NFT a game-changer in art industry

Wang Yuke and Chai Hua

NFT a game-changer in art industry

The emergence of non-fungible tokens has caused a real stir in the global art market, with a buzz around earth-shattering sales in NFT collectibles and NFT artists getting rich. Will NFTs merely enjoy an ephemeral popularity like most cultural fads, or are they around for the long-term? Presenting a positive outlook, speakers at the Asian Finance Forum 2022 on Tuesday said that NFTs are here to stay and that cryptocurrencies are key to sustaining their use in the art market.

NFTs have a unique identifier that can be used to prove ownership of any form of digital item. They can transform digital works of art and other collectibles into one-of-a-kind, verifiable assets that are easy to trade in the blockchain.

At the afternoon panel of the AFF, co-organized by the Hong Kong Special Administrative Region Government, Hong Kong Trade Development Council and China Daily, on the topic “Innovation Investment in NFT — Trends and Opportunities”, Francis Belin, president of Christie’s Asia Pacific, said he believes NFTs will become a long-term fixture in the art market. “The innovation of NFTs is here to stay and a new industry will stay growing.” An essential reason for this is that the tokens allow those in the art market to transact digital art creations safely.

Moreover, NFTs have proved attractive to young and crypto-savvy audiences who weren’t previously acquainted with art investment. Christie’s, the first auction house to sell NFT art, sold more than 100 NFT artworks last year, amounting to a whopping $150 million in sales. In one online auction, a digital artwork titled “Everydays — The First 5000 Days”, created by Beeple, sold for $69 million, overtaking auction records for physical pieces of art. And almost half of the NFT sales at Christie’s were made by collectors under the age of 40.

While NFTs, at core, are a technology that exists on the blockchain, what they represent to the art market is a new form of art consumption, said Warren Cheng, director of Fine Art Asia and Wui Po Kok, who is a staunch supporter of NFTs.

Creators, collectors

Not only do NFTs open up new creative possibilities to artists, they also increase the engagement level that creators can have with collectors, Cheng said.

“The NFT craze has created a new community of native NFT buyers who are used to paying loyalty and guest fees,” Cheng said. While this cohort takes NFT art buying in their stride, there’s “hesitance, resistance and a slow reaction” to NFTs among more traditional players in the art market, he observed, because these players don’t know how to use cryptocurrencies. Their resistance, he reasoned, also comes down to uncertainty about where NFT artworks stand within the value chain.

As an art fair director and a gallery owner himself, Cheng believes that the value-add lies in how well art fairs and galleries can present NFT artworks to the public and inform creators about how to leverage NFTs as a tool to elevate their art to a higher notch. “That’s why we hold discussion panels and theme-based sessions,” he said.

Fine Art Asia, which was the first major fine art fair to host an NFT exhibition in 2021, is ahead of the curve, exhibiting both antique and contemporary artworks. “The juxtaposition of different categories of art can spark new perspectives and new interests in viewing art,” Cheng added.

As the owner of Wui Po Kok gallery, Cheng designed NFTs around a collection of antique weapons to appeal to a younger audience. For example, a dagger from 2,000 years ago was minted with about 30 NFTs around it, with each NFT granting either the right to view or to bid. “For players in the art market, they’ve never thought that antiques could be packaged like this, and for those who are into NFTs and cryptos, they are surprised and curious to learn more about antiques and history,” he said.

According to Les Borsai, chief strategy officer at Wave Financial:

“The world is vast right now in terms of what opportunities are ahead of us, and it’s a really great time to be able to create and have that kind of imagination. I don’t really see anything slowing it down.” It’s heartening to see that a lot of traditional galleries and art museums are striving to investigate how NFTs might fit into their agenda, he said. “When galleries are trying to figure out how to be part of a secondary sale, that’s what all this technology allows for.”

People’s strong sentiment regarding crypto-art investment is sure to sustain NFTs in the art market. Cheng gives an anecdotal but convincing example. Six or nine months ago, the trading volume of NFTs was closely related to the price level of Ethereum. In the past few weeks, Ethereum has dropped in value, however trading in NFTs has continued. “I’ve asked a lot of people around me how they see it. They said, “Yes, Ethereum has dropped, but if I find an interesting project that can go four or five times higher, why should I care about the 20 percent slump?” Cheng said.

To sustain the existence of NFTs in the art market even longer, utility of cryptocurrency has to be created. It’s not the currency per se that matters. It’s the value that currency allows and “can create through trade and exchange of services” that counts, Belin said.

“I think at the end of the day, we being humans, will look back at what we can get from NFTs from all sorts of transactions,” Cheng added.

HK a global crypto hub

Looking ahead, Cheng believes Hong Kong can become a global hub for digital assets. The city has one of the highest percentages of people in the world that hold and also trade in cryptocurrencies, he said. As most virtual assets are based on cryptocurrencies, a high ratio of people holding cryptos provides huge potential. At the same time, he noted, the use of cryptocurrencies is a barrier for traditional art players and galleries, which have difficulty in jumping on the bandwagon.

Cheng added that a firm regulatory framework in Hong Kong will be very important if the city is to become the main hub for virtual assets, but right now that’s “kind of up in the air”.

Contact the writers at jenny@chinadailyhk.com