Bloomberg Línea Ideas — We have all heard of the term starving artists. A creator that has given up on a ‘traditional’ way of making a living to focus 100% on their creative work. If we just talk about visual artists, it is a very competitive world and just a few achieve vast success while they are still alive, if any. For those that do, that recognition does not translate into them benefiting from the appreciation of their early work, which sometimes they had to sell at very low prices to make ends meet.
Mike Winkelmann, better known as Beeple, is a dad and artist from Wisconsin that used to drive a cheap Corolla. But in 2021, he made headlines when his - “Everydays: The First 5000 Days” -- sold for $69 million at Christie’s, a piece that was a collage of 13 years of everyday paintings. The buyer, who owns the 3rd most expensive art piece auctioned at Christie’s, paid in Ethereum and did not get a physical sculpture, or a framed painting, they got a non-fungible token (NFT), which is essentially a digital proof of ownership, embedded on a smart contract in the blockchain.
NFTs are now becoming mainstream with more retail investors entering the space and more artists benefiting from the craze. One of the top projects, is a collection of 10,000 ape avatars known as the Bored Ape Yacht Club (BAYC) has a market cap of over $3.6 billion, according to CoinGecko, a cryptocurrency data aggregator. Like Beeple and BAYC there are many, many more.
NFTs: the end of the starving artist?
Built into the smart contract of an NFT you can embed the conditions that you want as a creator including royalties. As an artist the standard is that you get 90% of the proceeds of the original sale and 10% of royalties of the secondary market transactions.
Let’s use Beeple again as an example. He sold Crossroads for US$66′000 and he got US$59,400. Then it was re-sold for US6.6M and he received US$660′000, which was over 10 times what he got from the original sale. With NFTs the creator is constantly benefiting from the maturity of his work over time, bringing the end of the starving artist.
The most popular secondary market for NFTs is OpenSea but there are many others such as Aorist, Nifty Gateway, Rarible and many others.
It’s important to note that NFTs aren’t a magical way to create value. The value is created by the market’s desire for the piece(s) and the utility it brings to the buyers. What NFTs does bring is a paradigm shift from believing that things only have value if you restrict access to them. NFTs are again just a proof of ownership and the more something is widely shared the more valuable it becomes.
As we see the shift of NFTs into the mainstream culture we are also seeing institutions such as Meta4.Capital a Web 3.0 focused investment management fund that launched Meta4 NFT Fund I, an institutional-grade crypto fund focused specifically on NFTs enter the space, signaling that the more sophisticated investor market is paying attention to what is quickly becoming a new asset class. As Meta4.Capital founder and Managing General Partner, Nabyl Charania puts it: “Our thesis for this first fund is very clear, we are curating and collecting NFTs that represent historically significant, culturally relevant and rare specimens of NFTs that we have carefully mapped out across a timeline beginning in 2012, when there were initial attempts to attach artwork to contracts on the blockchain. What we have seen over various business cycles over the last 50 years is that culture drives the economy, and NFTs are the Trojan horse into an entire tokenized economy where power is shifting to the creators and where consumers can truly have a voice in the direction of the artists, protocols and ultimately economies they are choosing to support.”
Women bringing gender equality to the NFT space
While the crypto space has traditionally been filled by men, NFTs’ focus on creativity makes it more appealing to women. In the U.S. for example, we see projects like World of Women and Web3Equity in Miami that are supporting women by educating them on Web3 and getting them involved. One way Web3Equity does this is by selling its own collection of NFTs designed by a local female artist known as Superama. Each NFT purchase serves as a membership to Web3Equity, which organizes educational Web3 events primarily for women.
But it’s not just happening in the U.S.; in Latin America we also see some interesting NFT projects and efforts to get women involved. Xolos Crew in Mexico has designed 5000 NFTs that showcase Mexican culture and Day of the Dead NFTs sell NFTs that celebrate a famous Mexican holiday that honors those who have died. In Brazil we see Continent DAO which is creating utility NFTs to identify and invest in social wifi with the city of São Paulo. On the social side, we see Web3 Familia, whose mission is to onboard 1 million Latinos to Web3.
Latin America has always been a place that’s very interested in current trends and alternative investments since so many countries’ currency values are often shifting. NFTs allow artists in the U.S. as well as marginalized countries to monetize their art and live off their passions.
Beyond Art NFTs
Art NFTs are just the beginning and a great way to democratize access to this space. But the technology of proof of ownership will unlock solutions in different industries and be the building blocks of applications that we don’t yet imagine. NFTs can be attached to almost anything, such as property titles, diplomas, data, cars, concert tickets, movies, and identity and is now up it is up to the builders to show us what the future is holding for NFTs.
The views and opinions expressed in this article are of Laura Gaviria Halaby and do not necessarily represent the views or opinions of SoftBank Group. The content should not be taken as investment advice.
This column does not necessarily reflect the opinion of the editorial boards of Bloomberg línea, Falic Media, or Bloomberg LP and their owners.