A JPEG image sold for $69 million. We’ll tell you how.

The deal with American artist Mike Winkelmann, more commonly known as Beeple, is notable for several reasons.

Beeple swiftly entered the top three most sought-after and highest-paid artists in the world – his work “Everydays: The First 5000 Days” was auctioned as an NFT token for a record $69.3 million. 

Read more: Top 10 Most Expensive NFT items

Who is Beeple? 

Winkelmann was born on June 20, 1981, and raised in the village of North-Fond-du-Lac, Wisconsin. As a child, Winkelmann had no intention of becoming an artist. In 2003, he graduated from Purdue University with a degree in Computer Science. However, while in college, he spent most of his free time on creative projects such as digital short films and images, which he described as “weird little abstract digital art.” After graduation, Winkelmann worked as a web designer, but in his free time he continued to pursue his creative projects, which he called “Beeple stuff”.

In October 2020, Winkelmann began selling non-fungible tokens for his works through the Nifty Gateway service. A digital image in the form of a file was associated with a unique token on the blockchain. The token confirms ownership and can be transferred to another person.

Read more: What are NFT tokens?

Attention was drawn to the work of “Crossroads”, which could turn into one of two animations depending on the winner of the 2020 US presidential election. This image was sold by the author for $66,666.66 and resold for $6.6 million in February 2021.

A collage of images from the Daily series titled Daily: The First 5000 Days was put up for a two-week online auction on February 25, 2021, with a starting price of $100, which ended up selling at $69.34 million on March 11. For the first time, an object in the form of a unique token was sold by a traditional auction house, and it became the first lot for Christie’s that could be paid in Ethereum.

Read more: Why are some NFTs worth millions?

Winckelmann announced that at the end of April 2021 he will release a spring collection of works, which will also become available for purchase in the form of unique tokens. The artist is planning to push things more toward nature’s favor by donating several themed pieces to an upcoming auction run by the Social Alpha Foundation to benefit the Open Earth Foundation. The two nonprofits share a similar mission. Hong Kong-based Social Alpha focuses on finding new ways to use blockchain technology and California-based Open Earth studies how technology could be implemented in the fight against global warming.

So what do NFT’s have in store for us in the near future? 

Beeple’s piece has sparked lasting debates about the nature of NFT, and how much potential it has to crown the contemporary art market.

The tension emerged shortly after a week of passionate bidding for Everydays ended with a sonic boom last Thursday morning. Kelani Nichole, who first priced and sold artworks in bitcoin in 2013 as the owner of the new-media-centric Transfer Gallery, took to the private Discord server Friends With Benefits early that afternoon to call attention to what she saw as unusual behavior in the life cycle of Beeple’s headline-snatching token. 

But the second point of disagreement is even more existential. On one hand, Christie’s role in facilitating the sale of Beeple’s work was seen as a powerful validation of NFTs by (very) late adopters in the traditional art world. On the other hand, true believers in blockchain’s revolutionary potential aim to eliminate gatekeepers of all types. They saw Christie’s very presence in the sale as a betrayal of crypto’s core values, making any NFT transaction facilitated by the auction house illegitimate regardless of any procedural aspects.

At stake in this ideological clash are the answers to a set of questions equally relevant to the artistic avant-garde and tech-utopianists, particularly as demand for NFTs is growing with intensity. How many compromises can be made on an ideal before it implodes? Which dilutions (if any) are tolerable for the sake of attracting a larger audience to a potentially transformative cause? And will the answers be decided by any criteria other than who stands to make the most money from wide adoption? 

Read more: The NFT market is now worth more than $7 billion

What does it take to become the next Beeple?

In one sense, selling an NFT is similar to selling a painting, sculpture, or any other traditional artwork on the primary market. But from a crypto purist’s perspective, the differences elevate NFTs to a higher plane of equity and transparency—assuming they are executed within specific guidelines. Deviate from those guidelines and the process drags the artwork back down into the same swamp that hides so many dubious dealings in the legacy art trade.

An NFT sale consists of three steps. First, the artist “mints” an NFT for their artwork on the blockchain, meaning they essentially register the piece, verify themselves as to its maker and confirm its status as either a unique or limited-edition digital asset.

We have covered a comprehensive article about the nitty-gritty of NFT creation. But what does it take to become the next great artist on the digital art market? 

“It’s absurd at every level of implementation,” Kelani said in regards to Beeple’s work. “They sold a JPEG. This was a $69 million marketing stunt.”

First, in technology as in art, specialists in the subject often define what something is based on how it is done. NFTs turn out to be a textbook example of this dynamic, as Nichole and other crypto-fluent observers judged that the way Christie’s conducted the sale of Everydays invalidated any claim to its being a non-fungible token.

An NFT sale consists of three steps.

First, the artist “mints” an NFT for their artwork on the blockchain, meaning they essentially register the piece, verify themselves as to its maker and confirm its status as either a unique or limited-edition digital asset.

Crucially, the NFT itself is merely a string of alphanumeric characters that identifies the artwork within the larger system of the blockchain, just as an inventory number identifies a particular painting in a gallery’s database. In the vast majority of cases, the token links to but does not include the piece, which is a discrete file hosted “off-chain” on another server. 

For comparison’s sake, minting an NFT is somewhat similar to an artist sending a digital photo of a new painting to a dealer to confirm authorship, integrate the piece into their inventory, and begin drawing interest from collectors.

This leads to the second step: the artist makes the NFT available for direct sale through a particular intermediary. But whereas a traditional artist’s intermediary would normally be a dealer, the intermediary for an NFT is generally an online marketplace platform (such as MakersPlace, Christie’s partner in the Beeple sale). The NFT artist completes this step by authorizing their chosen platform to execute the blockchain-based “smart contract” governing the token’s terms and conditions. 

Among those conditions are the terms of sale. Traditional artists and dealers reach this consensus manually through consignment agreements that specify asking prices, maximum allowable discounts, and the dealer’s share of sales proceeds on the new works. 

One vital difference with NFTs, however, is that these terms are hard-coded into the smart contract. This means the final step in the sale—payment to the artist and transfer of ownership to the buyer—can happen automatically and nearly instantaneously. The process is much more laborious in the traditional market, where a dealer must manually send an invoice to a buyer, collect a check or wire transfers from that buyer, ship the artwork once payment has been made in full, and send the artist their cut.

Beyond the efficiency of automation, NFTs can also embed an artist resale royalty to be automatically paid out anytime the token is resold in perpetuity. Yet this advantage only manifests if the resale is executed via smart contract, i.e. through a marketplace platform. (While the standard NFT smart contract, known as ERC-721, does not include a built-in resale royalty, almost all platforms provide one in their terms of service.)

Addie Wagenknecht, an artist and developer deeply engaged with blockchain, largely echoed Nichole’s thoughts: “My opinion is that it’s a PR event that Christie’s took on as an opportunity to leverage attention.”

What role do celebrities play in the growth of this field? 

Back in the last century, the interaction between artists and fans was almost impossible. People went to concerts and could only write letters hoping to receive an autograph. Today, fans and their idols have more and more opportunities for communication and various activities, both online and offline. NFTs specifically can provide new ways to interact with celebrities, help them get closer to their fans, and even promote their name more effectively than using advertising.

NFTs introduce a new monetization model that benefits both celebrities and their supporters. Artists, for example, can issue a new song or make a drawing, a unique signature, or a music video, and turn them into an NFT. Fans can purchase the NFTs, backed up by items produced by their faves, and become the only owner of its official version.

By issuing NFTs, celebrities can also provide their fans with a unique experience, giving them a chance to buy a ticket to an in-person or online fan meeting, or even a trip with a star.

NFT collectible cards are currently popular in the sports field, but music fans, for instance, love collecting photo cards as well. Imagine the rise in interest if a photograph is unique and only one fan has a chance to own it.

In addition to that, placing products on NFT marketplaces and launching NFT projects is another marketing opportunity for celebrities, influencers, and other public figures. Apart from selling real merch, they can issue non-fungible tokens and see it as another form of eCommerce. 

Read more: Our favorite 10 celebrities creating and promoting NFT artworks.

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