FTX Collapse Is Not The End Of NFTs For Crypto And Art – ARTnews.com

The traditional art market’s acceptance of NFTs has been challenging. While some projects have been financially successful and critically acclaimed, others have languished, unsold and buried in a pile of visual noise. And just as the art world was warming up to NFTs for art, thanks to thoughtful projects like Frank Stella’s Geometries on the Artist Rights Society’s ARSNL platform or Peter Wu’s digital exhibitions at the Epoch Gallery, the crypto landscape has seemingly collapsed, leaving a chill that many fear will turn into a permafrost.

Unprecedented volatility in the crypto market – since bitcoin peaked at $68,000 last November, it and Ethereum have lost 75 percent of their value – culminating in the collapse of digital currency exchange FTX, a moment many have compared to crypto’s “Lehman moment” . As co-leader of Cowan DeBaets Abrahams & Sheppard LLP’s Fine Art & NFT Practice Group, I have received a steady stream of questions from clients and friends asking whether art NFTs are done since FTX’s demise.

My short answer is no.

While the miscalculations—or probably more troubling causes—behind the dramatic cratering of crypto should not be ignored, neither should the enduring potential blockchain technology offers regarding myriad innovative opportunities to enhance existing paradigms in the art world.

Despite the rapid growth and education about the existence and potential of Web3 technology, there continues to be a conflation of blockchain, crypto, NFTs and digital assets that leads to consumer confusion, especially in the art world. The key here is to understand blockchain technology and NFTs use crypto to work, but this is not the same as speculating on crypto. Thus, using crypto as a tool to record NFTs on the blockchain is a real function that justifies actual value if people want to continue to record information on the blockchain. This must be distinguished from the artificial value speculation irresponsibly created by pumping up a desired crypto future.

Furthermore, NFTs are not magical entities that create value where none existed before. NFTs are the digital equivalent of empty cardboard boxes that can serve as packaging for possessions, tools or experiences. An immediate positive result of the crypto winter and FTX bomb cyclone is the revelation that the packaging is being overhyped to have significant value in itself. The genuine value in the long term will be what it is associated with the packaging.

In the art world, this means digital packaging of meaningful artistic expression that will appeal to both digital and traditional collectors.

What is desperately needed are reliable industry-specific standards and protocols adopted on a broad scale, rather than piecemeal efforts tied to limited commercial enterprises. Some standards and protocols may be generic and relevant across different marketplaces, but we need more than a one-size-fits-all solution.

After the NFT-driven crypto-orgy of 2021, when the boundaries between markets became porous to the point of non-existence, 2022 has seen the re-establishment of market boundaries and a recognition that not all NFT projects are equal or universally relevant. The devaluation of crypto will hopefully hasten the return to more thoughtful approaches. Planning everything from individual projects to long-term business strategies must have a more vertical perspective, taking into account consumers’ specific desires and appetites. It turns out that while there may be overlap, consumers interested in video games or collectibles may not be the same as those interested in art projects or philanthropic ventures.

With the promotion of a number of digital art projects to be showcased at the upcoming Art Basel Miami, we can see that NFTs in the art market are far from over – in fact, they have only just begun. Take, for example, the exciting projects commissioned by pro-climate NFT marketplace Aorist.art, including those by Nancy Baker Cahill in conversation with Sophia the Robot, and Quayolas Effects du Soir. Or Tezos and Art Basel’s partnership that will allow visitors to create NFTs with German artist Mario Klingemann, which will generate AI portraits of fairgoers. That’s without even mentioning the many independent projects displayed in gallery stands and at satellite events.

NFTs for art are not dead, although we may need to rethink the term “NFT” so that it is less evocative to the general public of Ponzi schemes and blind speculation. Blockchain technology still offers great untapped potential to effect paradigmatic changes in the art world, from trusted certificates of authenticity to enforceable implementation of profit sharing, automatic licenses and restrictions on the display or resale of artworks. With less speculation, actual innovation and thoughtful advocacy for artists’ rights, NFTs could become the rocket fuel of 2023.

Let’s not throw the baby out with the bath water.

Rather, let’s focus on developing market-specific conventions that can serve as the basis for sustainable business practices; development of more sophisticated, industry-specific business tools; and a compelling reason for those passionate about the arts to be interested in the potential of blockchain to bring transparency, trustworthiness and fairness to a historically opaque and lopsided marketplace.

Like the dot com bust in 2000, the exponential growth of the crypto market over such a short period of time was based on superficial, unsound economic principles, and its implosion will clear the way for sustainable development. Like the dot com collapse, where the survivors went on to establish the enduring foundations of online commerce, these blockchain businesses built on solid values ​​will emerge from the tundra to serve as the bedrock of future digital innovation.