There is no denying that NFTs (non-fungible tokens) have been the biggest craze since the cryptocurrency bullrun led by the Bitcoin spike in 2017 took financial markets by storm. However, whereas cryptocurrencies, such as Bitcoin and Ethereum, are primarily considered a form of currency, NFTs are one-of-a-kind digital files. It’s thus perhaps no wonder that they are generally associated with digital art.
Although the majority of digital assets being minted and transacted on NFT marketplaces using the Ethereum blockchain network still fall within the general category of “digital art”, there have nevertheless been a great deal of new use cases for NFTs, particularly over the past year. Examples of non-artistic ways in which NFTs have been used recently are Jack Dorsey’s tokenization and subsequent sale of his first tweet for $2.9 million and the launch of NBA Top Shot, a joint venture between the NBA and Dapper Labs, which is a blockchain-based platform where fans can buy, sell and trade “NBA moments”.
Curated NFT marketplaces, such as Nifty Gateway, which sell everything from gifs and NFTs of individual pixels (no jokes) to digital tokens of real-world art created by high-profile digital artists such as Grimes, are accessible to everyone. But the traditional art world has not been asleep either. Major auction houses, such as Christie’s and Sotheby’s, have also joined the NFT market by listing crypto art for millions of dollars thanks to the blockchain technology that makes the minting of digital goods via smart contracts possible.
But what makes NFT art valuable? And who decides how expensive NFTs should be to begin with? These are questions we will be examining in this article. Read on to find out more.
What makes art valuable anyway?
There are basically four factors that determine the value which we attribute to art:
- Market-driven value
- Subjective value
- Objective value
- Historical value
Although this is potentially the most illogical form of value when it comes to determining the prices associated with art, it is nevertheless arguably the most powerful.
The market-driven value of an artwork is determined based on factors such as the popularity of the artist who created them, and the most important motivator behind market-driven value is obviously the speculated resale value of any given piece of art. For example, a piece of art created by Beeple, Banksy or Damien Hirst is far more likely to fetch a high price than one created by myself – even though we all know who is the most talented — just kidding!
But regardless of what you think of the morals or ethics underlying the fame of an artist being the main factor in determining the value of their art, it’s still almost always the main factor, especially when it comes to modern digital art, which comprises more than 99% of all NFTs minted today.
The subjective value associated with art is likewise a very powerful driver when it comes to the prices that artworks are sold at.
Subjective determination of the value attributed to artworks is often associated with the conditions under which they were created, the zeitgeist in which they came into existence, the (often equally subjective) political message or moral statement that a piece of art is perceived to convey, and even the political leanings or social affiliations of the artists themselves.
Again, some may argue that the subjective value attached to art is illogical, or even irrational, but it must be admitted that:
- If someone buys a piece of art because of the way it makes them feel, the reason for their willingness to spend money on it is no less “real” than, for example, the motivation to want to own it for the purposes of reselling it at a profit later.
- Subjective value can also be personal. In other words, the subjective value associated with specific works of art may be due to personal sentiments or emotions experienced only at an individual level. For example, the personal reasons for considering a unique NFT, such as a limited-edition digital collectible trading card, cryptopunk or nyan cat, to be valuable may have to do with the perceived significance of its existence by the individuals who thus attach value to it.
The objective value of an NFT artwork, or any form of physical art, can of course also be due to the technical skill and experience that was required to create it.
Few would deny that the skill and experience required to create a Normal Rockwell painting, and it is arguably this very skill that made his paintings valuable to begin with.
When it comes to digital art, determining the value of any given item, such as in the case of NFT art, is not quite as simple. First of all, most NFT art is currently created primarily to be popular and valuable. Of course, there are exceptions, and there are certainly talented and skilled digital artists out there. But the additional fact that the very concept of skill itself is much more difficult to define when it comes to digital art means that determining the value of NFT art is not primarily based on the technical skill (or even perceived talent) of most NFTs — at least for now.
This one is pretty self-explanatory. Items, such as limited edition collectible trading cards, historically significant tweets by famous social media tycoons, such as Jack Dorsey, the co-founder of Twitter, and digital items, such as photos that are associated with important historical events, often gain value over time due to their significance as reminders or windows into the past.
Of course, art that is valuable due to any of the above three factors often becomes even more valuable over time. For example, a famous painting like the Mona Lisa is certainly considered a technical masterpiece, but the main reason it is valuable is because it was painted by Leonardo Da Vinci, i.e. the fame of the artist himself in addition to the fact that it is a technical masterpiece of fine art have resulted in it becoming even more valuable over time, thus making it historically valuable, i.e. valuable for at least three different reasons.
Although NFT art has only been around for a couple of years now, there are already many instances of NFT artworks that have become increasingly valuable over time. An example is of course “Everydays: The First 5000 Days”, the famous piece by the now immortalized Mike Winkelmann (better known as “Beeple”), which was sold by Christie’s for a whopping $69 million. Being associated with the fame of the artist (now practically a meme himself), in addition to the fact that it is widely considered the first purely digital artwork offered by a major auction house, means that it now has market-driven value (i.e. as an item with a high resale value), subjective value, objective value (to those who appreciate his work) as well as historical value!