Sunday November 14, 2021
“Everyone wants to sell NFTs”
Crypto millionaires are turning the art world upside down
From a niche product to a billion-dollar market in a matter of months: Auctions with so-called NFTs are also becoming increasingly important for Sotheby’s and Co. Long-established auction houses, however, have to deal with a different type of clientele in the new business.
When James Christie sold masterpieces by Rembrandt and Rubens to Catherine the Great 240 years ago, he had no idea about Non-Fungible Tokens (NFTs). Today, Christie’s is auctioning virtual works of art in this novel crypto asset class for millions of dollars. Instead of dignified gentlemen in suits and ties, auction houses are now chatting with nouveau riche Bitcoin millionaires via Twitter.
“My inbox is overflowing. Everyone wants to sell NFTs,” says Cassandra Hatton from Sotheby’s auction house, which, like arch rival Christie’s, has been in the digital world since last year. So far this year, Sotheby’s has sold NFTs with a volume of 65 million dollars, Christie’s even comes in at over 100 million dollars.
Within a year, virtual art has achieved a share of 5.5 percent of sales for contemporary art at leading auction houses, according to data from the industry service Art Market Research. Experts believe this is just the beginning.
These images, videos and pieces of music are usually freely available on the Internet. The whole thing is what makes NFT technology unique and interesting for collectors. The works are digitally signed and registered together with their owner on a blockchain, a kind of encrypted database. This digital proof of authenticity and ownership makes the works unique and tradable, even if the underlying work can be reproduced millions of times. The blockchain is also the basis for cryptocurrencies such as Bitcoin or Ethereum.
Contracts are made through social media
The total volume of NFT deals reached $ 10.7 billion in the third quarter, according to data from the analysis firm DappRadar. NFTs are particularly popular with sports fans. So fans can secure video clips with the best actions of their idols.
Even in virtual worlds, so-called metaverses, there is a brisk trade in digital properties or outfits for avatars. Another example is the auction of the world’s first tweet by Twitter co-founder and boss Jack Dorsey in March for $ 2.9 million. At Sotheby’s, the original programming code of the World Wide Web was sold for over five million dollars in the summer.
Long-established auction houses will have to deal with a different type of clientele for the new business. Instead of using pen and pad, contracts are made via social media, and buyers register for auctions via Twitter. “That’s where everything happens, that’s where we conduct our customer relationships,” says Noah Davis, head of digital art at Christie’s.
Above all, he finds it remarkable how fast these formal processes run compared to conventional methods. What is also new is that artists want to work directly with auction houses and not market their works through galleries, as is usually the case, as Rebekah Bowling from Christie’s rival Phillips found. “The traditional structure was turned upside down. Otherwise, we were always the secondary market.”
Questions about the authenticity and origin of digital art
The rapid growth of the digital art market also harbors risks for auction houses. Cryptocurrencies used to purchase these virtual masterpieces have a reputation for being illegal. Cyber currencies such as Bitcoin & Co are misused for ransom demands in the event of hacker attacks or money laundering. “If a gallery brings an artist or works of art on board, you should take a closer look,” advises attorney Max Dilendorf, who specializes in cryptocurrencies. Money laundering with cyber foreign exchange is a known fact.
Christie’s explains the procedures for checking customers are the same as for physical art. At Phillips, they say they check whether the buyer has enough assets in their digital wallets. Sotheby’s did not want to comment on its lawsuits. Investors are also concerned with questions about the authenticity and origin of digital art.
For example, when the supposedly first ever NFT artwork was auctioned at Sotheby’s in June, one person complained that they already had an earlier original version of the NFT. The dispute delayed the auction, with the price of $ 1.5 million not paid until weeks after the sale.