Sotheby's and Phillips have launched so-called NFT auctions, a month after Christie's sold a digital artwork for $69.3 million, as traditional auction houses seek to capitalise on the craze shaking up the art market.
Three months ago, barely anyone had heard of a non-fungible token (NFT), a digital object such as a drawing, animation, piece of music, photo, or video with a certificate of authenticity created by blockchain technology.
But that changed in March when a digital collage by American artist Beeple sold for $69.3 million at Christie's, setting a new record for a n NFT, and the first message posted on Twitter went for $2.9 million.
More than $10 million in NFT transactions are now taking place daily, according to the website DappRadar.
The exchanges happen in cryptocurrencies on specialist sites such as Nifty Gateway and OpenSea, on the fringes of the art world.
A digital artwork by the artist Beeple recently sold for $69 million. Instead of a physical object, the highest bidder received a “nonfungible token.”— The New York Times (@nytimes) March 22, 2021
If you still find NFTs hard to wrap your head around, here’s what you need to know. https://t.co/0ntD8bO3NC
But the phenomenon is now becoming more mainstream with traditional auction houses keen to cash in, lending the craze, and digital artists, even more credibility.
"I feel like collectibles are collectible," said Max Moore, contemporary art expert at Sotheby's, which is holding a three-day sale from Monday to Wednesday of NFT works by digital artist Pak.
"I do expect some collectors who maybe have never purchased an NFT to make their first NFT purchase in this sale, given that it is a Sotheby's sale," he added.
The sale is also vastly different from a typical Sotheby's auction.
Collectors are able to purchase "cubes" for a fixed price of $500 each, which can then be redeemed for NFTs. In just 15 minutes on Monday, Sotheby's sold nearly $10 million in "cubes" via the Nifty Gateway platform, a partner for the sale.
Phillips is selling a unique work by Canadian artist Mad Dog Jones during an auction running from Monday until April 23.
When the work, called "Replicator," is sold, it will generate new artworks, which will themselves come with a limited number of NFTs.
There will be seven generations of NFTs in total, meaning between 75 and 300 digital objects will be created over approximately a year.
"We're situating these artists within the canon of great artists that we offer all the time," said Rebekah Bowling, contemporary art expert at Phillips, the third largest auction house behind Christie's and Sotheby's.
The movement into NFTs comes at an opportune time for the auction houses, who have sped up their transition to digital following a year of virtual sales because of the coronavirus pandemic.
The sales should help Sotheby's attract new collectors who may not have interacted with the house before, said Moore.
"It's a much younger audience, which I think is quite interesting for Sotheby's as well," he added.
Some 91 percent of people who bid for Beeple's "Everydays" had never bid at Christie's before. More than half of them were between 25 and 40 years old.
The NFT boom is being fueled by early investors in cryptocurrencies who became millionaires.
Unique 1/1 Punk Art Collection. Get yours now.— Wall Street Bean (@wsbean) April 8, 2021
"My primary focus right now is establishing these roots, these connections, establishing these relationships, understanding what drives their collecting habit, what interests them," said Moore.
"Then we'll be able to kind of target them in a way that we would never have done before."
The blockchain entrepreneur who has paid a record $69.3 million for a digital artwork looks, at first glance, nothing like a wealthy collector.
The 32-year-old is casually dressed in a t-shirt and chinos, lives in a regular Singapore apartment, and does not own any property or a car, with most of his investments in the virtual world.
"My prize possession would be my computer. And maybe my watch," Indian-born Vignesh Sundaresan, also known by his pseudonym MetaKovan, told AFP from his sparsely decorated flat.
His unpretentious demeanour offers no clue that he is a multimillionaire investor financing a fund focused NFTs.
Sundaresan defended the price he paid for the collage of 5,000 pieces of art created on consecutive days, which has transformed its creator, real name Mike Winkelmann, into the third-most valuable living artist.
"I thought this piece was that important," he said.
"As a piece itself it's awesome. But there is this signalling and symbolic intention also to show the world that... there's this whole thing that's going on underground."
The popularity of NFTs has been slowly growing, but only really hit the headlines with the sale of Beeple's latest work.
Sundaresan's Metapurse fund bought another set of 20 Beeple works in December and sold partial ownership of the collection as "tokens", originally priced at $0.36 per token and now worth around $5.
But he said buying "The First 5,000 Days" was emotionally draining, the sale at Christie's auctioneers lasted two weeks, with the price starting at just $100 and 22 million people logging on to watch the final dramatic moments.
"I did not think it will be this competitive actually," he said. "Even for me to spend that much money, it's quite hard."
He plans to display his digital art in a virtual gallery, and plans to hire an architect to design it.
"As an avatar, you will be able to go there and go to different floors and look at this art," he said.
Sundaresan said he felt a personal connection to "The First 5,000 Days" as his own story mirrored Beeple's, both men started as relative amateurs in their field but found success after years of hard work.
Beeple began "The First 5,000 Days" in 2007, when he was a bored web designer, and created a work of art each day.
"He has grown over every day, he has worked 13 years now to get to this point," said Sundaresan.
"I felt this soul connection with him."
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