Non-fungible tokens
A revolution in the digital art market

A blockchain technology is making waves in the art scene. For the first time, non-fungible tokens (NFTs) are making it possible to trade digital art just like paintings, sculptures or photographs – and charge equally high prices. We look at what non-fungible tokens are all about and how they can bring in so much money. 

By Stefan Kobel

The technical name of a blockchain element – NFT or non-fungible token – is currently the unexpected number one topic of conversation in the art market. This technology is the first to make it possible to distinguish between an original and a copy, even for digital works of art, opening up a whole new market.
 
Ever since Christie’s New York auction house sold Beeple’s, aka Mike Winkelmann, Everydays: The first 5000 days for 69 million US dollars, NFTs have been the talk of the town. The truly astonishing part is that this enormous sum was paid for a digital work of art that could, in principle, be reproduced at will. Any internet user could download a copy, even if the resolution might be less than satisfactory. The only difference between the “original” and the “copy” is the linked token that makes the original piece forgery-proof and thus unique (see info box). 
 
Initially, this is a great advantage for artists. To date, trading digital art like paintings, sculptures or other formats has been difficult because there is no physical object associated with a digital piece, so there is also no original. Another complication is that there can be endless number of identical copies of the same work. With the help of NFTs, artists can now release as many pieces of their digital work as they want – as unique, limited, or open editions. They can even decide if they want a percentage of the resale of their work. This is a huge step forward from conventional practice, where artists often do not benefit at all as the value of their work increases, or there heirs do at some point via modest resale rights income. “How much is the fisch?” Together with Scooter, H.P. Baxxter was one of the first musicians to certify special editions of his new album using NFTs. | Photo (detail): © picture alliance/dpa/dpa-Zentralbild/Jens Kalaene

Just a speculative bubble?

However, the current boom could very quickly turn out to be a speculative bubble. The relevant platforms are still dominated by digital banalities, at least volume-wise, while the traditional art scene seems to be gaining a foothold quite slowly.
 
There is also a widespread misconception that NFTs generally take the form of a work of art. An NFT can basically be anything though – a CryptoPunk consisting of a few pixels, a huge digital collage like Beeple’s, an animated computer graphic like those made by musician Grimes, a sneaker design, a collectable NBA basketball-league trading card, or the digital art that is already part of the traditional art world with its museums, art associations, galleries, and fairs. 
 
Whether the buyers, who each paid 140,000 euros for one of nine copies of one of the numerous digitized masterpieces from the Florentine Uffizi, will ultimately leave their heirs a tidy nest egg remains to be seen. As does whether the fund which Beeple’s digital collage is part of will ever yield a return, or whether anyone in 100 years’ time will still be interested in who owns the “original” Nyan Cat. We can safely view these as marginal phenomena of the art market. What is primarily driving the boom in NFTs is a capital market that has found a welcome speculative instrument in cryptocurrencies. There is still a lot of tweaking to be done, but ultimately time and the market will probably work out the bugs.