NFTs really came to the fore in 2021. Since then, NFTs have appeared in many fields. Art is one of them. A very conservative field by nature, is art about to use NFT as art generator? Find out in this article how NFTs intend to shake up the codes of the art market.
What is an NFT ART?
Before going any further, let’s remind ourselves what an NFT is. An NFT stands for “Non-Fungible Token”. In concrete terms, an NFT is a digital object such as an image, a GIF, a video, etc. The main characteristic of an NFT is that it is “non-fungible,” i.e., unique. But how can a digital image be unique, you may ask? Well, the very principle of a digital image is that it can be copied ad infinitum!
This is where the notion of “token” comes in. What is a token? Each NFT is associated with a token. The token contains the main information attached to the NFT (its owner, price, description, etc.). This token is registered on a blockchain, similar to a public register. The token is unique in the sense that it has its identifier. Through this token, the NFT becomes unique, even if the photo of the NFT (in the case of an image) can be copied.
Thanks to this tokenization system, NFTs have created a rarity in a digital domain that is essentially endlessly duplicable. With this characteristic, it’s easy to see how the fields of NFT and art could not but meet.
How are NFTs overturning the codes of the art market?
You need to be a specialist in the field to be aware that the authenticity and rarity of a work of art are the main parameters art lovers seek. With tokenization and blockchain, NFTs can meet these two primary criteria.
NFT Digital Art: A new digital art market
A veritable parallel digital art market has thus emerged simultaneously as NFTs. Marketplaces have enabled the sale and exchange of artistic NFTs on a peer-to-peer basis, i.e., without intermediaries. With the NFT boom, prices exploded. Several NFT sales have reached several million dollars. In March 2021, for example, Everyday: the First 5000 Days by American artist Beeple sold for a whopping $69 million. Imagine a work of digital art sold for $69 million! In fact, to realize the magnitude of the event, you need to know that Beeple has become the third most expensive living artist. The top two artists are Jeff Koons and David Hockney, who offer material, non-digital works of art!
In fact, the potential of NFT in the art world is immense. First, unlike the traditional art market, getting started with NFTs Art for sale is easy. To find out how to create an NFT, we invite you to consult our guide on the subject. Anyone can start an NFT. If the NFT in question is successful, the owner can earn a lot of money and, above all, a reputation in the field. In this way, NFTs have enabled a new wave of artists to emerge.
What does NFT stand for in art? NFTs are also very useful for artists who are already well known and present in the traditional market. In fact, NFTs allow artists to diversify their offers, increase their income, and reach a different audience. Some artists have understood this very well and have digitally reproduced some of their works to “put” them in NFT form. In this light, NFTs crypto Art represent an excellent marketing vector for the art sector. The same principle can be applied to museums and other cultural institutions, which can reproduce some of their works in NFT.
How to sell NFT ART: Traditional art market players want to get into NFT
The boom in NFT in 2021 has been such that the capitalization of the field has reached 41 billion dollars. Inevitably, players in the traditional (material) art market must be more sensitive to this new phenomenon for long! Auction houses, artists, and museums alike are moving ever closer to the world of NFT. Some have already taken the plunge.
For example, the Hermitage, the famous museum in St. Petersburg, offers some of its works in NFT. These include Leonardo da Vinci’s Madonna Litta and Claude Monet’s Garden Corner. The British Museum has also marketed digital reproductions of some of its works as NFT.
The same applies to auction houses. For example, the famous British auction house Christie’s has started selling NFTs. In 2021, Christie’s sold the equivalent of $150 million of NFTs. Just imagine, a significant art auction house founded in 1766 now sells NFTs! Let’s face it: NFTs are not just a bubble; they represent a new type of art.
“Beyond our auction and private sales results, which are exceptional, Christie’s has also made inroads into new sales formats and categories, including NFTs. They have enabled us to present works by new emerging and under-represented artists and reach a new audience of younger customers.” Guillaume Cerutti, CEO of Christie’s.
NFT ART Marketplace: new contemporary art, but not only!
So, what is an MFT ART? Are NFTs a new form of contemporary art? Indeed, some NFTs are directly linked to contemporary art. But that’s different for most NFTs. For example, looking at the most expensive NFT ART collections today is fascinating. You’ll find the following collections: CryptoPunks, Bored Ape Yacht Club (BAYC), and Mutant Ape Yacht Club (MAYC). These are the best-known collections; some of their NFTs have sold for millions of dollars. Many celebrities own these NFTs.
However, the NFTs in these collections are algorithmic. These NFTs have been created by computer. These NFTs represent a portrait, most of them of a monkey. Some NFTs, such as those in the CryptoPunks collection, are pixelated.
The excitement surrounding these NFTs confuses the issue of art. Indeed, how can we qualify these “digital vignettes”? If these NFTs link with contemporary art, they pave the way for a new type of art. There’s no guarantee that these collections will retain their value over the years, but it’s clear that they’ve quickly found their audience.
NFTs and the legal framework in UK and USA
How to sell NFT ART? The issue of the sale of NFT by auction houses was raised above with the example of Christie’s. But what happens in the United Kingdom and the United States? This is where the issue becomes more complicated…. Indeed, like many emerging industries, NFTs have outgrown the British and American regulatory frameworks.
UK Court Recognizes CLS as “Private Property
As expected with the adoption of NFTs, there is a lot of ground to cover, especially in the legal framework. In early May 2022, the UK Web3 community celebrated a very important legal precedent: the High Court of Justice in London, the closest analogue to the US Supreme Court, has ruled that non-fungible tokens (NFTs) represent “private property”.
Tom Graham, CEO and co-founder of UK-based Metaphysic.ai. stated:
“It is now unequivocal that NFTs are governed by the same property laws in the UK that govern all other property. This sets a great precedent for people investing in NFTs that the court system -at least in the UK- will protect their property rights. I don’t think the recognition of NFTs as private or personal property comes as a big surprise. NFTs can be bought, sold or exchanged, which essentially points to them being personal property on first principles. It would have been more shocking for the court to hold that NFTs are not personal property.”
In some ways it is a precedent for what is next in the world for new business practices and these new technologies for consumer protection in the face of the impending W3 breakthrough.
A U.S. federal agency has issued a legal advisory on NFT investments
The U.S. Office of Government Ethics (OGE) issued a legal advisory recommending several cases in which senior government officials are required to disclose their investments in non-fungible tokens (NFTs).
In the legal advice submitted to the agency’s appointed ethics officials, Director Emory Rounds III said that all investments in NFTs – both fractional (F-NFTs) and collectibles – worth $1,000 must be disclosed if “held for investment or income production” at the end of the reporting period.
Also, the guidance provided by the federal agency requires reporting of NFT investments if officers earned profits over $200 during the reporting period, adding that:
“Public financial filers should also disclose purchases, sales, and exchanges of cashable NFTs and F-NFTs that qualify as securities.”
The recommendation focuses primarily on reporting NFT investments that represent “assets,” such as real estate. However, OGE previously ruled that personal assets, including electronics, clothing, photos, or NFTs representing the same, are not reportable.
Depending on the circumstances disclosed by each filer, collectibles may or may not have to be declared as financial investments.
Filers have been advised to use OGE Form 278e to report NFT investments, in which investors should include details such as the value, type of proceeds, and amount of proceeds of all eligible NFTs. OGE disclosed that it will continue to monitor developments relating to cryptocurrencies and modify the above guidance as deemed necessary.
Future challenges for NFTs to establish themselves in the art world
How to make NFT in art? While the legal issue is making progress in UK and USA, NFTs still have some way to go to establish themselves in the art world. For example, the tax issue surrounding NFTs has yet to be resolved. For now, NFTs are considered “digital assets” for tax purposes. As such, they are subject to a flat tax of 30%, which breaks down as follows:
- Income tax: 12.8% ;
- Social security deductions: 17.2%.
However, discussions are underway to create a specific tax schedule for NFTs.
Another key issue concerns the environment. Indeed, as explained above, from a technological point of view, NFTs remain tokens or cryptocurrencies. Cryptocurrencies, however, raise several environmental concerns. Some cryptos indeed involve mining activities that are far from environmentally neutral. Many artists have voiced their concerns on this subject and refuse to enter the NFT field.
This question goes beyond the strict framework of NFTs and concerns the future of the crypto field. Faced with this challenge, many cryptocurrencies have undertaken developments to reduce their carbon footprint. The Ethereum crypto, the leading player in the NFT sector, is in the process of implementing a much more ecologically sober version 2.0.