NFTs are blowing up the art market

Who wants to pay $ 69 million for a digital image collage that can be duplicated indefinitely? That’s the amount an anonymous collector paid in March last year for a work by American digital artist Beeple, put up for sale at Christie’s. In reality, the acquirer did not purchase the work itself, but an NFT affiliated with it. ONE non-fungible tokena digital asset that is registered on a blockchain and represents a unique certificate of ownership – and therefore non-fungible (conversely, a bitcoin is fungible as it can be exchanged for another bitcoin).

In addition to this extraordinary sale, NFTs – which can be linked to all kinds of digital objects, from a picture of a cat to a clip from a football match – offer new ways to sell and exchange works of art, attract new collectors and empower artists. This may be what will remain beyond the current madness.

Mixed temporality

“What is currently selling best are dynamic NFTs, with embedded audio or video, those that use 3D or even those that evolve according to external factors such as the weather or the value of a cryptocurrency,” explains Michele Ficara, founder of Nftart.ch, a gallery specializing in NFTs in Lugano.

Over the course of a year of activity, this self-proclaimed “technological evangelist” claims to have made several dozen sales at prices ranging from $ 1,000 to $ 4,000 per year. work. The majority of buyers come from North America and Asia, but Michele Ficara “hopes the big Swiss funds wake up, just like the big banks that today see art as an attractive investment”. As for visitors to virtual exhibitions, what could be better than equipping their digital avatar with extravagant outfits acquired through NFTs?

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Among the artists virtually exhibited at NftArt, the FOX21 collective uses NFTs to reinterpret classics from Italian painting. A modern support for a traditional image. “The NFTs are a link between the past and the future,” explains one of the members, a former Milanese gallery owner who wishes to remain anonymous. Other masterpieces are revisited in FOX21 manner, e.g. The man’s son of Magritte (whose face turns into a bitcoin or a tennis ball) or The origin of the world of Courbet (adorned with a butterfly flapping its wings).

Royalties

NFTs offer two more pragmatic benefits, our interlocutor continues. “On the one hand, the artist can certify the authenticity of a work and, on the other hand, receive royalties during any resale, this ‘resale right’ often amounts to 4%.”

The non-fungible digital token is sometimes more valuable than the work it is associated with, argues Olivier Marian, co-founder of Arteïa, a Brussels-based company providing digital services to art professionals, “because NFT provides the indisputable proof. the purchase certifies that the owner of the work owns the original, which is significant at the time of resale, for example ”.

For him, digital tokens can bring growth to the art market. “They may crystallize the revolt of individuals who felt excluded, whether they are digital artists or new collectors. Millennials (the generation born between 1980 and 2000) do not want to hear about galleries where they will be scrutinized from head to toe; they prefers to buy online. The art world has understood that, “says Olivier Marian, whose company is preparing an NFT to be linked to physical works.

Artificial scarcity

NFTs are a digital counterpart to what has happened in the art market for a long time, says Mathieu Bernard-Reymond, artist photographer and teacher at the School of Applied Arts in Vevey. “These tokens make it possible to create limited series and sell them by obtaining correct prices, as can be done in galleries. It also highlights the uniqueness of a job. ”

But NFTs do not completely eliminate intermediaries, clarifies the photographer who plans to sell images via NFTs: “The platforms that create such tokens offer variable conditions, resale rights are more or less high there; some allow later changes to the work, others “Do not do that; and it is not always possible to resell works on other platforms. It is up to the artist to document himself well before choosing.”

Like traditional art market practices, the scarcity created by these digital tokens is artificial. “It may seem paradoxical to want to own something that is potentially found in many copies,” admits Mathieu Bernard-Reymond. , for example in a limited edition.

No privileged access

By the way, is it really possible in the digital world to own something that is by definition insignificant? “An NFT makes it possible to acquire a digital copy of a work,” analyze lawyers Stéphanie Chuffart-Finsterwald and Adrien Alberini, who specialize in new technologies and intellectual property. One can not acquire an idea, but its expression through an intellectual or creative effort that gives rise to a work that can be rejected on various supports. An NFT can represent the equivalent of a digital twin of an object, such as a clock.

The two Geneva lawyers, who are also lecturers at CAS Digital Finance Law at the University of Geneva, take another example, the book: “You have to distinguish between the owner of a book and its author. Acquiring a book gives ownership to the object, the book, but not to its content. How about when that object is purely digital, like a tweet?

On March 22, Jack Dorsey, one of the founders of Twitter, auctioned an NFT attached to the first message he posted on the social network, March 21, 2006. Price Reached: Nearly $ 3 Million. The buyer, a Malaysian entrepreneur active on the blockchain, thus justified his colossal expense. “In many years, people will understand the true value of this tweet, just like the Mona Lisa.” Acquiring this first tweet in history also allowed him to “emphasize the importance of NFTs for the democratization of the art market”.

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The tweet, which was worth 3 million, will continue its life on Twitter, specified Valuables, the platform that organized this auction. The recipient of the NFT attached to this message, which has been signed and verified by its creator, has the virtual response to an autograph. But what does he really have? “Legally, this acquirer owns tweets certified digital certificate, but that does not necessarily mean they own a right to that tweet as a work; that’s the whole point, ”resume Stéphanie Chuffart-Finsterwald and Adrien Alberini, from the Sigma Legal study.

Therefore, even after spending $ 3 million, the Malaysian entrepreneur will not have privileged access to this tweet, which remains visible to the general public. So how well have you invested in this NFT? “Perhaps, explain our two lawyers, for having been the first proprietor of such an NFT.” And hope to resell it with a significant profit – a key motivation for many participants in this still poorly regulated market.

How about reselling an NFT? In practice, the name of the holder is updated on the blockchain. Stéphanie Chuffart-Finsterwald and Adrien Alberini nevertheless recommend checking the terms of sale in NFT and concluding a contract, which ideally includes a signature in good and proper form.

Virtual fraud

Like any new technology, NFTs carry risks. Like losing access to the secret code that gives access to the electronic wallet that contains these tokens. “If this code, called the private key, is lost, there is no way to recover it and no one will be able to access the NFTs anymore,” warns Nagib Aouini, IT security specialist at Lausanne -based company DuoKey … According to him, in the future we could also see attempts to steal NFTs, “virtual robberies”, with hackers trying to seize the private key to electronic wallets.

The NFT sector, which is subject to unbridled speculation, is already attracting scammers who, for example, put works up for sale that do not belong to them – and without the knowledge of their author. This causes some artists to search for their name on platforms like OpenSea or Rarible – and often find pieces that they have created but never offered for sale.

Conversely, NFTs have the advantage of being denominated in cryptocurrencies. Beeple’s collage was thus paid for in ether, the second most widely used cryptocurrency in the world. However, the price of ether has multiplied by 2.3 since March 11: the 70 million that the artist has received today equates to 160 million dollars. But this tempting mechanism only works if bitcoin and its cousins ​​are on the rise.

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