Digital Art Entrepreneurship: NFT Art Market
On a global scale, art is one of the least regulated industries. Today, opaque pricing policies, source information and taxes are one of the major obstacles to the development of the art market. While NFT art offers an alternative for those who want to expand their digital investment portfolio, it also provides new opportunities for the art market in terms of transparency, reliability and appealing to large audiences. As the interest in businesses that can be purchased as Non-Fungible Token art is increasing day by day, new NFT art platforms have started to be established by entrepreneurs. While NFT is showing us the absurd aspects of the art world and its obsession with originality, it is a matter of debate whether what is displayed on the platforms is art. Why would anyone want to pay for the inimitable token of the image, which has millions of identical copies?
Is it absurd to pay half a million dollars for an illustration that exists in millions of identical copies? Buyers pay an extra half million dollars for an immutable Non-Fungible Token (NFT), which will forever reside on the blockchain as a certificate of authenticity, proving the buyer’s ownership. When we examine the history of art, this should not seem too far away. The art world has been dealing with proof of authenticity for a long time already. The importance of originality, far from all artistic concerns, continues its tradition with the artist signing his work for centuries.
The art market is divided into for-profit and non-profit institutions, both parties can benefit from NFT. In this article, I have discussed the points that entrepreneurs should pay attention to in the transfer of profit-oriented institutions, whose commercial models are shaped by the sale of art, to NFT platforms, based on my experiences. When I examined the existing NFT platforms, I saw that they made amateur mistakes because they did not know the contemporary art world. For this reason, I wanted to share market information as a recommendation for digital art investors.
In my article titled Art Collecting as an Investment Tool, I mentioned that works of art have become a collateral tool today. What I mentioned in this article by saying that truly pioneering and good art does not always show a sudden rise in the market, forms the basis of the discussions about NFT Art today. Be sure to check out the information I’ve compiled about discovering artists, staying tempted by popularity, and the importance of personal taste. The three key approaches to consider in this article also apply to the bullish NFT art market today. Every digital platform established by ignoring the fundamental dynamics of the art market poses a risk factor for entrepreneurs and investors.
The arts industry is an event-based industry. Although the events were suspended due to the pandemic, we witnessed that the market has become more digital than ever in the last year, with online viewing rooms and sales. Today the best art fairs give VIP screenings before galleries open. In the future, there may be digital version openings, previews, and we may be fighting for the first editions of the works that galleries put on sale digitally. So much so that if the world’s leading galleries offer editions of the best artists for sale as NFT, there are many collectors who would buy them. However, nowadays NFT art platforms are far from this approach and realistic investments. There is a good chance that you will soon be disappointed with the financial value of the business you buy today.
There is a solution to this problem, which is that the founders of the NFT platform exchange ideas with the players of the art market. NFT platform founders should definitely get ideas from people who are familiar with the art world, such as leading gallerists, curators, market experts, and art consultants. You ask why? Because of the investments of mega-collectors and the responsibility of being a cultural professional, a lot of information about the art market is not available to the public, but there is information that you can learn through interviews with these people. Even if you invent the best NFT platform in the world today, unless you get approval from the mega-players of the art market and the leading museums, it is possible to be seen as left out of the arts.
NFT platforms, when positioned correctly, can be in a much more advantageous position than today’s auctions. Although auction houses offer publicly available prices, they are not completely transparent to the government. For example, it is not obligatory to disclose the names of individuals or collectors who put the works at public auction and bid on the works. Let’s remember that the provenance (source) information in the auction catalogs often says private collection or sold to a private collection in the results. Although good faith efforts are made to ensure the provenance of the artwork in the most complete way possible, most bidders to purchase the artwork are forced to accept documents provided by the owner, and few provenance records are complete. However, NFT has the opportunity to provide complete confidence in this and similar source reliability issues.
When we consider taxes on the scale of the global art trade, artworks are moved from one country to another by changing borders, and each country has its own legal framework to regulate imports and exports. Sending or bringing business abroad also means paying customs duties. When the fees such as packaging, crate and shipping fees are added to this, there is a great cost. Digital artwork sales completely eliminate these costs. Imagine a future where your entire art collection is digital. A potential collector from anywhere in the world can see a piece of work from your collection for sale, instantly bid at any price, buy it, and instantly transfer it to their collection, all anonymously. Establishing a platform that can benefit from all these advantages in the long term can only be possible by adopting the basic dynamics of the art market.
