A new NFT [non-fungible token] initiative, artwork, or even a culinary digital asset is announced almost every day.
The creative industry throughout the globe has embraced these digital tokens in the hopes that their prices would follow a similar path as Bitcoin’s – a chance for early adopters to earn a lot of money. And there have been artists who have earned a lot of money thus far. Consider Beeple’s NFT project of 5000 digital artworks, which sold for $69 million at a Christie’s auction, or the Bored Ape Yacht Club series, a limited edition of 10,000 digital avatars that grant membership in an online social club, which sold for $300,000 apiece.
In the Middle East, where artists like Kristel Bechara and Aya Tarek have created their own NFT ventures, the movement is just as strong. Three Middle Eastern NFT markets raised roughly $10 million last year. Odiggo, a Y Combinator graduate, began as a vehicle parts marketplace in Egypt before pivoting to become an NFT marketplace in the last few months. Now, Art Dubai, the region’s biggest art festival, is devoting an entire area to digital art and NFTs.
What is a non-fungible token, exactly? NFTs are the digital equivalent of artworks and collectibles, if Bitcoin and other cryptocurrencies are the digital equivalent of cash. Consider Leonardo da Vinci’s Mona Lisa, the most renowned painting in the world, which stands alone at the Louvre in Paris. The Mona Lisa is available in a variety of reproductions, prints, and digital copies, but there is only one original version – the real painting itself. NFTs are simply a certificate that identifies the original digital asset and allows it to be sold and acquired, with ownership transfer recorded on the blockchain – the same digitally distributed ledger technology that cryptocurrencies utilize. It may be applied to any kind of digital product, including artworks, gifs, music, tweets, and lines of code, however it is presently most popular in the art industry.
However, one problem with NFTs is that digital items or assets are, by definition, repeatable. The infamous “Charlie Bit My Finger” video was sold as an NFT for £500,000, with the new owner removing it from Youtube. However, a quick search will turn up dozens of copies of the viral video; they may not be the original, but the content is identical.
“Adoption [of NFTs] into a larger audience of mostly millennials, gen X and gen Z collectors, as well as a few historical new media collectors, snowballed as a result of media hype.” According to Chris Fussner, curator of Art Dubai Digital, “I believe this reflects a change in demographic buying power and habits.” “It has transformed value judgments and frameworks for digital art and digital objects in various ways.” There is a value framework in place for these digital items, but it is still in the early stages of development; price swings have been extreme and will continue to be so.”
Is this craze just a bubble waiting to burst, or will NFTs become the standard method of buying and selling digital assets, especially once we’ve all arrived in the metaverse?
NFTs, according to Dima Abdulkader, co-founder of Emergeast, an online art gallery and marketplace featuring artists from the Middle East and North Africa (Mena), assist to “officialize” digital artists and their work.
Emergeast, which launched in 2014, was the region’s first marketplace of its kind, and in November 2021, it became the Middle East’s first online art gallery to host an NFT exhibition, “Meta Mena,” curating digital artwork from Mena-based artists on NFT marketplace OpenSea, the world’s largest NFT marketplace.
According to co-founder Nikki Meftah, Emergeast debuted at a period when “people were not confident with purchasing art online,” but as customers got more familiar with online shopping, the firm saw an increase in sales, notably during the epidemic. Emergeast has added additional capabilities to its platform with each new technology wave, most notably taking Bitcoin and Ethereum payments. According to Meftah, collecting NFTs is a “natural extension” of its digital first strategy.
Impact of technology
Advancements in technology have a direct influence on the art world. From technology and tool developments to social media and online auctions, there’s something for everyone.
Dawn Ross, director of collections at the Jameel Arts Centre in Dubai, argues that “there is an aspect of technology that offers up new possibilities and new forms of cooperation.” “We’re seeing artists collaborate with technologists, something we didn’t have 20 years ago.”
While some artists use technology to make their work, others have remained to their conventional tools while using the internet and social media platforms to construct their own virtual galleries.
“It’s given artists a lot more attention,” Meftah adds. “They’ve been able to develop their own reach through Instagram, and it’s given them a lot of power.”
NFTs are meant to exemplify this feeling of power by allowing artists to benefit from their work at every sale.
“One of the biggest benefits of NFTs is that artists may register to get a royalty fee anytime their work is sold on the blockchain,” Meftah explains. “The artist benefits from the resale and is aware of its destination. It also provides individuals a sense of belonging in the art world.”
Some NFTs function as a key or invitation to certain organizations and activities, resulting in the formation of an online community such as the Bored Ape Yacht Club. The city of Dubai has the most NFT activity in the region, with many makers and purchasers residing there, which is one of the reasons why Art Dubai opted to include a digital art segment this year.
“Over the past couple of years, the digital art sector – and specifically the art / NFT field – has witnessed tremendous development. “We’ve always been a fair company that puts innovation first, and we thought now was the ideal time to take a 360-degree look at the top global competitors in this field,” Fussner adds. “We identified a need to develop a connection between the global crypto sphere and the international art market because of the Dubai-specific backdrop – the city is fast becoming one of the world’s crypto-capitals and home to a whole new generation of entrepreneurs and collectors.”
Despite the increase in activity and attention, Fussner notes that “it’s still early days for NFTs in the larger art environment.” There are many gray areas, minimal regulation, and limited insight into their long-term viability.
“Geography is still very essential because of regulatory frameworks,” Fussner argues, “even if we live in a digital society.” “They’re essentially creating geo-fence marketplaces, where particular digital goods prosper in certain places but struggle in others.” I believe that regulation will be welcomed if it promotes innovation while also safeguarding the end consumer in a reasonable manner. There’s a good likelihood that AML [anti-money laundering] rules and regulations similar to those in the United Kingdom and the United States will be applied to NFT AML legislation, which I believe will result in a change in purchasing.”
NFTs are purchased using cryptocurrencies, and the majority of NFTs are sold with Ethers on the Ethereum network. Users are required to pay “gas money,” a charge paid to the miners who maintain the Ethereum blockchain, in order for the transaction to be completed and recorded on the digital ledger. These costs may sometimes be more expensive than the NFT; also, if a losing bidder pays a larger gas charge to acquire a digital asset during an NFT auction, their transaction will go through quicker, and the winning bidder will lose both the NFT and their money. Transacting on the blockchain is also an energy-intensive and environmentally hazardous activity. According to research conducted by Money Supermarket in the United Kingdom, the average NFT transaction consumes 340 kWh of energy, which is equivalent to more than a week’s worth of energy consumption for the average UAE citizen, and has a carbon footprint of 241 KgCO2, with an electricity cost of $50.
Intellectual property (IP) rights and safeguards are a particularly hazy subject. Artists may sell their work as NFTs while still keeping their copyright. Anything recorded on the blockchain is a contract and proof of ownership by default, but what happens when a digital asset is reproduced or reshared by others on the internet or in the metaverse?
“Earlier, there were problems about internet art and publishing photographs online, and who owns the copyright,” Ross explains. “With social media and how artists utilize this technology, the culture of how digital photos are used has altered and developed.” With these kinds of changes, it’s a fascinating moment, and it takes time for things to settle down. There are always ambiguities.”
There are currently no regulations specific to NFTs, and it is unclear whether existing laws and regulations will suffice for issues such as intellectual property, financial regulations, and transaction data security, though one benefit of blockchain is the increased transparency it can provide to the art world.
“Blockchain encrypts all of this information [of transactions], so it can’t be tampered with.” You know who owns the piece of art and who is the collector. There’s a lot more openness than there was in the old art scene. “You can track this art piece and determine who the previous owners were,” Alia Kawar, Emergeast’s NFT project manager, adds. “In the long run, since everything is public and recorded, it is a means to safeguard copyright and intellectual property.”
Brands all around the globe reacted to Facebook founder Mark Zuckerberg’s vision for the future of his social network and the construction of his company’s metaverse by building their own NFTs and meta presence. Burberry, Prada, and Louis Vuitton are among the fashion brands who have adopted blockchain technology and are selling NFTs in their virtual fashion displays. Users will be able to buy digital pieces of apparel as NFTs for their avatars after the metaverse is filled with avatars. The metaverse may have the biggest potential for NFTs, since it allows users to replicate their actual life in virtual space by buying NFTs for anything their avatar wishes.
“Everyone will have an avatar, and our NFTs will be linked to it,” Meftah explains. “Our NFT collection will determine who we are as individuals.”