. After that, a cut (usually 15–20%) goes to the artist’s manager. There is but a fraction of the original figure left that ends up in the artist’s pockets.

Even then, the contract between the label and the artist is still one-sided. How it works in practice, is the artist makes a deal with the record label, by selling the copyrights for their music in exchange for an upfront sum of money. Given the dominance of institutions, unless you’re a superstar, it is not hard to imagine the balance of power that lies with the record label when negotiating the contract. The same gatekeeping also occurs within the visual arts, existing as art galleries and publishers.

That’s where NFTs come into play. NFTs give musicians a tremendous edge to the norm. First, a mint may act as a seed-funding round for the musicians. Now having the financial ability to fund their work, artists no longer need to accede to the onerous demands when negotiating contracts. Having a solid community of fans empowers the artist in more ways than one. The 1000 True Fans essay points out that it is realistic for an artist to have a thousand fans that each spend $100, thus netting them $100,000 in a given year. Having a community of fans as investors also empowers the artists in other ways, such as promotion and marketing, thus cutting out the need for marketers such as record labels. Further, this allows artists a direct link with their most loyal supporters, and makes it easy for relationship-building to occur.

Another incentive for artists is that they may enjoy a share of the royalties.

While NFTs do not automatically confer copyrights nor music royalties (only on-chain ownership certification), platforms like Royal and Audius aim to automatically distribute royalties whenever a song is streamed. Audius made headlines with a USD $5 million dollar funding round, with superstars such as Katy Perry, Pusha T, and Jason Derulo throwing their weight (and money) behind it. Blockchain-based streaming platforms are truly poised to disrupt traditional giants like Spotify and iTunes.

The metaverse revolution is a godsend for budding artists. Metaverses, being virtual worlds, require people to develop them. From VFX artists to sound engineers, people with the ability to create all heavily stand to gain career-wise. Some metaverses, like Enviro, take the form of art galleries. No longer bound by inconveniences like time or space, artists are now able to present their work to a global audience.

Speaking of global outreach, NFTs allow people from traditionally poor art scenes to develop as an artist. While previously, artists might make a sacrifice for their career by moving to expensive cultural hubs like Paris, they now enjoy a spatially unlimited outreach.

This is not the only way that NFTs enable diversity within the arts. Smaller target audiences attract less attention from corporate bodies whose main interests lie in turning a profit. For example, a project specifically aimed at African-Americans would be less likely picked up by venture capitalists than a project designed for a wide-ranging audience. The reasoning behind this is that it has a smaller target audience. NFTs allow artists to reach out directly to their community, without having to go through these gatekeepers. This enables community and diversity-focused art to thrive.

Art, Culture and NFTs — how are they interlinked?

Art is more than mere brush strokes on a canvas. It can be a depiction of reality, a communication of emotions and even expressions. It reflects the society around us and tells our story.

Culture, on the other hand, is understood as the unique ways that different people live, and their capacity for expressing their experiences with symbols. For example, the maple tree is representative of Canadian culture as with how kimonos are symbolic of Japanese culture.

Art and culture exists in a cycle where each shapes the other. Art, being the cache of society’s collective memory of the time, plays a large part in forming the culture of a community — it changes opinions, instils values and immortalises experiences over time.

Moving forward, NFTs will play a part in this cycle. Lowering the barriers of entry to art, enabling fair payment and providing artists with strong backers — will facilitate an artistic revolution. At the same time, NFTs will also bring a renewed public interest in the arts (due to their ease of access), which will increase the influence on the culture that the arts have.

Conclusion

Over the past few decades, humanity has witnessed never before seen high levels of productivity or innovation. The reason for this is simple: we have shifted from a past focused on industrial production through bulky machinery to the present, where the production and management of information reigns supreme. The cost of entry is low — anybody with a laptop may participate.

Similarly, when traditional barriers to entry and gatekeeping within the arts are overcome, we will see a frenzy of human creativity; an influx of emotional stories through different mediums. This will shape the cultural landscape of entire communities, moving us towards a more interconnected, empathetic world.

For those that may have missed our previous articles on NFTs, you can refer here:

Part 1: NFTs — the bricks in the walls of Web3
Part 2: NFTs — A curious case of Utility