Last year, On March
11, 2021, a non-fungible token created by the digital artist Beeple sold for an
eye-popping US$ 69 million, sending shockwaves across the global art community.
Soon after, more sales of these digital items that are kept on networked computer
systems, based on a blockchain, and worth millions of dollars followed.
Moreover, the
COVID-19 pandemic affected fewer people to visit and give money to art
galleries, which worsened their financial problems. Many people have done crazy
things, like selling priceless works of art, to fill budget gaps. Can NFTs
bring in the money that museums need so badly?
British Museum and
Academy of Motion Pictures are producing their insignia. A very early NFT from
a donor was okayed by the Institute of Contemporary Art in Miami. The Museum of
Digital Life is also an NFT of the whole museum.
Even though this
break in the art world has been going on for more than six months, museums have
rarely been interested in NFTs. As scientists who study the finances of nonprofits
and the rise of NFTs, crypto-assets, and other blockchain-related applications,
we see four main reasons museums haven't been able to turn the NFT trend into a
windfall of money.
NFTs are complicated.
People who run
museums know how to bring together education, art, and curation. NFTs are also
based on art, but they have much more in common with symmetric encryption than
traditional paintings, which are made up of statues and colors.
NFTs differ from
currencies such as bitcoin and Ethereum, designed to be interchangeable because
each NFT represents a unique item. Figuring out how NFTs should be handled,
stored, and valued is hard, and museum staff may not be used to making NFTs
quickly for auction.
Also, NFTs are
usually treated as crypto-currencies, and only a small number of businesses,
like art galleries, buy things with them regularly. Along with a lack of
financial knowledge and a culture that tries to minimize risks, there are legal
issues and insurance problems. So we can see why museums haven't rushed into
the market for NFTs.
Missing financial advantage
It can be hard to
figure out how a person who owns a piece of art is linked to a non-financial
transaction (NFT) about that piece of art. It might show up, or the NFT might
be a separate asset from the art itself. The art owners also keep ownership of
any NFTs made from their art after they are made and sold.
This splitting up
could mean that the art owner can't turn an associated NFT into a big payoff.
The value of an NFT is like the value of a painting: it has little to do with
what the chassis, canvas, and paint are worth. It depends on how much people
are willing to pay.
Musicians and artists
who control their work can and do mint NFTs tied to them. When art is in a
small museum, it is much harder to know how much it is worth as an NFT.
In the same way that
a book with the author's signature can be better than one without, an NFT made
by a musician of a popular piece of music can get the attention of collection
agencies.
On the other hand, a
book made by a museum and signed by an nft or the author is likely less
interesting to collection agencies. A gallery with an NFT made by an artist
could bring even more passion. To put it another way, even if a museum has good
art, that doesn't mean that making NFTs is a sure way to make money.
Musicians, not organizations, get paid in the NFT market.
One reason the market
for NFTs tied to art has grown is that customers see holding and buying NFTs as
a way to interact with and financially support the artist. More generally, the
value is decentralization, and NFT clients are much less likely to care if a
middleman gets involved.
One example of a
principle that was made to help musicians is the frequency of smart agreements
that protect the artist's royalties every time an NFT connected to their work
is sold.
Making money, which
is often said to be the main benefit for galleries that want to jump right into
the NFT market, may not be as easy as it seems initially.
First, museums need
to figure out if selling their existing collections would make it harder for
the public to see them, which could go against their laws and goals. Second,
they must ensure that the money from sales related to the group is returned to
the right things.
And there is a chance
that pieces of the collection will be treated as money-making tools by accident
if they bring in money instead of just being on display for the public. As time
goes on, we still don't know if NFTs will help brick-and-mortar galleries make
money instead of making new opportunities for virtual ones.
High-risk NFTs are volatile and unclear.
The high-interest
rates they can bring are unique, and many NFTs quickly lose their value. And
there is a lot of change, just like with crypto-currencies. Several NFTs,
including ones from Grimes, A$AP Rocky, and John Cena, have lost a lot of value
in a very big way.
Depending on NFTs to
raise money could be risky, and the boards of galleries could decide it's not
right for their charitable organization to own them. That means museums might
have to quickly sell any NFTs they make or get, even if that makes the NFTs
less useful to the museum.
There is still a lot
of doubtfulness about what precious NFTs can do for the main goals of an art
museum. They are neither objects nor works of art. Even digital art that can be
shown is not the same as any NFT that came from it.
To make sure, NFTs
are still brand-new. But banks and other traditional banks that didn't pay much
attention to cryptocurrencies are now considering playing a bigger role in
those markets. As the NFT market grows, traditional organizations in the art
world may be joined by something similar.
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