Why Are NFTs Suddenly So Popular?
The sales are storied, and the hype is palpable – NFTs represent the future of art, and they have solidified their place in contemporary culture. With their relatively recent emergence into public consciousness in early 2021, the prodigious gains that NFTs are generating appear to have come almost out of nowhere. And while some collections have notched up millions of dollars in sales in a matter of months, others sell for the price of a pair of shoes. The value of certain NFT collections might seem arbitrary, or even misplaced, but it actually stems from a well-recognised formula within the established art world.
To truly understand why NFT collections have experienced such astronomical growth in recent months, we only need to look at the traditional art market for a viable comparison.
History has always favoured originality and innovation. Some of the most valuable and cherished artists of all time are the Impressionists, who rebelled against figurative realism in the nineteenth century, and the Abstract Expressionists, who similarly reacted to modernist restraint in the forties and fifties. Art collectors tend to value those who break the mould, pioneer new techniques, and who set the bar for future generations.
Tyler Hobbs, Fidenza #313
The same can be said for contemporary art. Among the NFT collections that have reached unparalleled heights are those that paved the way for others to follow, and whose creators aren’t afraid to explore unchartered terrain. One of the most prized NFT collections is an example of generative art by Tyler Hobbs, known as Fidenzas. These visually stunning works are reminiscent of mid-century modernist paintings, resembling something that would hang in the MoMA, but their inception is a little more complex than applying paint to canvas. Generative art is created using an algorithm that randomly produces different variations of the work at the time of its purchase, so neither the artist nor the buyer knows what it will look like until the purchase is made.
The Fidenza series perfectly encapsulates three key elements of how NFT collections derive their value: innovation, rarity, and aesthetic appeal.
The series is limited to 999 pieces, making each one highly desirable because of its rarity. In many ways this echoes the traditional art world, where the rarer the art is, the heavier its price tag. Typically, this explains why artists receive the most notoriety and success after their death: because their work is no longer in production, it is considered more scarce, and therefore more valuable.
Not all popular NFT collections are visually akin to a de Kooning masterpiece, however. Some of the highest-selling and wildly popular series like Bored Ape Yacht Club and CryptoPunks appear to be little more than pixelated or cartoonish doodles. But behind the simple visual style lie multiple layers of cultural significance within the NFT sphere. These collections gained popularity due to their early emergence on the scene, and were among the first to popularise the profile picture, or PFP, form of NFTs. They are designed to become the owner’s digital avatar, the face of their online presence. No two apes or CryptoPunks are alike, ensuring their scarcity, and therefore their intrinsic worth.
Larva Labs, CryptoPunk #9998
The function of NFTs as status symbols is another aspect of what makes these collections so popular. Just as buyers of physical art would add a Picasso to their collection for the prestige it brings, NFT collectors seek out projects with large cult followings. Not only does this provide them with access to exclusive content and a stake in an emerging asset class, buyers are aligning themselves with a unique community. Crucially, this association is considerably more public than ownership of a rare painting or fashion collectible; the NFT is generally displayed on social media for all to see. So significant is this ‘digital flex’ that Twitter is even integrating a feature to allow users to verify that their NFTs are the genuine article. After all, the value of an NFT is not simply in the visual elements it’s made up of, but in the smart contract which denotes irrefutable ownership and authenticity.
This is why NFTs attempting to emulate or even outright copy successful and popular collections don’t carry the same level of desirability as the originals: they simply aren’t original.
The success of individual NFT collections like Fidenza and CryptoPunks can be attributed to their originality, their rarity, and their cult status. All of these aspects are mirrored in the world of physical art and fashion collectibles, but this is where NFTs differ from the traditional market. Part of their immense popularity lies in their ability to reach a global audience instantaneously. Collectors no longer need to attend fairs in Basel, Miami or Hong Kong to pick up the latest and boldest works of art; they need only open their internet browser.
In a post-pandemic world, the potential for NFTs to bring audiences together, put art in the hands of collectors and revenue in the pockets of artists, is exceedingly powerful.
The most successful NFT collections may not always look like traditional works of priceless art, but the reasoning behind their popularity is fundamentally the same. Creators have enjoyed immense success with their collections of culturally significant, visually powerful and provably rare NFTs. More broadly, these collections have been catapulted into the mainstream in a remarkably short space of time due to the ease of access for collectors and creators across the globe. And as the world begins to awaken to this paradigm shift in culture, the popularity of NFTs shows no signs of slowing down.