New Art Basel Report Says NFTs Are On the Rise: What Does That Mean for Black Artists?
by Yvonne Bynoe
Art Basel & USB recently released The Art Market 2022, a 279-page report about the global art market and for the first time NFT data has been included. The author is economist Clare Andrew, PhD who has been preparing this report since 2005. In case you’re not clear about what an NFT is, Forbes magazine defines NFTs (non-fungible tokens) as:
“A digital asset that represents real-world objects like art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.”
NFTs are lines of code minted on a blockchain that represent a digital work “living” on another platform on the internet. Therefore, you don’t hang an NFT on your wall. Instead, you hold the digital asset in your personal encrypted wallets. Interest in art NFTs rocketed in the aftermath of Christie’s March 2021 auction of “Everydays—The First 5000 Days,” by digital artist Mike Winkelmann, known professionally as Beeple, for $69 million dollars. Subsequently, more artists from around the world began minting their work as NFTs for sale on a range of platforms including OpenSea, Rarible, Mintable, and Makersplace.
Businessman and rap music mogul, Shawn “Jay-Z” Carter commissioned artist Derrick Adams to make an NFT to commemorate the 25th anniversary of his 1996 debut album, Reasonable Doubt. The NFT draws from the album’s original cover photograph. Adams had painted a physical version of the image which is part of Carter’s personal art collection. In June, 2021, Sotheby’s sold Adam’s NFT for $139,000 with a portion of the proceeds going to the Shawn Carter Foundation founded in 2003 to aid underserved Black children.
Derrick Adams, Reasonable Doubt NFT
Although art NFTs represent only a slither of the market, their growth is nevertheless indisputable.
In 2019, only 2% of total NFTs sales were art related according to the Art Basel & USB report. The report goes on to say that sales figures increased in 2020 to 24% but then the sales percentage for art NFTs dipped to 14% in 2021 as collectible NFTs began to dominate.
According to the Art Basel & USB Report in 2019, there were 1,370 NFT art buyers rising to 131,000 in 2021. Furthermore, in 2020 only $20.1 million dollars worth of art NFT had been transacted. However, in 2021, sales were $2.6 billion. The report also states that 74% of high net worth individuals had purchased NFTs in 2021 with a median of four per person.
NFTs have been touted as a new option for Black artists who have struggled to navigate the art world and sell their work in traditional galleries. The supposed advantage is that NFTs cut out the middleman and give an artist unfettered access to the entire world of art collectors.
Some Black artists have indeed benefited from minting NFT art.
Nyla Hayes, Long Neckie Ladies series
Thirteen-year-old Nyla Hayes, who was interviewed on NBC’s Today Show on April 7, 2022, has reportedly become a multimillionaire by selling her NFT art. Hayes, who has more than 20,000 followers on Instagram, became famous for her art NFTs of women such as the late Supreme Court Justice Ruth Bader Ginsburg and comedian Lucille Ball. Her series, Long Neckie Ladies, consisting of 3,000 images, depicting women of assorted hues with elongated necks became a hit. Entrepreneur and investor Gary Vaynerchuk (Gary Vee) bought one of the works from the series for the equivalent of $3,311.00. Vaynerchuk’s purchase undoubtedly led to more sales of Hayes’ NFT art work.
Canadian artist Lana Denina is reported to have sold $300,000 worth of her Mona Lana Collection, a digital art series she began creating in November of 2021. In a CNBC interview Denina stated, “The Mona Lana collection includes 500 unique portraits of women…Each portrait was generated by code with 112 different traits.” According to Black Enterprise magazine, “Denina earns 20% royalties on secondary sales of her work.”
The secondary market is very important to NFT artists.
Lana Denina, Mona Lana Collection
The Art Basel & USB Report states that in comparison to traditional art collectors who tend to hold onto their acquisitions for more than 10 years with an average resale of 25-30 years, NFT collectors typically resell the work in a month. Despite the enthusiasm for NFTs among tech evangelists, the picture isn’t altogether rosy for visual artists. It appears that, similar to the real world, the majority of visual artists in the digital realm aren’t making a great deal of money from their NFTs.
The article, “Most Artists Aren’t Making Money Off of NFTs and Here are Some Graphs To Prove It” by Kimberly Parker (Medium, April 19, 2021) states that in 2020, the majority of NFT primary sales (33.6%) were for $100 or less and 20% of primary sales were $100-200. The Art Basel & USB report indicates that in 2021 primary sales prices rose to $1,462. However, it should be noted that Ethereum network and marketplace costs would be deducted from that sum.
While NFT proponents cite the lack of barriers to entry as a key reason for Black artists to mint NFTs, it seems that the “Old Boy Network” has migrated to the metaverse.
There have been ample complaints that many of the top NFT marketplaces require creators to apply or be invited to list their work. Moreover, some platforms do not accept or invite non-White artists. Consequently, Black entrepreneurs and creatives began developing companies and platforms to host and promote the work of Black artists selling NFTs.
In another blow to the notion that NFTs remove the art industry gatekeepers, the Art Basel & USB report says that only 8% of high net worth collectors have used NFT platforms. The vast majority of wealthy collectors were still relying on traditional trusted sources for their NFTs such as galleries and auction houses such as Christie’s, Sotheby’s and Phillip’s. Unsurprisingly, it also doesn’t seem likely that a totally unknown Black artist is going to make a killing with NFTs. Successful artists usually are part of strong online communities who robustly promote them and their NFT drops on social media platforms.
Overall, while NFTs are likely here to stay, it remains to be seen how financially revolutionary NFTs will be to Black artists long-term.
Some internet architecture experts say that most NFTs bought today will be worthless in 10 years because of the technology and the vagrancy of startup companies. If the startup business that hosts an NFT on its platform folds or the link for the NFT in the blockchain is broken, then the NFT becomes “empty” or worthless. As it stands, a company has no legal duty to maintain the structures associated with the NFTs that it sells. The rampant trading of art NFTs has led to accusations that NFT art has more in common with the stock market than with the art market. The allegation is that NFTs are not art but rather unregulated financial products that transfer wealth to and among a relatively small group of investors.
Those assertions should concern Black people. Increasingly, Black people are being encouraged to enter the world of cryptocurrency, which is central to NFTs, as a pathway to wealth. What rarely gets discussed is that cryptocurrency, attracts a large number of White supremacist groups.
White nationalists groups bought bitcoin early with the intention of creating an alternative financial structure and have funded their operations from their profits. The far right fringe is also more likely than the general public to invest in cryptocurrency.
The Southern Poverty Law Center, a respected not-for-profit organization that tracks hate groups, stated in an December 2021 article, “How Cryptocurrency Revolutionized the White Supremacist Movement”:
“The estimated tens of millions of dollars’ worth of value extreme far-right figures generated represents a sum that would almost certainly be unavailable to them without cryptocurrency, and it gave them a chance to live comfortable lives while promoting hate and authoritarianism…”
Furthermore, legal concerns abound with regard to NFTs, including copyright and trademark infringement claims as well as disputes over ownership rights.
There are also digital art forgers stealing traditional artists’ work and minting NFTs from them. An NFT platform also isn’t financially liable to artists or to collectors if their platform is hacked into and the NFTs it hosts are destroyed or stolen. OpenSea and fellow NFT platform LooksRare have been named in a $6 million negligence lawsuit filed in February of this year in federal court in Nevada. The plaintiff, Robert Armijo, had three NFTs stolen in a “phishing” attack. Armijo had paid approximately $300,000 for the three NFTs. Armijo’s lawsuit claims that the two platforms failed to implement “common sense and reasonable security measures” to protect users from fraud and from the sale of stolen NFTs. Within hours of the phishing attack, one of Armijo’s stolen NFTs was listed and sold on OpenSeas; the other two were sold on Looksrare. The plaintiff therefore further argues that the defendants “have taken advantage of the unregulated digital asset market and have profited enormously from the sale of stolen NFTs, including the NFTs that were stolen from [him].”
The NFT universe is also rife with scams. The most notable is the “rug pull” where a fraudulent founder promotes an artwork or art project and seeks investors. The fraudulent founder then absconds with the investors’ money and never delivers the NFTs. One of the biggest “rug pulls” to date is Baller Ape Club, which was a collection of 5,000 NFTs sold at a price of 2 SOL each, worth around $2 million in total at the time. Directly after the sale, the project administrators deleted all relevant social media accounts, leaving no trace that they ever existed. An investigation was launched, but it’s unlikely that investors will recover their money.
It’s foreseeable that in the near future federal regulations will be enacted to rein in folks who are using cryptocurrency based platforms to launder money to fund domestic or foreign terrorists or to defraud people. Also, likely on the horizon are new Intellectual Property laws governing NFT creators’ use of copyrighted and trademarked content and the licensing of art NFTs. However, it’s less apparent right now how new laws would impact visual artists who create NFT works.
There are plenty of reasons at this juncture to be skeptical of the ability of NFTs to empower a large number of Black visual artists. The chief reason among them is the relatively small number of NFT art collectors. That number gets exponentially smaller when it comes to how many art NFT collectors, given what we know of the crypto world demographics, have a desire to acquire NFTs minted by Black artists.
In terms of whether an artist should become involved in NFTs, the short answer is maybe.
If you’re not selling your physical art works, minting and selling NFTs may be an alternative route for you to investigate. It’s a very different milieu than conventional visual art, so be prepared to learn how it operates. In addition, if you’re generally satisfied with your physical artwork sales and have the additional time and/or resources to explore NFTs, it may prove financially beneficial—especially if you have a large online community. If you do decide to mint NFTs, conduct due diligence on hosting platforms and consider joining an NFT collective that can help you with not only creating your art NFT but also promoting it to buyers.
All that is certain is that technology is always changing and new laws could dramatically impact cryptocurrency and the platforms that host NFTs. The best advice for artists is “Play at your own risk.” This means get in now, make some money if you can, and be ready to cash out quickly if the bottom falls out.
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Yvonne Bynoe is the founder of the curated online platform @shelovesblackart which highlights visual art from the African diaspora to encourage more people of African descent to collect art. She is a former attorney, cultural critic and author of several popular books on popular culture.
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