Real-world, physical Art as NFT assets?
We’re all seeing the headlines — “the first physical NFT gallery”, “first physical NFT art sold at auction”, “ the most expensive NFT Art ever sold”. But… aren’t NFTs a digital…thing?
Yes, NFTs are a digital ‘thing’, but they are changing the nature of ownership and adding a different dimension to the ownership of physical assets. This becomes especially interesting when it comes to art which, to date, has largely resisted the changes that happened regarding the digitalisation of business models in the creative industry, the way we consume media, and the 24/7 immediate accessibility of services.
Paintings, sculptures and photography have, for the most part, been physical objects showcased in galleries, but the combination of the COVID-19 pandemic and the advent of NFTs places art at the forefront of a revolution in consumption.
What are NFTs?
A non-fungible token is a unique and non-interchangeable (non-fungible) unit of data stored on a blockchain. This lack of interchangeability distinguishes NFTs from blockchain cryptocurrencies, such as Bitcoin. Since every NFT represents an individually unique digital asset, using a digital ledger to provide a public certificate of authenticity or proof of ownership, a single NFT can’t be duplicated while maintaining the same value as the original. For NFT’s digital assets, the owner and transaction history of the work are recorded in the blockchain technology log, and due to the nature of the technology, no one can tamper with it.
Digital Art
Digital art was an early use case for NFTs, because of the blockchain’s ability to assure the unique signature and ownership. More specifically, digital art has traditionally been very hard to monetise since digital files can be easily copied and reproduced, driving their value down. NFTs overcome this problem by providing metadata that certifies that a user is the ‘true’ owner of the art, records the history of its transactions, as well as confirming the authenticity of a piece. Since artworks and collectibles naturally fit into what NFTs are, they have become a big commodity of NFTs. NFTs also allow for digital artists to be continually supported (like when you stream music) as smart contracts enable the creator to receive a royalty each time the piece is sold, providing digital artists with the financial security to continue creating new works.
Physical Works of Art as NFTs
While NFTs are largely related to ‘digital artwork’ and reproducible digital files such as photos, videos and audio, they can also represent any type of physical asset, acting as a kind of ‘digital twin’ to a real-world item.
The Merriam-Webster dictionary defines “the arts” as “painting, sculpture, music, theatre, literature, etc., considered as a group of activities done by people with skill and imagination.” It’s quite exhilarating to imagine the possibilities that NFTs bring to ‘the Arts’ in terms of business models, the way we consume and experience them and perhaps even a totally new form of interaction made possible by NFT technology and web 3.0. Just take a look at the types of arts there are that can benefit from by being registered as NFTs on-chain:
- Music (instrumental and vocal), Dance, Drama, Folk art, Creative writing, Architecture and allied fields, Painting, Sculpture, Photography, Graphic and craft arts, Industrial design, Costume and fashion design, Motion pictures, Television, Radio, Film, Video, Tape and sound recording, the Arts related to the presentation, performance, execution, and exhibition of such major art formsAs the digital economies continue to thrive, there are high chances of NFT technology to play a pivotal role in bringing the digital and physical worlds closer to one another than they have ever been before.
Adding value by creating a tokenised version of a real world asset
As mentioned above, NFTs can represent any type of physical asset, and can add value to it for the following reasons.
Simple trading
Registering real-world artwork simplifies trading. Usually, a physical art piece is bought and sold at an auction house or a gallery or via direct sales by the owner, or art dealers. Whichever route is chosen, the physical item must be evaluated, authenticated, packaged and transported to complete the sale. By contrast, an NFT can be sold instantly on numerous online marketplaces.
Availability
An NFT can be sold or bought at any point unlike traditional works of art which usually changes hands every few years or decades due to the expensive price and because of the complicated process of inspection, authentication, transportation and careful storage of the physical item (not to mention tthe extra expenses like insurance). An NFT, representing ownership of the physical artwork, can change hands instantly several times in a day or hour with different owners across the globe.
Liquidity
Where a traditional art piece sale is limited to customers of the auction house or gallery, an NFT piece can be bought or sold by anybody with access to the internet and a crypto wallet. This opens up possibility of artworks to be traded by a much wider global pool of buyers and sellers.
Logistics (Or lack of logistics)
Transferring high value physical assets is complicated, the process usually involves some or all of the following: shipping, insurance, escrow for the funds, a dispute resolution process, and so on. The transfer of an NFT is instant and funds can be transferred as part of an atomic swap ensuring both parties get what they bought/sold.
Fraud Protection
Fraudulent copies of physical artwork being sold is a major problem. Even well established galleries occasionally come under suspicion of inadvertently displaying fraudulent pieces. Once the ownership is registered as an NFT on-chain, the artwork will be very difficult to undermine.
Furthermore, linking physical art to NFTs are moves the burden away from the financial imperative of art, towards the creative by ensuring exclusivity and authenticity:
- Original works are protected, offering creators more control, a worldwide stage, and greater potential for turning their art into a career
- Instead of the traditional route of setting up an art gallery, artists now have easier access to art as a career.
- Sellers and buyers can easily prove the art is genuine thanks to non-alterable unique blockchain technology encouraging purchases thanks to the transparency of issues regarding legal ownership and status. As such, an NFT will retain its value, or perhaps even increase in value, should the buyer choose to sell.
- Linking physical art to NFTs cuts out the middleman, so the artist can deal directly with the buyer, and enjoy the full profit of the work and buyers won’t be exposed to unnecessary high additional fees.
The challenges of linking physical art to NFTs
- Custodianship — the digital NFT and physical asset sync.
- Non-authentic and counterfeit NFTs for sale
- Copyright issues eg. the buyer cannot display the NFT for the public, as they own the artwork, but not the copyright. Unless the copyright is embedded into the terms of the NFT, it is not the buyer’s right to share or distribute the work.
Kocoon d’Art — Art, Finance & Technology
Now, you can afford to own world-class artwork, wherever you are, whoever you are
Kocoon d’Art is a Korean startup founded in 2018, specialising in art gallery and exhibition organisation, private and corporate curation as well as art consulting. Project d’Art NFT is a new business venture started in 2021 to create a physical art NFT and DeFi services platform based on the technology of Solana. Project d’Art NFT’s mission is to disrupt the traditional art industry, democratising the Arts by registering world-class works to NFTs on-chain, while providing financial services including lending/borrowing, asset management, derivatives and payments.
Our vision is to make the Arts, the greatest wealth of mankind, accessible to everyone to own and invest, fostering diversity in the types of art owners and collectors. We will work until every established and promising young artist has their real-world art registered as an NFT and offered an access to a global audience, as never before.
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Originally published at https://medium.com on April 6, 2022.
