Digital Art
Note: Data in this section last updated May 28th, 2022
Last updated
Note: Data in this section last updated May 28th, 2022
Last updated
Digital art NFTs – often affectionally called JPEGs by the community – are by far the largest category in the burgeoning NFT market. They are valued at over $20 billion and represent 78% of the total value and over 85% of the total volume of all NFTs. That’s why when most people hear the word “NFT”, they immediately think of a JPEG.
The digital art space has recorded several high-profile sales in the last year, including:
Beeple: Beeple’s Everydays: the First 5000 Days – a digital mosaic of 5,000 individually crafted pieces – sold for $69.3 million in 2021
Art Blocks: Forty Art Blocks projects, including several Ringers, Fidenza and Chromie Squiggles, have sold for over $1 million
Crypto Punks: Sixty-eight Crypto Punks have sold for over $1 million with Crypto Punk #5822 going for $23.7 million in February 2022
Bored Ape Yacht Club: Nineteen avatars from the Bored Ape Yacht Club have sold for over $1 million. The collection also boasts the highest floor price (i.e. the minimum price at which you can buy an asset), ranging between $150K and $400K in April and May 2022.
Mutant Ape Yacht Club: Several assets from the Mutant Ape Yacht Club (BAYC’s sister project) have sold for over $1 million with one “Mega Mutant Serum” selling for $5.8 million in January 2022
Azuki: The Azuki collection was launched in January 2022 and obtained a floor price of over $120K within 3 months. In addition, Azuki granted all holders two additional assets valued at nearly $20K each in early April 2022 (representing an almost 50x return for original holders).
Top Shot: NBA Top Shot has 37 collections with a value of over $2M and 5 individual NFTs with a value of over $1M
Selected NFT Sales in 2021 - 22
Although at first glance it may seem odd that people are paying tens of thousands to millions of dollars for pictures of cartoon apes, it’s not that strange when you consider the scope of the traditional art market.
Perhaps more importantly, art has proven to be an outstanding investment: it has outperformed the S&P 500 over the past 25 years, has little correlation with other asset classes, and it performs especially well in times of inflation.
Contemporary Art has Outperformed the S&P 500 Over the Past 25 Years
Unfortunately, the traditional art market is antiquated and plagued by numerous problems. Not only are fewer than 20% of works sold online, but the industry also suffers from illiquidity, fraud and is notorious for the paltry economics received by creators (there’s a reason for the “starving artist” cliché…).
NFTs have the potential to fix many of these problems and several experts believe they could represent art’s “Uber moment”, catalyzing a 10-fold increase in industry sales. Indeed, proponents argue that NFTs will:
Increase Access: There are currently fewer than 10,000 serious art buyers globally and these collectors tend to be older (average age of 59) and male. Given their ubiquitous access and lower average price point, many researchers believe that NFTs have the potential to grow the universe of buyers by 100x and spawn a demographic shift to a younger and more diverse crowd.
Enable New Art Forms: Historically, there was no market for digital art because it was impossible to separate the “owner” of a work from someone who simply made a copy. NFTs have solved this problem, not only creating the first market for digital art but also unlocking the potential for future art classes that we haven’t even started to dream up (e.g. programmable art that could change color as the weather or seasons change)
Increase Liquidity: Art is notoriously illiquid – it requires specialized brokers or auction houses, and even when the sale is made someone must arrange shipping, storage, security and insurance to ensure safe delivery. Digital art, on the other hand, can be listed online, sold within minutes and delivered instantly
Make Artists Richer: While there are several factors limiting an artist’s ability to earn a living, one of the biggest is the absence of royalties. Unlike other entertainment markets such as music, film and TV, artists do not receive a cut of sales on the secondary market. Because all NFT sales can be easily tracked and programmed to pay a cut of secondary sales to artists, they will likely usher in an entirely new, royalty-based, business model that will undoubtedly enrich artists
Increase Consumer Utility: Many NFTs offer consumers benefits that go well beyond holding traditional art, including: 1) access to a community (which can include anything from Discord membership to private party invites), 2) ownership of the IP (i.e. the right to receive royalties if someone wants to use your art for any reason and the right to create and sell derivative works) and 3) potential to receive an ownership stake and governance rights of the collection itself. As such, many NFT buyers feel like they’re purchasing a piece of art + a country club membership + the IP rights to the next Spiderman + shares of stock in the next Marvel
Finally, NFTs can be an extremely effective display of wealth and status. While this may seem gauche – it’s an undeniable part of human psychology (and perhaps one of the reasons that Bernard Arnault, the Chariman and CEO of Louis Vuitton, is one of the richest men in the world).
For purposes of this report, we’ll divide digital art into three categories:
Art: This category includes manmade digital art (such as Beeple’s Everydays) and generative art, which is art made by computers (such as Art Blocks)
Avatars: Includes art such as the Bored Ape Yacht Club that is intended to be used as a profile picture on Twitter, Facebook, Discord and / or Instagram (and eventually as one’s “avatar” in the Metaverse)
Collectibles: Includes virtual memorabilia such as NBA’s Top Shot, which creates virtual trading cards of memorable moments, such as a game-winning dunk by LeBron
Avatars are the Largest Category of the Digital Art Market at Over 70%
Art is an underestimated and often misunderstood asset class. According to crypto research firm , the total value of artwork across the globe is nearly $2 trillion, and the industry does over $50B in revenue per year.
Eliminate Fraud: Fraud is rampant in the art world – it is estimated that and dealers often embellish a work's record of ownership (known as "provenance") in an attempt to increase the price. NFTs can eliminate both problems, using cryptography to guarantee authenticity and the immutable nature of the blockchain to assure provenance
More on these three models is coming sections
