Committed to creating value in the art market. We deepen our market understanding, expand our network, and cultivate a diverse audience. We publish our newsletter targeting intelligent and inquisitive people who are not traditional art world participants. Recognizing a broad demand for insightful critique of art and the art world, plus an under explored dynamic interplay with the growing market for Digital Art, we are developing innovative products to engage and expand our audience and unlock value for our clients.
Let's Get Digital Part 3
Published about 2 months ago • 9 min read
Let's Get Digital Part 3
Published: Tuesday, 6 August 2024
After three months of nose-to-laptop, I remembered this is a European art newsletter. Therefore, it is time to set my email auto reply to “Je suis actuellement en vacances”. Thank you all for reading: along with the rest of the art world, we’ll be back in September.
Before we go, here is the third installment of our voyage into Digital Art. There’s more than one bar chart coming up (shudders), so I’ve included some artworks I think are bonita.
The art world has dealt with change before: we discussed the rise of photography in "Let's Get Digital Part 1", and the ascendance of Asia and the Middle East in "It's the "Quiet" Season (or is it?)." In those cases, the “TradArt”
[1] world was able to adapt and co-opt the new entrant into their existing business model.
Is that where the future lies for Digital Art and NFTs? It is certainly possible that the Impossible Creatures #247 NFT will end up in the Evening Auction alongside an Impressionist piece like Marine, Régates à Villers. The major auction houses and dealers have invested significant effort in attracting and absorbing the crypto world. However, the resources devoted to embracing this new tech have produced mixed results.
Before we discuss those mixed results, we need to consider the “size of the pie”. Luckily for us, the investment bank UBS produces an annual Art Market Report, which is an impressive deep dive into the numbers. Even luckier for you, the 2023 Report is 260 pages, but I’ve read them for you.
(Note that the “Digital Art” columns are placed 2nd last instead of before “Film or video art”. Call me pedantic, but this annoys me; subconscious bias against Digital Art, perhaps?).
This puts a few things in perspective: only 15% of HNW (“High Net Worth” i.e. the kind of folks that UBS likes to have as clients) art collectors bought Digital Art in 2023. On par with Photography and Film, but well behind traditional Paintings.
(More subconscious bias: Millennials have the highest spending across all categories, but the chart is organized in descending order according to the Boomers' spending habits…).
The generational demographics are super-interesting. All generations primarily collect Paintings, but Gen Z and Millennials have a wider spread across categories. Pie charts show the point more directly:
Gen X might hate me saying this, but they mirror their parents: both Gen X and Boomer collections are dominated by Paintings. Millennials and Gen Z are making a change though: not only are Paintings less popular, but their interest peaked in every other category.
Maybe this difference is an age/wealth effect? The older you are the more money you have, the more you can spend on art [2]. Perhaps the Boomer/Gen X charts showed more diversity when they, too, were young, once upon a time long ago.
To be blunt, we should find out soon. The “Great Wealth Transfer” from Boomers to their lucky heirs includes everything you can expect from a Gatsby novel: trust funds, horses, houses, cars and their private art collections. It would be very reassuring to the older Collectors (and their art advisors and auction houses) if the buying habits of the younger generations start to mirror the tastes and buying behavior of their elders when they have the means to do so.
With an eye on this younger crowd of Collectors, the establishment has tried to integrate these new technologies. Digital art fairs, conferences, and auctions have been introduced. Christie’s created their own on-chain auction platform, “Christie’s 3.0”, open to everyone and exclusively for “exceptional” digital art. They have launched their annual Art + Tech Summit to bridge the issue of collector knowledge about this artform, to build appreciation and respect in the space, while creating networking opportunities.
Sotheby’s have done something similar with their “Metaverse” platform. That name starts to hint where they begin to go off track: I’m not 100% sure what the “Metaverse” is, but I don’t think Sotheby’s does either, and it’s definitely not NFTs. They bill themselves as “Curating The Best of Digital Art”, but their website is noticeably sparse and lackluster, especially compared to their primary sites, and I didn't want to link my wallet to find out.
More numbers explain why: the 2023 Art + Tech Report [3] (confusingly, not related to Christie’s Art + Tech Summit) show galleries and auction houses are the least preferred ways for Collectors to buy Digital Art (5% and 1% respectively). The most popular purchasing avenues are specialized NFT marketplaces (35%), and buying directly from the creator (30%).
TradArt is not “digitally native”, and the crypto world has created their own marketplaces and platforms, rendering traditional galleries and auction houses irrelevant. Reading and listening to NFT artists and collectors, they often sound entirely uninterested in the old world. Their community and spaces seem to thrive as separate entities from traditional artwork structures.
And yet… their language also sounds oddly familiar? In some ways, the new space is showing trends and tendencies established in the traditional art world. They talk of “Collectors” and “Artists” and “Galleries”. For all the talk of inclusion, they create members-only enclaves like the Bored Ape Yacht Club. They host exclusive events for private viewings, reserve pieces for “friends and family”, and create deep nested hierarchies and social status… it all sounds very familiar, doesn’t it?
It’s possible all this is a function of age: NFTs haven’t been around that long. Much like cryptofinance is re-learning some of the lessons of traditional banking, perhaps NFTs will mirror the structure that TradArt developed over hundreds of years.
If so, that opens a space for traditional players to bring their skills, their networks and their money. The Art + Tech report revealed an important factor for the acceptance of digital art: contextualization and curation of the material. This is a potential opening for traditional establishments filled with individuals who have dedicated years to this form of study and expertise.
There’s an aesthetic opportunity too: a majority of Digital Art has echoes of Impressionism, Surrealism and Pop Art (especially Dadaism [4]). It is possible this demographic of existing collectors could be attracted to Digital Art.
Many NFT artists are also gamers, embedded in the utopian/dystopian/fantasy escapism of modern video game design. This shows their artwork, much like Salvador Dali's work (for example: The Disintegration of The Persistence of Memory) is a physical manifestation of an obsession “to resolve the previously contradictory conditions of dream and reality into an absolute reality, a super-reality”. An entrepreneurial dealer could bring those [old] audiences and [new] artists together.
Well, Maybe I Didn't Actually Want to Be Your Friend Anyway?
It’s generally assumed, especially in the NFT world, that the TradArt world wants in… but is this a smart business move for them? They already have well-established franchises that survived centuries. There is material risk, reputational and financial, if any crypto-sketchiness contaminates the traditional business model.
These risks were brought to sharp focus on "The Night That Sotheby’s Was Crypto-Punked" in 2022. After months of cultivating collectors, curators and artists in the lead up to a major sale of NFTs, Sotheby’s was subject to a classic crypto stunt: the rug pull [5] by 0x650d (name tag of the individual) undermined the seriousness of the venture and closed the minds of many interested investors who had previously been willing to experiment with something new.
Perhaps surprisingly, there’s an environmental angle too. Christies has pledged to reduce their emissions by 50% and neutralize their carbon impact by 2030. Sotheby’s aims to reduce their carbon business operation, supporting environmental initiatives and organizations, and extending the life cycle of art and culture for generations to come.
That’s problematic, because it takes a lot of energy to produce, mint, exchange, and store NFTs. The e-waste production ultimately contributes to human’s carbon footprint. According to Forbes, the average NFT emits 211 kg of CO2 across its lifetime. This is comparable to the energy consumption of the average person in the EU over four weeks… for each NFT
[6].
Active steps have been taken to use less energy intensive mechanisms, like proof-of-stake [7] instead of a proof-of-work. NFT projects like ZooLife, National Parks NFT, and Sunken Blimp committing themselves to conservation and sustainability. Still, it’s a real challenge, and could also provide the corporate cover allowing participants to excuse their exit from a market they were struggling in anyway. "We could have dominated NFTs but we preferred to save the polar bears", they sulked.
Drip #54, Drip Drop by Dave Krugman, 2.5 ETH, collection of 1,111 1:1 photography NFTs.
Where Next?
NFTs and Digital Art are cool, both aesthetically and for the new possibilities the technology allows. It would be very exciting to see traditional artists use NFTs the way it has been adopted by the fashion and gaming industries: you buy an NFT (maybe with an image of a work or relating to a theme) and it gives you access and ownership to a physical work of art by the artist (something more than just a museum quality print). Damien Hirst did a variation of this in 2022, where the buyer could only keep one version (physical or NFT) and the other would be destroyed.
I do think the traditional art establishment will keep trying to absorb the Digital Art world… in my opinion, it could be a more fundamental challenge to their business model than previous market evolutions have been. The crypto-NFT will also evolve, maturing and likely adopting many of the customs and hierarchies of the traditional world. However, I do think they will remain distinct, if only because of the generational impact: if you’ve cut your teeth on CryptoPunks, are you really going to grow up and start loving Old Masters?
We can only presume and speculate which direction this world may go in. This is one of the drawbacks of anything new: "you know nothing, Jon Snow" [8]. The technology in this space is still developing, the art is new and developing alongside it, the new communities are still forming and identifying themselves while new business models try to find traction. At least for crypto-NFTs in all its forms it may take 10-20 years to see this solidify. Or we can even find out next week. Anything’s possible and everything is fast moving.
See you in September!
[1]
"TradFi" is “Traditional Finance”, as opposed to “DeFi” which is “decentralized finance”, mainly cryptocurrency. Similarly, “TradArt” is “Traditional Art”, as opposed to NFTs, which are mainly JPEGs of monkeys?
[3]The Art + Tech Report is an annual query of collectors active in digital art to explore the intersection of technology and art with the aspiration that these insights not only steer discussions and ignite innovation but also foster a deeper understanding of the impact of web3 on the art market. The 2023 survey had 300 collector respondents.
[4]Dadaism- an art movement that was an immediate reaction to WW1 and the senseless slaughter that ensued. It was a blatant rejection of logic, reason, and the aestheticism of modern capitalism, instead expressing nonsense and irrationality. Notable artists include Hugo Ball, Marcel Duchamp, Man Ray, and Hannah Höch.
[5]Rug-pull- a term used to describe a scam where a developer/creator will promote a project and then disappear with investor money.
[6] Here is a chart of the carbon footprint of 5 different NFT collections calculated by 8 billion trees:
[7]Proof-of-Stake- a mechanism used to verify blockchain transactions. It differs from proof-of-work mechanisms in that it incentivizes honest behavior by rewarding those who put their crypto up as collateral for a chance to earn more.
[8] Yes, I may be obsessing about binge watching Season 2 of House of The Dragon when I'm on holiday. There's a more serious point though: when you think about it, we actually don't “know” with much certainty a majority of our history; especially the truth, and even more so with art history. History is written by the victors, and there is extreme bias and storytelling in most explanations and analysis of things. So essentially I have two fancy degrees* in the history of presumed knowledge and speculation of things that happened as it is told through art.
Basically, five years of "I drink and I know things". Don't tell Dad.
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Committed to creating value in the art market. We deepen our market understanding, expand our network, and cultivate a diverse audience. We publish our newsletter targeting intelligent and inquisitive people who are not traditional art world participants. Recognizing a broad demand for insightful critique of art and the art world, plus an under explored dynamic interplay with the growing market for Digital Art, we are developing innovative products to engage and expand our audience and unlock value for our clients.