Where is the value in NFT art? The answer is in digital scarcity

All anyone wants to talk about NFTs are the astronomical prices they’ve been fetching. But what is underneath this phenomenon and how can it empower our artists? Digital scarcity is the foundation for limited supply and building the value behind NFT Art

As the world and market of art increasingly transition into the digital sphere and world of blockchain, million-dollar auctions and celebrity endorsements have dominated the conversation around NFT art, with pieces like the ‘Bored Ape #232’ selling for a handsome sum of 1080.69 ether ($US 2.85 million). 

However, looking beyond the headline-grabbing sales figures and hype-based speculation, NFT are delivering something fundamentally revolutionary for the artists, sellers, and consumers of digital art. 

The biggest reason? Digital scarcity.

In the digital art landscape, where counterfeiting and replication of art are all the more difficult to combat, this has already reshaped the value of digital ownership. 

How has digital art been valued in the past? 

Unlike physical artworks, the inability to physically “collect” or uniquely own a piece of digital assets has long made digital art both financially and culturally marginalised in the traditional art world. 

Traditional artworks have drawn their value in the marketplace from the beauty, cultural notoriety, and associated stories of each artist. However, it is the rarity and beauty together that have afforded the astronomical sums paid for works like Jackson Pollock’s ‘Number 17a' and Pablo Picasso’s ‘Le Rêve’. Much like diamonds or gems, the scarcity or finite amount of each of these goods along with their place culture has defined their value. 

Jackson Pollock’s ‘Number 17a’ sold for $202 million in a private sale

What is fungibility and what is an NFT? 

In plain terms, fungibility is the ability for one good or asset to be readily exchanged for another of the same kind. Where alternatively, goods or assets that aren’t interchangeable, like unique collectibles are considered non-fungible.

In the material world, this central idea manifests itself in collectibles like tradable cards, memorabilia, and of course art, with their physical rarity informing their value in the market. Within a digital environment, Non-Fungible Tokens (NFTs) are the instrument that allows digitally native art to be non-fungible, scarce, and collectible. 

Blockchain networks, just like the physical world have fungible or non-fungible assets, with the most common fungible assets being currencies such as a bitcoin (BTC). NFTs are unique units of data or “tokens” that are stored on a blockchain - which is an unchanging, publicly accessible, and verifiable digital ledger - that can be sold and traded.

What does digital ownership mean for artists, sellers, and consumers of NFT art? 

The true intrinsic difference between owning NFT artwork or a jpeg copy of the same piece may be a matter of personal belief and cultural shifts. However, the practical distinctions of  NFT art are already apparent and transformative. 

NFTs are some of the easiest ways to commodify an artists’ work and empower them financially. Once minted, they can be continually sold and traded, just like any secondary market for collectibles. Artists can even earn automatic royalties on NFTs. 

By connecting ownership of these artworks to NFTs on a Blockchain network, each piece of digital art has the added value of verified scarcity, traceable ownership, and provable authenticity. Just like physical pieces, this allows digital artists to create originality in their works, owners to engage in the clout of authenticity, commercial displayers to have the comfort of legal compliance, and buyers and sellers to highlight the value of provenance. 

Whether the speculative trend of NFT art marketplace continues or not in the near future, what is certain is that NFTs have transformed the economics around digital art. 

Want to explore the value of NFT Art for your company or workspace? Intrigued by the potential of NFTs to empower your digital artwork? Let the team at Sugar Glider Digital find the perfect solution for you. 

Words by Cameron Thach