NFTs have exploded onto your social feed. Art specific headlines may shock, surprise, and confuse, but data is the real reason this technology has turned the art world upside down.
Data is an integral part of all modern markets. Gone are the days when you need to pick up a newspaper to check the prices of your stocks. However this is not true for all markets; many illiquid markets like art and collectibles rely on opaque sets of proprietary information.
Traditional art data, for example, is expensive and provided by private service providers. These service providers are critical parts of the industry giving collectors, advisors, galleries, and anyone else involved in the art trade valuable insights into artwork provenance and historical pricing.
To an outsider or newcomer, it can be relatively challenging to figure out where to get data when your point of reference for market information is often public stock quotes which are available for free and updated in real time.
NFTs have changed the game
Lots of people are talking about them, but what exactly is an NFT? NFTs are a new technology standard that use the blockchain to store uniquely identifiable pieces of information.
This is a huge breakthrough when you think about digital media like art. For the first time ever, we can identify a specific piece of digital art. This is simple yet profound. We now have scarcity for digital objects. That allows SuperRare, a digital art marketplace, to use NFTs as the certificate of authenticity for digital artworks.
This is powerful for three reasons.
1. We now have a cryptographically secure certificate of authenticity. This is a big deal. In the art world, provenance is one of the most challenging aspects of collecting. With NFTs, checking the authenticity of a work is trivial.
2. Since we have encapsulated the artwork in a blockchain token, we can use smart contract settlement layers for auctions and sales. This is extremely powerful. It allows for completely transparent pricing data in real time! We are shifting from a closed system of proprietary data to an open system with freely accessible data. With greater price transparency, new collectors feel more comfortable making purchases and engaging with the market.
3. Thanks to standardization, these NFTs can be interoperable with any piece of software that chooses to support them.
New market dynamics
NFTs are a paradigm shift for art and related markets. This technology has created an explosion in art collecting. Individuals who were previously excluded can now enter the space and start an art collection with a few taps on their phone. As with all markets, the digitization and reduction of friction creates a large expansion in the potential of the art market. Over the next decade we’re going to see art collecting become ubiquitous.
This is partially due to the fact that NFTs allow platforms like SuperRare to build new features into the art as well. For example, because SuperRare NFTs are digitally signed by artists we can pay artist royalty payments in real time when art sells in the secondary market. This is an enormous breakthrough as royalties have long been an unattainable dream in traditional art markets.
We are in the early stages of a revolution in art collecting. NFTs create digital scarcity and cryptographically secure provenance records. As VR, AR, and digital media integrate more deeply with our everyday lives, NFTs will serve as the foundational component unlocking value for both artists and collectors alike.