Blockchain and Crypto: Art Auctions' Paradigm Shift

When the CEO of Christie's—one of the world's best-known art auction houses—told his audience a few weeks ago that it would accept cryptocurrency as payment for their artworks, it confirmed the cultural shift that has permeated the world of art.

In recent months, a mammoth work of digital art with a unique NFT (as provenance) called Everydays: The First 5000 Days, by artist Beeple sold for over $69 million and the platform accepted payment in cryptocurrency along with other modes. That is higher than what works by classic masters to include Monet and Picasso have sold for.

For the uninitiated, an NFT or a non-fungible token works thus: unlike a bitcoin which is crypto-currency and can be traded for other measures of crypto, am NFT is a digital signature that is unique, cannot be replicated and designed to purchase real-world assets like cars or wine or art and serves as built-in authentication that gives proof of its ownership of the asset especially when it is digital. How do you get it? Cryptocurrency can be used to buy NFT from an NFT marketplace that can then be used to buy assets that range from sneakers to tweets to art. The finer nuances go on and on but essentially it allows for a new model of value exchange.

In the Indian context, the broader questions circle around how leading artists in India could start to even tinker with this new mode of value exchange when it not permitted by the Central Bank yet; would they want to receive bids for their art in Ethereum or Bitcoin; and finally at a deeper level will they be comfortable dabbling in digital renderings of their lives works?

The leading ones I spoke to say they are in wait-and-watch mode and while they aren’t whipping out professional-level software and starting to buy NFTs they are keeping close tabs. Gallery-owners say it's only a matter of time before the trend picks up. Beeples’ work was after all purchased by a buyer of Indian origin.

So far, India doesn't allow a policy for trade with NFT and is examining the issue of a cryptocurrency via the central bank but that would be akin to KYC regulations and requirements for say forex or any other fiat money.

The Indian art scene has seen a recent boom in the last 18 months. So, if the dithering to create a quick policy around both crypto and NFTs continues, whether the choice is exercised or not, the art world is certainly losing potential options for sales. Given the sky-high prices for works by masters such as Amrita Sher-Gil, Tyeb Mehta, SH Raza and others which have smashed all prior price records and moved will on two the tens of crores, two trends emerge.

One, that the market is maturing and the second, that Indian art, always seen as an alternative but niche asset class, is growing in consumer base and in value and will mimic global trends sooner versus later.

In June, this year Christie's website experienced something it had supposedly never done before: it crashed. Why? Buyers were jostling for webspace to purchase works by a newbie digital artist FEWOCiOUS (real name Victor Langlois) and as a result, the sale was pushed to a few days later. Langlois has already earned approximately $18 million selling digital art via NFTs in just under a year. Equally, while artworks may be bought and sold for Bitcoin it is important to note that most auction houses such as Christie's and Sotheby's are still taking their own premium on sales—in fiat currency.

Are NFTs here to stay or becoming a bubble? There is a generational movement that seems to embrace everything that is on the internet, accessible on an app and is giving way to a mechanism of value transference that may become de rigueur in the future. What it certainly purports to do is open up to present new possibilities in the art world for stores of value but at a more futuristic level maybe even open up endless possibilities as to what art will be defined as?

Imagine then the record-breaking bids of the future happening for a crumpled note that was tossed in the trash can by Krishen Khanna, or a WhatsApp message by Anjolie Ela Menon or a tweet by Paresh Maity. Absurd? In part, it is already happening.

Just days ago, coinciding with the Summer Olympics opening ceremony, Muhammad Ali Enterprises and Sotheby’s will put on auction an (NFT) that features an original artwork created by Muhammad Ali. The announcement states that the digitized NFT artwork shows the champion boxer's interpretation of his 1971 ‘Fight of the Century."

All of which leads us to the thesis then that the future of NFT is not art itself but the fact that it opens up the floodgates for creating wallets where you can trade stores, and even fractional bits of value for artworks that can be expanded to include songs, dialogues, collectables, tweets, Instagram posts, literally anything. Because you can't see digital art without a digital screen so it's not truly just bits of code—the screens themselves are merely portals and windows to what is seen as objects of value.

NFT cryptocurrency and the ability to engage in fractional ownership of what is termed fine art is likely to be the norm going ahead with barter hinging on digital tokens of value but if that will rewrite the very definition of art and what future generations is best exemplified with an experiment undertaken by British artist Damien Hirst.

Hirst—in his inimitable style—jumped onto the crypto wagon as he announced on Instagram. As part of his non-fungible token art offering, the artist created 10,000 unique paintings, signed and numbered and with a watermark and hologram.

These individually correspond to an NFT, which can be bought for $2,000. After two months, however, owners decide whether to stick with their non-fungible token, in which case the physical painting will be destroyed, or keep the original artwork—in which case the NFT will be deleted from the blockchain platform. Which will be valued more—the digital provenance or the actual artwork itself?

That's the tongue-in-cheek point that Hirst is making and which needs to be determined for the long run. Until then, expect pixels to play a role in high-priced masterpieces in the future.