The Rise of NFTs and How They’ll Impact Culture
A few weeks ago, Beeple (aka Mike Winklemann) made history when his piece Crossroads, an NFT issued work, resold for $6.6 million.
On Thursday, March 11, his digital artwork Everyday: The First 5000 Days sold for over $69 million at the conclusion of a Christie’s auction held with MakersPlace (an NFT issuer). Making history again, the artwork is both the most expensive NFT ever sold, as well as the first to be hosted by a major auction house.
Learning about NFTs this past October, Winklemann admits that not only is auctioning his work at fine art institutions like Christie's a new experience but even just being able to sell his work to fans in general. "I used to just give away video files to people," the now third-most-expensive living artist tells Highsnobiety.
As one of the first successful applications of blockchain technology, NFTs are on the way to becoming their own billion-dollar industry. This has led artists, collectors, and crypto-traders to examine the potential of these digital tokens, as well as how they could impact culture.
With more and more major artists starting to issue NFTs, we’ve decided to look at who’s making noise, as well as how this new frontier will manifest amongst artists and brands.
A Brief History of NFTs
One of the earliest case studies of blockchain collectibles was Spells of Genesis, where founder Shaban Shaame stated that people were selling fake versions of character cards and transacting on PayPal. To combat this, Shaame created a blockchain trading card game so all players could see what cards were authentic.
After Spells came CryptoPunks, which was founded by Matt Hall of Larva Labs. Hall was fascinated with the idea of creating a finite set of characters on the blockchain, so he developed 10,000 24x24 bit characters known as CryptoPunks. As one of the first introductions of scarcity for digital files, Punks started as low as $0.11 and have sold for as much as $1.5 million.
But the biggest fascination with early NFTs came with CryptoKitties, which were digital cats to trade on the blockchain. When a CryptoKitty sold for over $100,000 in 2017, it gave NFTs their first big story.
Despite the larger and larger price tags, NFTs were still only traded amongst a niche group. These were often people with too much Bitcoin or Ethereum and nowhere to spend it, which is why many early high-dollar examples included Rare Pepes, CryptoPunks, and CryptoKitties rather than what most would consider traditional art or collectibles.
The mainstream perception of these endemic communities viewed them as very fringe, and even in the case of CryptoKitties, was labeled a fad similar to being the "beanie babies of blockchain." Still, the early effort of these groups laid the groundwork for NFTs' potential, which became alluring for the first wave of mainstream participants.
How the NBA and Covid-19 Accelerated NFTs' Growth
In 2019, Dapper Labs (the team behind CryptoKitties) announced a partnership with The NBA to build NBA Top Shot, which was one of the first instances of a notable company getting into NFTs.
Top Shot is a marketplace where people can buy and sell video highlights of NBA games. Akin to trading cards, this was one of the first instances where NFTs made sense to the masses, as it was not only issued by the NBA but in video format.
During the pandemic, the value of both collectibles and cryptocurrencies soared. With NBA Top Shot synthesizing the two worlds this past October, it was a perfect storm for NFTs to have their first primetime win. At the end of February, Top Shot sales eclipsed over $230 million.
Now with a sense of legitimacy, applying the same concept to digital art was starting to make more sense.
Empowering NFT Creators, Collectors, and Collaborators
Though NFTs sell for millions already, scrolling through Beeple's Instagram story will show he's selling pieces for $15, which collectors are turning around and reselling for upwards of $350,000.
Although Winklemann has broken through as the most successful visual artist so far, several notable musicians have started to enter the space as well. Back in October, MF Doom auctioned off NFT hologram DOOM Masks. The auction concluded on the day of his death. Last month, Soulja Boy issued a "Crank That" NFT for 5 Ethereum, and not long after, EDM producer Gramatik had an NFT sale which totaled $1.54 million.
Beyond individual efforts, NFTs also empower collaborators to retain an equal share of recognition and notoriety for their works. While the likes of music video directors and digital artists are traditionally commissioned beforehand for projects, NFTs enable these collaborators to split recognition and sales however they deem fit. The best part? This could introduce a new era for self-funding.
“Grimes and I had been making music videos for almost a decade. We never had large budgets for the ambitious visions we aspired to capture and we felt constrained by the nature of shoots,” notes photographer and videographer Mac Boucher.
Deciding to take on a DIY approach that eventually led them to communities into 3D software and game design, these groups are how Boucher and Grimes learned about smart contracts and NFTs. Recently partnering up for War Nymph, the duo collected around $6 million on Nifty Gateway.
“I believe that everything that can be digitized will be digitized...We should start assuming that everything online is inauthentic until it's proven to be authentic. It adds a whole layer of proof which gives the publisher more tools to derive value from,” Boucher relays
Beyond publishing, NFTs can help expand and protect other revenue streams as well. In speaking with Andrew Gertler, manager for Shawn Mendes, he tells Highsnobiety that blockchain will eventually be the go-to for concert tickets, noting how they can capture the revenue lost to resellers:
"If you look at what’s happening with NFTs, the secondary market is not just being monetized by the originator of the work, but it's being encouraged (for the artist to capture residuals). I think that will certainly start to happen with concert ticketing, where for so long we’ve had to fight scalpers, now the hope is the secondary (market giving revenue to artists will) be encouraged."
What Gertler is suggesting is good news for the likes of streetwear and fashion houses as well. Already commissioning video and digital content, the blockchain enables them to not only sell these exclusive works but raise the price of an asset based on how many are left, while simultaneously getting paid residuals from resellers.
Although the momentum is exciting, with anything in blockchain, many skeptics are wondering: “is this legit?”
With 15% of Americans owning a cryptocurrency, the argument of a crypto-bubble is slowly dwindling away. Even with an upcoming correction, NFTs won't have to endure nearly the same litmus test as their blockchain predecessors.
What’s Next for NFTs?
NFTs are still very much in their infancy.
Currently, Nifty Gateway and MakersPlace are some of the only NFT issuers that accept credit cards but still require Meta Mask (a browser extension). Other issuers not only require browser extensions but transferring cryptocurrencies to different accounts and having separate digital wallets for collectibles and currencies. When considering the current high price tags out the gate, the added technical aspects of this all might be a headache for the average consumer.
“For a wide group of fans to collect, trade, and value NFTs, prices will need to be reasonable to provide a lower barrier to entry. (We'll) need more platforms to emerge that transact in fiat, and not just crypto, so the learning curve is easier,” Gertler suggests.
Expressing a similar sentiment, Winklemann agrees that accessibility can be an issue for those not familiar with cryptocurrencies. In terms of NFTs being a bubble, Winklemann also predicts that prices will likely correct to how the current art market rewards effort, impact, and notoriety of work.
For now, the gold rush surrounding rare digital art is getting people excited about the potential of blockchain in a tangible way. Artists can issue digital copies of their work that previously didn’t have value. Collectors can own exclusive works that don’t just feel like a donation but rather owning something coveted.
"I think there will be a button on Instagram where you can just 'buy this post'. It will be: ‘like', 'comment, and 'buy'. That will be the new flex," Winklemann tells us.
Since our conversation, Twitter founder Jack Dorsey established an NFT auction for the first tweet ever sent. The auction concluded at a sale of $2.9 million (which will be donated to charity).
It’s a new era in culture... one where instead of asking ‘what can we create with this?’ people are finally able to just create what they want to release into the world. And for most, that’s why they got into art in the first place.
