NFTs – Four art market experts discuss the advantages and potential risks of blockchain

In the limelight after the multi-million auction of Beeple’s The first 5,000 days. Art and tech, a compendium of the recent turmoil in the art market and the global excitement about disruptive technologies

Disrupting the art world: blockchain technology and NFTs

March 11, 2021. The art world witnessed Christie’s auction of a nearly 70 million U.S. dollar digital artwork using non-fungible tokens (NFTs). The first 5,000 days by Beeple, a thirty-nine-year-old American graphic designer, is a collage of images. Mike Winkelmann, Beeple’s real name, is now the third most expensive living artist in the world by selling price. The online auction, lasted two weeks and saw the participation of thirty-three potential buyers. It was also a milestone for the auction house (founded in 1776). It stimulated interest from collectors, experts, art lovers, and tech enthusiasts in the recently born artistic movement, known as Crypto Art. 

According to Andrea Baronchelli, a professor at City University of London and the Token Economy theme lead at The Alan Turing Institute. The first attempt to deploy blockchain technology for leisure hit the market in 2017 with CryptoKitties. A blockchain game on Ethereum developed by Dapper Labs. A Canadian studio which allows players to purchase, collect, breed and sell virtual cats. Non-fungible tokens are digital assets representing art, collectibles, and in-game items.

They are traded online, often with cryptocurrency, and are encoded within smart contracts on a blockchain. A digital record whose entries are grouped into ‘blocks’ concatenated in chronological order. Its integrity is guaranteed by the use of cryptography. This certifies that a digital object is unique and non-interchangeable – not fungible indeed. This technology is suitable for the art market as it provides information on the artwork’s history by certifying its origin. It allows artists to link their names to the artworks and put a clause that ensures they will be remunerated in case of future transactions. 

Applying blockchain technology to the certification and verification of works of art

The applications of blockchain technology in the art world are not limited to the production of non-fungible tokens. Aware of the limitations of paper certificates, Robert Norton, CEO and co-founder of Verisart, came up with the idea of applying blockchain technology to the certification and verification of works of art – both physical and digital – and collectibles. «By using shared cryptographic attestations and a shared timeline, you can build better standards for Certificates of authenticity», Norton explains. 

Verisart was founded when Ethereum – the biggest platform for creating and publishing peer-to-peer smart contracts – had not yet been launched. The two primary services offered by Verisart are NFT minting and the production of digital blockchain certificates for any physical and digital creations, including existing NFTs. Norton explains that several minting platforms and marketplaces present limitations in terms of how creators can describe their digital products. These restraints range from the size of NFTs files to the length of the description. So while NFTs provide a recording of their transactions’ history, at Verisart creators have the opportunity to create avail of digital certificates maintain an ongoing narrative about the work, and share it with potential buyers.

Emanuele Dascanio and DRIFT: exploring of the new frontiers of digital art

The digital revolution ignited by the advent of blockchain technology has drawn the attention of artists working with other media and techniques. Hyperrealist artist Emanuele Dascanio entered the fragmented and unexplored market of NFTs with Sublimi Ingenio. YOU are a NFT (2021), released in June on SuperRare, the digital art market on Ethereum. His first NFT is the evolution of one of his most known drawings, Allegory of the Sublime (2013), in which a girl stares at the palm of her right hand in a moment of introspection. In Sublimi Ingenio, YOU are a NFT, the lines of her hands become codes. Each of which represents a historic moment, a change. In his NFT production, Dascanio tries to reinterpret his previous works. Adding digital layers capable of amplifying their messages or redirecting them towards elements of the ‘crypto culture’. 

Decentralization, freedom, and awareness of the countless means available. The new frontier of NFTs not only encouraged Dascanio to get out of his comfort-zone and explore new artistic languages. It also allowed him to expand and streamline his artistic production. This often requires up to two years of work; depending on the subject as well as the size of the drawing.

According to Dascanio, NFTs allow artists to interact directly with users without any time or space constraints and enable more transparent transactions; eventually giving rise to a decentralized system of knowledge. NFTs can be valuable tools for emerging artists seeking new outlets and growth opportunities as a new and growing market. Availing of blockchain technology, in September 2021, Dascanio embarked on a long-term project aimed at tokenizing events and elements of history and culture. The first step of the journey was the release of an NFT celebrating the history of Lamborghini.

About the authorship of a work Norton and DRIFT 

Blockchain technology expanded the creative possibilities of artists whose works have a close relationship with space and the physical aspects of art. The production of studio DRIFT is composed of Lonneke Gordijn and Ralph Nauta. They specialize in experiential sculptures, installations and performances, is a testament to this. Besides the most renowned advantages of blockchain and digital art, DRIFT found within this new technology an opportunity to make the codes and software they often use. This to develop their physical works visibly, and thus show the world another part of their creative expression.

NFTs buyers: crypto natives and investors looking for quick gains

During their solo exhibition at Pace Gallery, Materialism: Past, Present, Future (2021), DRIFT showcased on Pace Verso; Pace’s brand new digital platform, their first NFT in collaboration with musician Don Diablo as part of their augmented and mixed reality artwork Block Universe (2021). «With Block Universe, we reimagine the solar system in block formation. Block universe theory suggests that time is yet another dimension and that the past, present, and future co-occur. NFTs are forever, and the work encapsulates that with its theoretical engagement».

In order to fight CO2 emissions, ten percent of the sale of Block Universe was donated to JustDiggit. A grassroots organization committed to fighting global warming by re-greening Africa. Among NFT collectors, Norton and DRIFT identify two main categories of buyers: crypto natives and investors looking for quick gains. Crypto natives are people who already have cryptocurrencies and crypto wallets in their possession; as well as a great connection to these new disruptive forces and the possibilities of their markets. 

Nonetheless, Norton acknowledges that the trade of NFTs and cryptos is by no means a mainstream activity. «At this stage, less than one percent of the global high-speed Internet population has bought an NFT; in terms of crypto ownership, in the U.S., around twenty percent of households have some cryptos in their possession. If you are a crypto native, you are by nature a tech enthusiast and an early adopter». Despite the widespread speculation of the high-end market, Verisart’s CEO acknowledges that there are art lovers fascinated by the newest artistic trends amongst the NFT collector base. «Traditional collectors express an interest in the NFT market. We try to guide them into those fields – but classic art and NFT worlds are still separate», DRIFT agrees.

The emergence of new aesthetics and the formation of digital communities

According to Norton, one of the drivers of the NFT market is the tendency for crypto enthusiasts to create subgroups whose members are united by shared interests and images. A sort of ‘digital tribalism’ emerged from innovative ways of exploiting digital channels. Discord, a U.S. VoIP instant messaging and digital distribution platform initially designed to facilitate the communication between gamer communities, is today the preferred platform to discuss NFTs and cryptos.

In the last few years, a proliferation of digital communities revolving around NFT collections has been observed. The most famous collection of NFTs is CryptoPunks. The brainchild of Larva Labs studio, founded by Canadian software developers Matt Hall and John Watkinson. Since 2017, 10,000 images of pixelated punks have been created on the Ethereum blockchain. Originally placed on the market for free, nowadays, the cheapest punk would cost around 30,000 U.S. dollars in Ethereum cryptocurrency. While the rarest may be worth almost 10 million U.S. dollars. 

The geenration of digital apes on Ethereum blockchain

Similarly, Bored Ape Yacht Club, a community of NFT holders created by four anonymous founders, generated ten thousand digital apes on Ethereum blockchain from over 170 possible traits. Including expression, headwear, and clothing, which were sold in April 2021 for less than 200 U.S. dollars each. Thanks to the explosion of interest in NFTs and a successful marketing strategy. The rarest apes today are worth more than 1 million U.S. dollars. Jimmy Fallon, Post Malone, and Eminem are among the celebrities who already own a bored ape. Their possession grants access to a close-knit community and members-only benefits. 

The first of which is access to THE BATHROOM, a collaborative graffiti board. Other remarkable NFT collections, according to Mauro Martino, director of the Visual Artificial Intelligence Lab at IBM Research, are MekaVerse. A collection of 8.888 generative Mekas with hundreds of elements inspired by the Japan Mecha universes, World of Women. It comprises 10,000 diverse digital artworks of women, and Cool Cats; a collection of NFTs generated on Ethereum blockchain consisting of 10,000 randomly assembled cats from over 300,000 total options. The spread of NFTs and associated collections also marked the return of Eighties and Nineties aesthetics dominated by video games such as Pacman, pixelated images, and bright colors. These can be found, for instance, in the cyberpunk works of Mad Dog Jones, a Canadian crypto artist to keep an eye on, according to Martino.


Market structure: fragmentation, decentralization and potential threats

Community building is also a key activity for emerging artists trying to enter the fragmented and decentralized market of NFTs. «There are platforms and online marketplaces for non-fungible tokens. Some open, like OpenSea, and others more curated, such as Rarible and auction houses’ digital platforms. There is a large supply of NFTs because basically everyone can access the market and sell. Gatekeeping is indeed removed, but another market is immediately born: that of attention», Baronchelli explains. Being the traditional art market formalized and institutionalized, the advent of NFTs has broken mechanisms and dynamics that have existed for decades. By allowing people without artistic backgrounds to access the market and be successful in terms of public acclaim and sale prices. 

«NFT works do not need to fit a certain mold; you can simply experiment and venture out into different expressions you find interesting. On the other hand, because getting involved with NFTs is so easy, it is hard to distinguish who does it for the money and who does it as a form of creative expression», DRIFT points out. Among the many different digital platforms where artists can mint NFTs, Ethereum is, according to Norton, the most extensive and most widespread. Especially in the high-end market segment, followed by Flow, Polygon, Solana, and Binance.

Comparing the early NFT art market to street art

This fragmentation makes the market free, available, and accessible. However, all three experts agree that the flipside of no barriers to entry is the vast supply resulting in a barrier to visibility. In this context, digital platforms such as Discord and social media are critical tools for building communities; raising awareness around an artist’s work.

Norton compares the early NFT art market to street art, where artists do not need direct gallery representation to reach collectors. However, successful NFT sales, like that of Beeple’s, also have a great return in terms of image and marketing. Many auction houses and art galleries have already launched marketplaces devoted to NFTs. Two names that stand out are Sotheby’s, which released Metaverse last October, and Pace Gallery, with Pace Verso. These are not only smart marketing strategies, but a necessary response to a market that is growing and expanding at a fast rate. «Intermediaries either become bigger by responding to the market, or they become irrelevant if they cannot adapt with the times», says Norton. Martino explains that this trend will eliminate boundaries between digital and traditional art as the distinction between galleries and museums devoted to one thing or another is already fading away. 

Potential threats of cryptoart the lack of an authority 

The lack of a central authority monitoring the market implies investment risks such as scams at the expense of both creators and investors. At the creator level, scammers pass themselves off as established artists, while at the collector level there have been some reports of thefts of digital artworks and entire collections. Norton stresses how securing digital assets in the correct way is key. Using cold storage systems allows collectors to store their assets offline and spend without their private keys ever being online, as opposed to online browser-based wallets. According to Baronchelli, the market’s deregulation attracts all types of buyers and illicit activities, such as money laundering.

Baronchelli and Norton agree that the market is witnessing the emergence of a level of authority. Also the implementation of security policies by digital minting platforms and marketplaces. «The success of Coinbase and OpenSea shows that people are prepared to have a certain amount of centralization in exchange for increased security. The reality is the system is designed to be decentralized. If it becomes too centralized it might lose appeal for some people, especially the early groups», says Norton.

Dascanio argues that the NFT market has taken on a pyramidal and centralized structure since it started to attract investors and big capital from traditional markets. The anonymity behind which market players hide might increase the risk of scams. «At Verisart, we always verify the identity of sellers. We do not allow sellers to make Certificates of Authenticity without having their identities verified, and same goes for NFT minting», explains Norton. 

Blockchain and energy consumption

One of the known implications of blockchain technology relates to energy consumption and how this will cause environmental damage in the long term. Blockchains work in accordance to two systems. Proof of Work (PoW), implemented by Bitcoin and Ethereum. This requires miners to solve complex and computationally difficult mathematical problems to add blocks to the blockchain. Proof of Stake (PoS) is more sustainable and based on the principle that each user has to prove possession of a certain amount of cryptocurrency.

According to Norton, a trade-off between security and environmental sustainability exists; with blockchain technology created with more of an eye on security than energy efficiency. More sustainable options are emerging. FLOW, based on a PoS system, releases regular reports on its energy consumption. Dedicated NFT platforms, such as Pace Verso, operate on a side chain that is 99.9 percent more eco-friendly than average platforms. Increasing interest in environmental issues are among some of the most widespread platforms. «Ethereum is planning to move from PoW to PoS. In the future, I would expect blockchain technology to improve from an energy consumption perspective», asserts Norton.

Predictions on the evolution of the NFT market

The boom in NFTs, following the record sales of last year’s auctions, has generated an increasing interest in the NFT market, as well as predictions on its future evolutions. A first attempt to shed light on the emergence and growth of the NFT market made by Martino and Baronchelli. They worked together with a group of researchers composed of Matthieu Nadini, Laura Alessandretti, Flavio Giacinto, and Luca Maria Aiello.

On October 22, 2021, the research team released Mapping the NFT revolution. Market trends, trade networks, and visual features, a report analyzing data on 6.1 million trades of 4.7 million NFTs between June 23, 2017, and April 27, 2021, obtained primarily from Ethereum and WAX blockchains. The first part of the study aims to understand how the market has grown over time by analyzing its statistical properties and trends. The second part focuses on the network of interactions generated by each NFT transaction and the network of NFT assets. To establish what determines the price of NFTs, the researchers developed three hypotheses. 

Mapping the NFT revolution

The first hypothesis builds on the existence of a potential correlation between prices of two or more NFTs; with similar characteristics and NFTs belonging to the same collection. The second hypothesis concerns networks of NFT traders and their habits, such as their spending level and the frequency of purchases and sales within the same network. Through machine learning and artificial intelligence techniques; the third hypothesis analyzes the visual features of the NFTs to see if they are reasonable price predictors.

The findings of Martino and Baronchelli analysis validate most of their initial assumptions, revealing that history is the best price predictor. Results also show that NFT collections tend to be visually homogeneous. Most traders specialize in NFTs associated with similar objects and tend to form tight clusters with other traders exchanging the same kind of objects. NFT specific properties, such as the visual features of the associated digital object, help increase price predictability for works of art. Baronchelli claims how to make reasonable guesses regarding future market trends. Experts should have available not only a database composed of a number of transactions, but also the sale attempts of collectors as well as their desire to sell.

Robert Norton

CEO & co-founder of Verisart providing real time certification and verification of artworks and collectibles through blockchain technology. He was formerly CEO and co-founder of Sedition art and Saatchi Online.

Mauro Martino 

Artist, scientist and creator and director of  the “Visual Artificial Intelligence Lab” at IBM Research with offices in Cambridge, MA and New York City. He is a Professor of Practice at Northeastern University.

Andrea Baronchelli 

Readed in Mathematics at City University of London, Economic Data Science theme lead at The Alan Turing Institute, and a research associate at the UCL Centre for Blockchain Technologies.

Emanuele Dascanio 

Hyperrealist artist trained in the workshop of Gianluca Corona. In 2021 he dropped his first NFT, Sublimi Ingenio. YOU are NFT, on SuperRare, followed by several other digital artworks inspired by his charcoal drawings. On 10 February 2022, a four-handed artwork by Dascanio and Matteo Mauro was auctioned on SuperRare.

Studio DRIFT 

Founded by Dutch artists Lonneke Gordijn and Ralph Nauta in 2007. Their production ranges from experiential sculptures to installations, from performance to digital art.

The writer does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article.

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check and buy on Prototipo Store
item collections in limited edition
crafted according to our editorial search

Hemp / made in Italy
Lampoon is working to restore
Hemp production in Italy
as hemp is the one and only
natural vegetal fiber sourceable in the country
for more info, please email us at [email protected]