The Rise of Virtual Status Symbols: Blockchain, Digital Art and NFTs
As we spend more and more time in the virtual realm, the notions of luxury and status symbols begin to manifest themselves in novel ways.
March 23, 2021, Gökce Sandal
Digital technologies have provided artists with novel possibilities and platforms to reach broader audiences, but the endless replicability of digital items has made it challenging to monetise digital-only artworks. Merging the worlds of blockchain, art and luxury, non-fungible tokens (NFTs) may offer a new way to free ownership from its material constraints and assign scarcity-based value to digital items.
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Authenticity and scarcity in the digital creator economy
Digital technologies have upended the ways art is created, distributed and enjoyed. With new artistic tools and cross-discipline fields such as computational art, the digital economy has widened the sphere of artistic possibilities and given artists new mediums to work with. With the rise of the digital economy, a new generation of digital products to support digital creators has also emerged, making artistic skills more accessible and easier to learn.
However, the digital arts scene has so far lacked two key elements – authenticity and scarcity – that have historically been central to art. Since digital content is, in most cases, freely available and easy to duplicate, assigning scarcity-based value to the digital medium has been a near-impossible task. Hence, digital content creators have been struggling with both copyright issues as well as monetising their work.
Non-fungible tokens: Blockchain meets the art world
As unique tokens living on a blockchain, non-fungible tokens (NFTs) offer a new way to bring the elements of scarcity and ownership into digital items. They allow buyers to purchase ownership of a digital art piece, such as an image, song or video animation, whose authenticity is instantly verifiable on the blockchain.
Yet, unlike other crypto tokens that are interchangeable, non-fungible tokens are one-of-a-kind, just like physical collectables. In other words, while two Bitcoins are identical and are worth the same price at any given time, NFTs’ value is subjective – it is tied to scarcity and the broader socio-cultural context, which makes them particularly suited for the digital art landscape.
While NFTs have been around for a while, they have been mainly confined to the niche corners of the internet until late 2020. With the impact of the pandemic and the entry of multiple renowned artists into the NFT market, the phenomenon has recently started to gain mainstream appeal.
In an industry-first move, the world-famous art auction house Christie’s has recently launched its first NFT auction to sell a fully digital artwork by the graphic artist Beetle, which has attracted a monumental bid of $69 million. Another artist, Grimes, sold $6 million worth of artwork in just one day, including animated videos set to the artist’s original music. Similarly, designer Andres Reisinger sold ten digital renderings of furniture in an online auction, which can be used to furnish virtual open worlds such as Minecraft.
Abba Chair, Complicated Drawer,— Reisinger Andres (@reisingerandres) February 23, 2021
Complicated Sofa & Custom Piece. pic.twitter.com/sYKRP14Z8P
The rise of the metaverse and digital luxury
Another influential factor driving the development towards digital luxury is the accelerated adoption of metaverses, which are open virtual worlds anticipated by many to be the next evolution of social media. With the pandemic’s impact, open-world virtual games have seen a massive surge in popularity. For instance, social gatherings, fashion shows and even political protests and funerals have been organised on Nintendo’s avatar-style life simulation game Animal Crossing.
In addition to bringing people together in times of social distancing, virtual open-worlds have also become avenues for self-expression, sparking new opportunities for brands to create value. For example, luxury homeware brand Olivia started offering virtual interior design consultancy services to help Animal Crossing players decorate their virtual islands.
As the technical possibilities of metaverses expand, more aspects of everyday life, from work meetings to entertainment, will take place on these platforms in the future. Consequently, we may begin spending more and more money on digital clothes to dress our avatars or digital furniture to decorate our virtual spaces. This will, in turn, further increase the demand for digital luxury and virtual status symbols. By mirroring the traditional luxury concepts of scarcity and exclusivity onto the digital realm, NFTs offer a novel response to this emerging need.
Envisioning the future of ownership and luxury in the digital economy
The recent introduction of blockchain technology into the creative field may transform how we engage with digital content and usher in a new era in the digital creator economy. The rise of NFTs will allow fans to support digital creators directly without any middlemen. The possibility to build royalties into NFTs will create a new, ongoing revenue stream for artists, where they can receive a commission whenever their work is sold to a new owner.
Bringing in the notions of authenticity and exclusivity into the digital world will also open up a sea of opportunity across industries. While the importance of ownership has been weakening with the rise of the experience economy, the increasing popularity of virtual worlds may signal a resurgence of virtual ownership, giving rise to new business models and value propositions.
By freeing ownership from its material constraints, digital collectables may especially unlock massive potential for the luxury market, whose business model built on physical exclusivity has been disrupted by digitalisation and sustainable consumption.
However, rather than replacing physical luxury, it is likely that digital status symbols signal a shift into a hybrid era of extended reality, offering brands a new possibility to extend their presence onto the virtual realm in immersive ways.
On the other hand, investors have been warning that the sudden spike of interest in NFTs may lead to an investment bubble that will eventually burst. While the prices will most likely go down once the novelty wears off, the concept of digital luxury will have staying power, since it is intricately linked to the larger megatrend of digitalisation and the innate human desire for status.
Digital luxury and status symbols are good examples of old concepts finding a new life in the digital world. Could any of your organisation’s offerings be brought into an entirely new domain to give it a new meaning and dimension?
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ASSESS HOW THESE SHIFTS WILL IMPACT YOUR ORGANISATION
To write this article, Futures Platform’s futurists have collected the data from different phenomena and studied linkages between them. Here are the three colliding phenomena that are shaping the future of the digital creator economy and new status symbols.
Various trends such as technological advancements, digital transformation, gig economy, and the rising importance of multidisciplinary skillsets in general have led to an increase in the number of artists using different artistic mediums in their practice. Digital art tools have introduced new artistic possibilities and created new cross-disciplines such as computational arts and new media arts. The internet has also made art education more accessible and made it possible for artists without formal art education to build new skills.
Blockchain, the technology behind the cryptocurrency Bitcoin, is a system of recording information in a way that makes changing or hacking the data extremely difficult. It is one form of Distributed Ledger Technology (DLT) where records of transactions are stored in public digital ledgers distributed across the network. Blockchain technology is not confined to the cryptocurrency world, and it can bring about a technological revolution as big as the Internet.
Technology has radically altered the norms of consumption by enabling access to products and experiences without the need for owning them. People’s increasingly mobile lifestyles, digitalization, worsening social mobility patterns and the shift to more eco-friendly ways of living all play a role in the changing global attitudes towards ownership. The shift to access over ownership will require many industries to radically transform their traditional business models.
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