For a long time, the art market has operated with its traditional and somewhat outdated approaches to art collecting, sales, and acquisitions. However, in this day and age, it is undergoing a profound digitalization, discovering new monetization opportunities and transforming into a more advanced form through NFT applications. It is also thriving with the emergence of specialized assistants like Digital Basel.
Often misconceived as a passing trend, NFTs possess the potential to disrupt the existing order, streamline processes within the art community, and establish a secure method for tracking artwork ownership. As a result, not only do galleries and affiliated artists gain access to fresh revenue streams, but galleries and museums also acquire impetus within the art discourse.
Let us delve into how the ascent of NFTs can address the prevalent challenges in the art market and revolutionize the way galleries, collectors, and artists engage with one another, bringing about positive changes for all parties involved.
Defining NFTs: Basics of Non-Fungible Tokens
NFTs, which stands for non-fungible tokens, represent a new breed of digital assets, distinguished by their uniqueness and irreplaceability. Stored on the blockchain, a secure and transparent digital ledger, they can serve as digital ownership certificates for paintings, statues, photos, and other artistic forms.
Unlike fungible tokens, which aren’t unique, have strictly defined denominations, and can be exchanged accordingly, NFTs are the complete opposite. They are distinctive from one another and have different values depending on the scarcity, uniqueness, utility, and the asset linked to them. Furthermore, tokens are not just another form of currency but rather a valuable tool for art institutions to generate added value, engage collectors, and monetize their artworks without selling physical originals.
To leverage these capabilities, organizations have to possess several essentials, like:
- Crypto Wallet: galleries and individuals should create crypto-oriented digital wallets on platforms like MetaMask, as regular credit and debit cards can’t store cryptocurrencies.
- Crypto: instead of fiat money, all transactions in the NFT art market are conducted with cryptocurrency. The most prevailing one is Ethereum, but there are other possible options.
- Assets: as NFTs are linked to digitalized assets and represent them in the virtual realm, organizations should decide which property will be turned into tokens.
MetaMask is similar to virtual wallets for fiat money but allows users to manage their crypto-based property. Image: MetaMask
As evident, implementing a new technology like NFT in art institutions can be a challenging task. It requires individuals in charge to learn how to properly approach and utilize new digital assets, or at least find specialists in the area to guide them. However, if art institutions want to make the most of the new era in the art market, they will have to make an effort, as NFTs are key to achieving their objectives.
Are NFTs Unleashing a Digital Renaissance in the Art Market?
Despite being criticized by the art community in the early days, NFTs gradually found their way to the tool sets of modern galleries and their affiliated artists. Today, tokens contribute to the evolution of the art market, transforming critical aspects of art collecting, sales, and acquisition through the technologies of the Web 3.0 era.
- Ownership: one of the main features of NFTs is proof of ownership, which can help galleries and buyers track the purchases and verify the validity of new digital assets. Each subsequent owner gets complete access to the blockchain ledgers of the acquired assets, ensuring transparent and secure NFT ownership.
- Liquidity: compared to traditional art auctions, selling artworks as NFTs offers a much more streamlined approach to monetizing art. Galleries can sell their assets to the audience 24/7 on highly-liquid online marketplaces, while also avoiding governmental regulations on precious items. As a bonus, there are no expenses for transportation and storage of the to-be-bought artworks.
- Monetization: in addition to commissions and traditional auction houses, galleries and their affiliated artists have access to various options for generating income. For example, tokenization facilitator Digital Basel integrates a smart contract system into your tokens. As a result, your gallery receives royalties after the initial deal, raising funds and mitigating market volatility. On the other hand, your organization can utilize tokens as tickets for special events to real-life attendees, promoting them and driving sales.
Digital Basel is one of many platforms where galleries can make their artworks more accessible to collectors and leverage tokenization benefits.
The Future of NFTs in the Art Market
For some, the future of NFTs in the art market is uncertain, as the initial hype over tokenization has diminished. However, the potential benefits remain substantial to foster the interest of the target art audience and encourage them to implement NFTs in their business ecosystem. As NFT technology continues to evolve, we can anticipate witnessing more innovative and imaginative applications within the art world.
Fresh breath for Galleries
During the 2022 Les Rencontres event, Lazare Eloundou, Director of the World Heritage at UNESCO, discussed how the health crisis influenced cultural institutions and how they should change in the face of modern challenges. Based on her statements, there are three key points for galleries and museums to consider:
- Art institutions should diversify their channels to ensure public accessibility even during times of crisis.
- Digitalizing one’s assets enables a global audience to equally engage with art, exhibitions, and activities.
- Monetization channels should be more adaptable, providing art institutions with sufficient revenue to withstand crises and preserve art.
As previously mentioned, NFT technology can help galleries increase the value of their real-life assets by transforming them into high-liquid items with a wide range of utility. This way, assets become accessible to the public in the digital realm, generate long-term or short-term revenue, and can be utilized to promote live events. As a result, tokens help galleries achieve all three objectives at once, allowing them to fund their projects, maintain connections, find new supporters, and revitalize their operations.
Digital preservation
Traditionally, galleries face the challenge of meticulously preserving their exhibits due to their vulnerability to decay. Factors like moisture, sunlight, oxidation, and various environmental conditions must be carefully managed by art institutions to ensure the longevity of artworks for future generations. Sometimes, even masterpieces cannot be displayed to the public due to the risk of damage caused by environmental changes, and regular restoration may not be a feasible solution.
The result of the attempted restoration of Ecce Homo by Elías García Martínez after the parts of the mural flaked due to the decay.
However, in the digital age, the concept of digital preservation emerges. By transforming physical objects into NFTs through companies like Digital Basel, galleries can safeguard their assets for eternity. This approach enables them to make artworks accessible to the public in the digital realm, while the original pieces remain safely conserved.
Expanded utility
As the end of the COVID-19 pandemic was declared on May 5, 2023, the art community and the world as a whole gradually returned to their old ways. However, in response to the events of previous years, galleries have begun seeking new opportunities to diversify their channels and operations by embracing Web 3.0 technologies.
Among these advancements are NFTs, which offer art institutions the opportunity to connect with global audiences and monetize their engagements. This innovative technology enables galleries to not only generate new assets for sale on virtual marketplaces, resulting in both long-term and short-term profits, but also establish a framework for promoting their existing products and services. By leveraging specialized intermediaries like Digital Basel, minted NFTs can transcend mere salable assets. They can serve as exclusive event IDs or grant owners access to a range of discounts and benefits.
Despite the initially negative impression, NFTs have emerged as a powerful catalyst for revolutionizing the art market. By offering fresh opportunities and addressing long-standing issues, these tokens have become invaluable assets for art institutions aiming to challenge the status quo and enhance public accessibility to art.
If you are curious about the untapped potential of NFTs, our team strongly encourages you to invest your time in learning more about these distinctive digital assets. Alternatively, you can dive straight into NFT collecting and explore firsthand the prospects they hold for art institutions, with the assistance of facilitators such as Digital Basel.