Will blockchain-powered digital collectibles revolutionize the art world, or are they just another bubble waiting to burst? Collectors have dropped millions of dollars on crypto keepsakes, known as Non-Fungible Tokens (NFTs), in the last two weeks, and Chinese social media is buzzing.
As the novel assets start to sell for millions in the West in forms ranging from fine art to trading cards, Chinese tech and art influencers have been asking whether they’re a real investment, and what they mean for the art industry. So far, art and blockchain outlets have been mostly positive, while social media users have been more mixed.
As far as we can tell, China is not a big consumer of tokenized art yet, although there is no hard data on the regional spread of NFT transactions. A Chinese-developed chain Binance Smart Chain, is powering some NFTs, although most use Ethereum.
What’s an NFT?
NFTs are crypto assets based on blockchain: Whenever a token is bought or sold, the transaction is recorded on an ever-growing digital ledger.
Unlike Bitcoin, each NFT is unique and can’t be duplicated, so they can’t function as a currency, but as collectibles. In digital art, encrypting works into NFTs acts like a signature: The original can always be identified by the signature while countless copies are created.
NFTs currently exist in a legal grey zone in China. Their future is uncertain: They are not currencies, which is the prohibited use of Bitcoin. Holding crypto assets like collectibles is likely ok. But NFTs can foster speculation, which is what Chinese authorities were trying to stomp out when they banned crypto-public listings known as Initial Coin Offerings in 2017.
Four events pushed NFTs into the trending column of the Twitter-like Weibo in the last couple of weeks.
- March 2: US artist Beeple sold a 10-second video titled “Crossroads” for $6.6 million on an online Christie’s auction. The related hashtags have been viewed over 1.63 million times on Weibo as of the time of writing.
- March 8: the founder and CEO of Twitter Jack Dorsey announced he is auctioning the first Tweet as an NFT. The CEO of Oracle Hina Estavi reportedly bid $2.5 million. Related hashtags have been viewed over 3 million times on Weibo.
- March 10: a group of self-described “art and NFT enthusiasts” bought a Banksy artwork for $98,000, burned it, and sold it as an NFT for $380,000. The hashtag “burn an artwork so that it can be sold for over four times the price” gained over 44 million views on Weibo in 24 hours.
- March 12: Beeple sold a digital painting for $69 million, the hashtags have been seen almost 2.4 million times.
Many in the art world have rushed to welcome NFTs as a breath of fresh air in what they see as a dinosaur industry with a strict hierarchy.
Traditional art trading is a rather conservative industry. It is highly hierarchical, highly opaque, and often slow to accept new things. All attempts to challenge its structure are questioned for a long time.Sonia Xie, Vogue China, March 11
Crypto collectibles could bring tech-savvy, or tech-hungry, millennials into auction houses.
The entry of NFT encrypted art works into the auction market marks a possible trend: that auctions need to attract a new generation of customers who are not in the field of traditional art collection.Yu Yi Collection Auction Magazine, March 4
Or it could get really metaphysical.
Art investment will be able to transcend material forms.Yu Yi Collection Auction Magazine
Power to the people
Others don’t see auction houses and collectors as the benefactors of tokenized art. Instead, they see technology fueling a revolution in art markets. This techno-optimistic argument is that NFTs will change the relationship between artists, sellers, and buyers, to the benefit of artists and small-time art investors.
It is not only a change in artistic form, but also a change in production relations.Yuan Yan, Art Business, Feb. 25
Digital art creators will be able to wrangle some power over their works from the collectors by maintaining ultimate ownership of their own creations even after it is sold, the magazine wrote.
In the traditional art industry, after a buyer purchases a work, the buyer holds its ownership, exhibition rights, sales rights, and even copyright. […] Digital art collectors who own the NFT may only have the reputation rights and trading rights as the supporters of the artist, while other rights need to be determined by the artist, the collector, and the market.Yuan Yan, Art Business
The most techno-utopian of the takes imagined a world in which NFTs provide financial tools that could allow artists to capitalize on their art in new ways, and the general public to invest in artwork as stocks.
In the traditional art market, artists usually only get a share when their works are sold for the first time. After that, the profits generated by each resale of their works all belong to the seller. In the field of encrypted art, artists can hold “shares” of works through customized smart contracts, and a portion of the premium generated by each exchange in the future will be distributed to artists in proportion.Sonia Xie, Vogue China
But not everyone was into the hype, especially on Weibo. Some voices warned that NFT art might be the next bubble.
Often due to lack of artistic professionalism or financial risk management capabilities, it has become a fundraising test ground for speculators…
The value of NFTs is often more dependent on market behavior than the value of the underlying assets. […] When we look to the beautiful picture of a decentralized, free, and open encrypted art ecosystem, where everyone is an artist, and everyone can set a price for the art they like, please also remember that no matter what platform is used, the exposure of the work is also directly affected by the platform and its popularity, and people’s attention is often directly linked to the economic value of the work.The Art Newspaper, March 4
A report by HashKey Capital, one of China’s biggest blockchain venture capital firms, said that art is the “most suitable application” of NFT technology, but that regulation is lagging.
NFT development is in the stage of unregulated “barbaric growth”. According to the characteristics of NFT non-homogeneous tokens against physical objects, criminals may use NFT to launder money and in criminal activities such as trading prohibited items. In addition, as the value of NFT assets continues to increase and the ecosystem gradually expands, it may become a new target for hackers.Fan Xiaoqi, HashKey Capital Research, March 3
Weibo users saw the recent NFT headlines as a gimmick to inflate the value of the tokenized art.
“The burned Mona Lisa seems to be more valuable than the Mona Lisa,” said the top voted comment on a Weibo news post about the burning of the Banksy artwork, with over 18,000 likes.
“Isn’t it just hype? They do a gimmick so that they can sell at a high price,” said the second most-liked comment on the same post, with 4,000 likes .
“Burn the person and sell their photo,” said a popular comment on another post.
Awareness of the risks didn’t stop some blockchain publications from offering NFT investment advice. One article said that eager investors don’t want to be left out of the next big crypto market.
The NFT market is gradually gaining traction, art creators are actively exploring the production of NFT works, and investors are looking for new investment opportunities because they feel FOMO (fear of missing out).Li Xiaoping, 8BTC.com, March 8
Instead of worrying about fine art, the article recommends investing in crypto basketball trading cards in the virtual collectors game NBA Topshot.
The NFT product that the author invests the most is NBA Top Shot, which is a blockchain-based NBA digital collection card launched by DapperLabs in cooperation with the NBA. Most of the people who play the NBA TopShot card game are born in the 90s. They have a deep affection for basketball and the NBA in their student days.Li Xiaoping, 8BTC.com
The author describes WeChat groups in which people are discussing how to best capitalize on the NFT hype, concluding that even if the market is a bubble, it is a good opportunity to make money.
Innovation and hype, value and bubbles, are never contradictory. NFT is on the ascent.Li Xiaoping, 8BTC.com
If prices keep rising, Chinese investors are likely to jump on the bandwagon.
This article is not currently available as an NFT, but if you have a few million dollars lying around, make us an offer!