Footprint: Will NFT Art Replace Traditional Art?

If we start counting from June 2020, it has been over a year since the beginning of the "DeFi Summer". During this time, the entire DeFi world has grown rapidly like mushrooms after the rain, facing various challenges, yet its resilience remains strong.

This year, besides the continued rapid growth in data in various blockchain projects, distinctive public chains have also blossomed. Although NFT is still a niche area in the field of encryption, with more and more celebrities and high-net-worth collectors entering the market to invest in NFT products, and well-known institutions participating in NFT project deployments, following the momentum from last year's "DeFi Summer", more people believe that this year is the "NFT Summer"!

What is NFT?

NFT stands for non-fungible token, which is a unique blockchain project with blockchain management rights, mainly applied in areas such as gaming props, crypto art, and social tokens.

In 2021, the NFT market experienced explosive growth, with its market value skyrocketing from $55 million in mid-January to $5.1 billion in October, a 9282% increase. The number of NFT holders also surged from an initial 190,000 to 560,000, a 195% increase. The daily trading volume of NFTs significantly increased in August 2021, with the number of traders continuously rising until October, gradually returning to rational levels.

Market Value & Holders (since January 2021), Data Source: Footprint Analytics

Trade Volume & Traders (since January 2021), Data Source: Footprint Analytics

The influence of NFTs is continuously expanding. NFT games are usually the first to attract attention. Data from Footprint Analytics shows that the popular Axie Infinity, its token AXS, has seen significant increases in both trading volume and price since June 2021. The price has surged from less than $1 at the beginning of the year to a recent high of $135.

Price & Vol Trend: AXS (since Jan 2021), Data Source: Footprint Analytics

Although the rapid development of NFT games is impressive, NFT art is the most compatible with NFTs. Art and collectibles account for 84% of the total NFT market volume. The most notable platform is OpenSea, which claims to hold 97% of the NFT market share, facilitating transactions of art, music, domain names, virtual worlds, trading cards, collectibles, sports, and functional assets, with art collectibles proving to be the most popular category.

Market Share of NFT Volume by Category since Jan 2021, Data Source: Footprint Analytics

Since Ethereum's "London Upgrade" EIP-1559 in August 2021, as of October 20, 2021, OpenSea ranks first in ETH burned, with around 80,000 ETH burned, accounting for about 14% of Ethereum's total burn. Axie Infinity also ranks sixth, indicating that NFT transactions have become an essential part of the blockchain world.

As blockchain NFT art development heats up, it also brings significant impacts to those in the traditional art industry. Traditional art galleries typically seek collectors willing to preserve works long-term, and the career development of artists plays a crucial role in the long-term success of galleries. The NFT art world, in terms of form and liquidity, has a significant impact on the traditional art industry, disrupting its established patterns.

NFT Art vs. Traditional Art

In March 2021, artist Mike Winkelmann, known as Beeple, created the NFT artwork "Everydays: the First 5000 Days," which was sold for $69.3 million. Winkelmann spent over 5,000 days creating a unique digital collage artwork composed of independent pieces. This artwork was registered and traded in NFT form on the blockchain, shocking the traditional art world and sparking discussions on the differences between NFT art and traditional art.

Compared to traditional art, NFT art has undeniable advantages that impact traditional art to varying degrees in four main areas.

1. Transparency of Information

For traditional art, information asymmetry is the biggest obstacle in buying and selling art. Many renowned galleries or collectors often spend a significant amount of time or money verifying the authenticity and transaction details of artworks. They also need to understand the seller's reputation and credibility through various channels to determine if the price aligns with the artwork's value. Both galleries and artists selling artworks want to know who purchased the artwork and what other artworks the collector has bought besides theirs.

For NFT art, all historical transaction information, including the issuer, exhibition records, and sales records, is completely transparent due to being recorded on the blockchain from the start. This transparency allows buyers and all users on the chain to have clear access to all information about the artwork. It also enables creators to easily track their artwork's whereabouts and current value. Through NFT artworks issued on the chain, every upload, update, and transaction is recorded, preventing counterfeit products and protecting the rights of both artists and collectors.

2. Lower Costs

Traditional art transactions mainly go through galleries and auction houses, where creators exhibit their works through intermediaries. Traditional artworks are generally larger in size, posing challenges for storage and transportation, leading galleries to pay substantial annual venue fees for storage. When artworks need to be transported, extra care is required to ensure their integrity, making transportation costs much higher than standard goods.

On the other hand, NFT artworks only need to be exhibited and traded on the chain, reducing high transportation, storage, maintenance, and legal costs compared to traditional art transactions.

3. Increased Exposure and Liquidity

An artwork's value depends on the artwork itself, but its price can only be realized through circulation. Traditional art transactions are heavily influenced by time, geography, and audience. Major art exhibitions are mainly concentrated in cities like New York, Berlin, Paris, and Hong Kong, catering primarily to the affluent. This results in limited clientele and poor trading volume, with the traditional art world facing challenges in exposure, limited audience, poor liquidity, and poor circulation.

On the contrary, NFT artworks present a different facet. Artists can choose to release NFT works on the chain, set prices for their works, and conduct transactions through platforms that integrate global art resources, bringing together artists, collectors, investors, and critics worldwide.

NFT artworks can trade 24/7, providing higher exposure and broader clientele. Collectors can even invest in NFT fragments, lowering the barrier to entry for collectors and expanding the audience to ordinary consumers. Additionally, the integration of NFTs with DeFi enhances the financial attributes of NFT artworks, allowing users to collateralize high-quality NFT assets in DeFi protocols to purchase new assets, increasing the liquidity of NFTs, a convenience not easily achieved with traditional art.

4. Clear Ownership

For traditional art, once buyers obtain a work from the creator, they can replicate it to continue trading in the secondary market. It is challenging for users unfamiliar with the work to distinguish between the original and copies, leading to ownership disputes and a decrease in the artwork's scarcity and value through continuous replication and dissemination. Additionally, artists do not receive royalties from secondary sales of traditional artworks, unlike NFT artworks where creators can earn secondary sales income through verifiable programming methods, increasing the total income for artists.

Substitution or Integration?

When traditional art collides with NFT art, it sparks various opinions, including skepticism from traditional artists but also garnering recognition and attention. The scarcity and uniqueness of NFT artworks drive demand, offering more openness, transparency, lower costs, higher exposure and liquidity, clear creator ownership, and more financial possibilities compared to traditional art, leading to NFT gradually replacing traditional art.

However, traditional art and NFT art are not mutually exclusive; they can coexist and integrate perfectly, permeating the physical and digital worlds. Collaboration between NFT art and galleries or auction houses can help artists showcase and sell their works, improving efficiency, reducing costs, expanding the traditional art audience, reshaping the traditional art world, and making the future art world more vibrant.

The above content is for personal perspectives, reference, and communication purposes only and does not constitute investment advice. If there are any clear misunderstandings or inaccuracies, feedback is welcome.

Footprint Analytics Website: https://www.footprint.network/
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About Footprint Analytics

Footprint Analytics is an all-in-one visual blockchain data analysis platform. Footprint solves the problem of cleaning and integrating on-chain data, allowing users to enjoy a zero-threshold blockchain data analysis experience for free. It offers over a thousand table templates and a drag-and-drop charting experience, enabling anyone to create personalized data charts in 10 seconds, easily understanding the stories behind the data on the chain.