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The Art NFTs and Their Marketplaces
Lanqing Du∗, Michelle Kim†, Jinwook Lee∗
∗Drexel University, Philadelphia, PA 19104, USA
†Horace Mann School, Bronx, NY 10471, USA
Email: jl3539@drexel.edu (Corresponding Author: Jinwook Lee)
Abstract—Non-Fungible Tokens (NFTs) are crypto assets with
a unique digital identifier for ownership, powered by blockchain
technology. Technically speaking, anything digital could be
minted and sold as an NFT, which provides proof of ownership
and authenticity of a digital file. For this reason, it helps us
distinguish between the originals and their copies, making it
possible to trade them. This paper focuses on art NFTs that
change how artists can sell their products. The art NFTs also
change how the art trade market works since NFT technology
cuts out the middleman. Recently, the utility of NFTs has become
an essential issue in the NFT ecosystem, which refers to the
owners’ usefulness, profitability, and benefits. Using recent major
art NFT marketplace datasets, we summarize and interpret the
current market trends and patterns in a way that brings insight
into the future art market. Numerical examples are presented.
Index Terms—Non-Fungible Tokens (NFTs), Digital Art, NFT
Marketplace, Machine Learning, Principal Component Analysis
I. INTRODUCTION
A. NFTs and the Art Industry
In April, 2022, Sotheby’s sold a small receipt paper of the
1959 project called “Zone of Empty Space” by Yves Klein,
the French conceptual artist, for $1.2 million. It was a part of
the ledger where Klein recorded all sales and resales of the
1959 artwork ( [11]). More than a half-century later, thanks
to blockchain technology and NFTs, this ledger-keeping has
become an essential part of the art industry. ( [1], [2])
The phrase “NFT art,” we believe, is not the most accurate
phrase. NFT itself is not the art, it is simply a technology
that increases the utility of the art, by functioning as a proof
and traceability of the ownership. ( [3]–[5]) Thus, throughout
the rest of the paper, we will be using the phrase “art NFT”
as opposed to “NFT art.” There are three types of art NFT:
digital art (stand-alone), PFP (generative art), and Phygital art
(linking physical art with the NFT). ( [6]–[8]) The very brief
history of NFTs begins with digital art and its pioneer Kevin
McCoy. ( [9], [10]) In 2014 McCoy and Anil Dash created
the first stand-alone NFT, Quantum.( [12]) Prior to Quantum,
digital artworks were “fungible,” meaning that there were
multiples of the same artwork. Following McCoy, artists like
Mike Winkelmann, better known as Beeple, and companies
like Larva Labs, creator of CryptoPunks, took center stage on
the NFT market.
The launch of CryptoPunks marked the creation of a new
category of art NFT: PFP (Profile Pic) created using a tech-
nology called generative art. PFP art including CryptoPunks,
Bored Ape Yacht Club (BAYC), Doodles, and recently Clone
X doubled as a form of art and a status symbol on various
social media platforms. In the last couple of years, BAYC be-
came widely popular within the NFT community and beyond,
with the most expensive piece, #8817, selling for $3.4 million
in 2021. ( [13]) Yuga Labs, the creator of BAYC, have fully
experimented with and implemented business strategy models
like token-gating. Token-gating is a way of adding value to
an NFT by granting the holder exclusive access to content,
community, events, and physical products, in addition to the
digital token. ( [14]) BAYC was also the first art that granted
full commercial rights to the Intellectual Property (IP) to its
holders, who were now able to commercialize their Bored
Apes. Unsurprisingly, popularity factors for BAYC include
commercial rights and exclusive access to spin-off collections
like Bored Ape Kennel Club (BAKC) and Mutant Ape Yacht
Club (MAYC) both of which have high resale value as well
access to off-line events including the annual Ape Fest.
If commerce platforms like Nifty Gateway and Superway
became well-known for their curation of digital art, mar-
ketplaces like OpenSea became highly successful from their
listing of PFP art, such as the BAYC. While digital art centers
around individual artists, like McCoy and Beeple, PFP centers
around companies, Yuga Labs and Larva Labs being the most
notable, where they curate communities, introduce roadmaps
and coordinate on and offline events and launches.
There are not yet any notable cases of the third type of
art NFT, “Phygital” art (Physical and Digital art). Yet, by
linking NFT (digital proof of authenticity) with physical art,
it will revolutionize both the NFT and the traditional art
market. The prime challenge is finding an optimal method of
linking the two; Quick Response (QR) codes, Radio Frequency
Identification (RFID), and Near Field Communication (NFC)
are a few ways.
Art NFT is changing the landscape of the art market and
its players including, the artist, buyer, and platforms (galleries,
online commerce platform). While in the traditional art market,
galleries and auctions and their agents functioned as an inter-
mediary between the artist, the artwork, and the customers,
the emergence of NFTs has bridged the gap between the three.
Now the artist or the creator can list and mint their artwork
directly on an online platform (with little to no commission
fee) and oftentimes connect directly with their buyers. Though
there are still technical, ethical, and sometimes legal issues
associated with art NFT, it will shift the dynamic between the
artist and the buyer, the role of the intermediaries (auctions,
galleries, online platforms), and most notably the trends and
value surrounding art.
arXiv:2210.14942v1 [q-fin.ST] 23 Oct 2022