The New Era of Owning and Collecting Art On-Chain

Transcript

We have actually reached our very final panel happening here in the Audi MIDI room for the CBC 25. Uh so please uh please stay uh and welcome us welcome on the stage Zach Nelson of Jenzio Media who will be moderating our panel the new era of owning and collecting art on chain. Please help me welcome them. Hey everyone, super excited to be here and introduce my next guest, Weey from Art Funible and Boris from Live Art. Hi. Should I sit in the middle? Yeah, it's okay.

Fine. So, as we all know, the space around NFTTS and art has changed a lot in the last couple of years, and we're going to kind of dive into the different aspects of NFTTS and the projects that these two are working on. Um, before we kind of get into the questions, I'd love if my fellow panelists could just introduce themselves, talk about what companies you're here representing and what you guys do there. Shall I start? Hi. Uh, I'm Wei from Artf funible. We are um mark art marketplace on blockchain for both digital and physical art. Uh we dig uh tokenize um uh artworks for living artists. Yeah.

Hi guys. I uh I'm Boris Pesner. I'm the CEO and founder of live art and uh we um tokenize artworks of dead artists. That's great. So uh I would say that I mean Every now and again they're not entirely dead, but they're definitely in the what what you would call blue chip artists in the top 20 of the market cap and we kind of look at art as an asset class. So we actually use words like market cap to when we when we think about artists um and I'm sure we'll talk much more about how it's done and all the intricacies of it. Awesome. So for those who are outside of crypto, how

would you classify NFTTS to that person? Digital assets, art, collectibles, or something else entirely? In other words, for someone who doesn't know what an NFT is, how would you explain it to them? Try sir. Yeah, go ahead. NFT for me is only a digital to certificates which you can use for like approving ownership for uh digital art, physical art or collectibles or what we um hear very often now uh for um asset investment like U RWA they are all using NFT um this is for me NFT not art not specific like crypto art and so on we I I don't usually I don't call them nifty

art Yeah, couldn't agree more. NFT is a bit of a dirty word right now. I agree. Yeah. And uh we never use it. Uh it's really a technology, you know, it's like saying, you know, I'm going to I'm going to write my novel in Microsoft Word, so doesn't mean anything. Um and uh but what it is, it's essentially a way to have uh a proof of digital ownership. That's what it is. But it's actually a little bit more than that. Part of it is a certificate that you actually own the thing that uh that uh that you are supposed to own be that digital or maybe piece of a physical uh object to a physical asset in the case of RWAS. But then on top of it, the magic of it is

that once once that becomes a digital asset, you can do all of the wonderful digital things with it that you cannot do with any of the physical assets. All of those decentralized finance things that we know and love like loaning and like borrowing and collateralization and vaulting etc etc etc. So, it kind of opens up a whole new world what you can do with assets that before tokenization would not be possible. And I kind of wanted to to just jump on something you said because I think it's probably something that a lot of the audience is thinking is like why why is NFT as you stated Boris a dirty word now? Because I think that is something that probably a

lot of people are thinking about like why why is that? I would say uh when we go back to 2021 there are like um there was a super hype uh about NFTs. So there were a lot of uh tradings um on NFTs and uh people talking often like they are only GPAC like FT GPAC and we also we also call like NFT flippers. They're not like a an an art collectors and and they are like using NF as like a um like a gambling uh I would say um maybe not that very correct but um many people using that to make money um and then we kindly uh kind of uh misuse this uh this

term back to 2021 2022. So when and and then when we talk about NFT now um Many people said would say NFTTS are already dead and which actually they mean um the the JPAC NFTs or PFP and FFTs back to 2022 and 2021 and that's why we we prefer not to use this NFT for actually our digital or physical art onchain. Uh we avoid using this term. Yeah, I think that it was a bubble. Lots of people lost money and so that's why it's a dirty word. Yeah, I remember being in

uh Miami during the hype of NFTs and it's just a bunch of, you know, dudes going around being like, "Look at how much money I made off this NFT and this NFT." six months later. Yeah, it's just like with any other bubble, you know, when uh when it bursts, a lot of people are left holding the bag and uh of course they don't like it and so the whole concept behind it becomes a little bit touchy. So that's that's basically what happened. But again, it's just a technology layer. There's nothing wrong with it just like any other tech. And uh uh if used properly, it can do wonderful things. I agree. And that kind of gets me to my next question, which is what is the biggest advantage of putting art on chain

and obviously is um maybe I want to go back a bit to to the to the to the hype. Uh it's not only the bad thing because of this hype. A lot of people um heard about crypto and they also enter crypto web 3 because of this NFT hype. a lot of young po uh people back to 2021 they join our crypto community they join our web3 community so this is the the good side about about this uh this time this hype um so I I don't want to only say it's a super scammy stuff to back to then u that's what I want to add um yeah um I mean NFD can bring us uh bring artworks uh transparency and

authenticity authenticity You can once you put uh artwork online all the transactions are recorded on online and you can see it. Uh there's nothing to hide, right? We even publish all our code of smart contract and all um com uh the complete uh platform uh code we put online everything open source. So it's extremely open source uh open and transparent which I really like it. And of course also like you can use a lot of like um Boris mentioned a lot of other um functions which you can't use if you don't use NFT as instrument uh for example like uh you can u implementing

royalty commission for artist and uh uh artists can have having can have profit from like reselling art and they can get very close to their collectors. So um and like you said you can fractionize uh an artworks which is also not possible if you don't use an FD as instrument. Yeah. Yeah. Um I would totally agree with all of this. I think there's one other aspect that is super important and that's accessibility. Right. So once it's on blockchain it's available worldwide and globally. So anybody in any country anywhere in the world who normally would not have access to these kinds of physical assets right to high

quality art or even to emerging art uh suddenly can right be that in digital form or even on a piece of a Picasso in a fractionalized form. So this accessibility some say democratization of art ownership is a huge um component of the value uh value here. But I think that uh I kind of want to return to my point that I made previously. Uh once it's like ownership is only part of it, right? So being able to own it in places where normally you would not be own able to own such assets uh is important and it's pretty awesome already because it's like we want everybody to be an owner of something,

right? It empowers people to own assets. It's very awesome just by itself. But then you can do things with those assets, right? You can actually get yield from them. You can you know bundle them into funds and indices and provide liquidity to those funds and then get yield from that. You can loan against it. So it's like you you know not only do you own something but you can in fact easily participate in all the digital economy. Why? Because the protocols for all of because of the composability of all these standards NFT standard for instance 720 not necessarily RC 721.

Uh because of that you can there's there are protocols that already exist that allow holders the owners of these assets to participate in the digital economy which you cannot do with a piece of art that's hanging in the wall or you know a car or you know a watch or other things that we tokenize and fractionalize. You simply cannot. So it's a it's a completely new value that gets unlocked that gets opened up by bringing an asset onchain. So ownership is one super important but then there is a whole class of value beyond ownership simply because the asset is now digital in the standard form that is composable into all of these other things that we can do in uh

defy and on crypto and kind of speaking about you know blockchains and you mentioned the ERC standard. Do you think right now there's a certain blockchain that's leading for NFTTS and if so why? I think now I would say Solana even we yeah even we don't use Solana uh just my personal preference uh I um I still like EUM uh as a go gold goat standard you know uh and we uh currently add base a layer to eerum uh on the top because um the expensive aspensive artworks on eum mainet and uh the rest

we use we use space but um I mean Tasos of of course there are a lot of huge NFT community on Tasos and also Solana is part currently not so big in no not so active uh in in NFT scene I don't know do do you agree or you see something else um I um my view on this um is a bit different it's not totally compatible with yours, just a different perspective. I view chains as a distribution channel, right? We've got stuff to sell, they've got audience. So, what's the best distribution channel and the same thing for crypto wallets? There

are other distribution channels ch but for us chains are pretty important. So, all chains are good. If they provide uh a sales channel, they're great. Now, who provides the best sales channel? Um, you know, we sell a lot of art in particularly in fractionalized form, right? Tens of millions of dollars worth of art, uh, you know, like so far per year. So certainly planning to do much more. Um, no one chain can absorb this kind of volume today based on the web three communities that those chains have. Uh, you know, the web two the next the next billion users from web two have not yet come in. We all want them to come in.

It's going to be amazing when they do. But so far, all these products for the most part are sold to uh to web three natives and and in the case of art, some art collectors in web two, but that's there aren't that many of them in the tens of thousands, right? But in web three, we now have millions, but not maybe tens of millions, but not billions. So, there are not many buyers. So, every buyer is important. And the question is, what are the chains that have the most buyers for this particular product, right? Not for some altcoin or whatever people like to trade or memecoin. There are lots of buyers for that as well on different chains. Salana obviously the number one there. But for this kinds of products, right? The products that have tangible that are backed by tangible value. Well, what we

found is that yeah, there are big chains like B and Ethereum. Ethereum is a bit expensive, so we don't sell much on Ethereum. Gas is too high. So, we're currently on 17 different chains. So, every time you publish an asset, it's available on 17 chains. So it's pretty good you know case study of which chains actually perform and uh the answer uh might surprise you. Those are the chains the chains are not necessarily the biggest chains but is the chains with the most passional communities uh passionate communities that have an affinity for something either tangible or um cultural.

So uh let me name some names. You know you've heard of duckchain. Does anyone here know duck chain? I haven't heard of it. So, it's a kind of a meme chain around ducks. They buy a lot of warhole and kusama from us in shards. Have you heard of apech chain? Ape chain. Yes. The monkeys, they buy a lot of morakamis and coons from us and so on down the line. Right. So, it's not just the big chains. The big chains are great and uh you know there is some volume that comes through that but it's like too diffuse and the community is mostly into uh into you know decentralized finance or whatever financial rwas but there are these cultural chains which are smaller but actually fantastic distribution channel

you have to work with them but you know that's what we found. I think that's really interesting because like I think people are still under the perception it's mostly Ethereum and platforms like OpenC and are you do you have you seen a large shift from that? I think uh to for our business those platforms are irrelevant. This is this is where like legacy NFT and legacy art collectors hang out. Very interesting. It's true actually market marketplace doesn't really matter because we use the standard you you can decide on openc super uh foundation wherever and and also for us um we are

in the marketplace year event but we curate art so we we help people to select art and we talk to artists and we do a lot of uh offline events and to to to showcase uh to the web two people to the web two collectors uh um our artists as well. So uh we are not only a marketplace but like Boris said marketplace is the one. Uh once you purchase our artworks from us or mean artworks from us you can go to other market to sell which is good right we are extremely open and in web3 it's it's our like ideology. Yeah I think that's really important too like meeting them

where they're at versus trying to change behavior. And I think that's really interesting. Um, what is sort of the biggest misconception around NFTTS from the mainstream? Like you said, the next billion users, so in other ways, how can we get those billion users to adopt NFTTS? Well, it's a scammy misconception is that it's a scam, that it's a JPEG that you're buying. And uh um you know going back to our previous convers previous question um it has to do with that 2021 bubble right so uh I don't think it can be thought honestly that's why we don't

use the word NFT just you just I think it's too tainted and then and and then it's unnecessary it's like it's just it's just a just enable it's just a name of a technology. It's like a name of a protocol. It's a name of um just a technological thing that uh there's no need for it for that word to be used ever again. Yeah, we also avoid to use NFT now because once we we talk about NFT and this oh it's a scammy right NFT art uh all uh it's dead. So you often oh is NFT still alive? uh are you still doing NFTs? I was like, "Yeah, we are." And if we call us RWA because

we have physical artworks, I think you too, right? And they say, "Oh, RWA and you are not RWA." Uh because they consider RWA as like a uh real world assets like gold, like stock, like bond and and so on. They would not call us. But we are RWA. We use NFT for real world asset, right? We use for real world uh stuff. Um but like so this misconception of NFT um plus art um is really what we try to uh avoid that people still have this you know this uh this from 2021. Yeah if I could build build on that a bit just give another

example uh you know if when you when you look at a cultural asset let's just go with art. So you look at a painting um you know part of its value is financial value part of its value it's social value cultural value aesthetic value ego boosting value whatever right but non-financial value so uh uh if you were to build a digital product that represents that value you probably would use the right tool for the right to represent the right component of the value so the financial value you actually wouldn't use NFTs you would use fungeible tokens because they're easier to trade there is a whole decentralized finance protocols you know that are available for them they're more liquid etc and to represent the collectible

value and the social value you would use NFT so in one of the you know uh projects that we've done and probably we'll do more more and more of that we in fact have an NFT that emits fungeible tokens the funible tokens represent the financial value the NFT represents the collectible value they can be coupled or decoupled there's you know different different ways of doing it Uh the reason that I'm kind of going into the weeds here is just to illustrate that NFT is a tool in this case that I just described. It's a tool to represent the non-financial value of an asset whereas the financial value could be represented by something else by funible tokens. You could also represent the financial value by with NFTs. Totally possible to do that but

but that's actually not optimal because NFTTS are harder to trade. They're not as liquid. They're not as composable, right? There aren't that many protocols for them. So actually decoupling NFT for non-financial value and uh tokens you know like KRC20 type tokens for financial value may be beneficial in certain cases and so uh again I didn't mean to go into the weeds on you know how we do things but it's more mostly to illustrate the point that NFT is just a tool you don't have to use that tool for everything use that tool for what's appropriate so saying like you know why is NFT the reward word, you know. Well, it isn't. It's it's just technology.

It's just it's just a protocol. Awesome. People were misusing it to to to to mean something else. They were misusing it. They use that label to mean, you know, that uh you know, monkeys. Yeah. And that that kind of gets me to my my next question is do you see Board Ape Yach Club as art or do you think it's something else? Do you want to? Sure. I'll take it. It's always a great question. Uh, well, you know, I sold my previous company to Christies, so I kind of have some background in the art world prior to web 3 in crypto. Uh, and uh,

the classical the classic art historical way to answer it is that, you know, all art at some point was monkeys, right? So the impression the impressionists were laughed at right in the in the beginning and now an impressionist painting maybe worth $100 million right but in the beginning they were not taken seriously they were not that was not considered to be art so uh a monkeyy's art the time will tell right so it's like we never say for instance when we fractionalize art for instance we don't say museum quality art which would be sort of a standard aperty way of saying it we say investment grade art so is it It's either investment grade or it's not investment grade. Clearly, impressionists are now investment grade

art. Currently, these monkeys are probably going to be investment grade art. We'll see. Time will tell. Uh certainly like all the other things that we sell, you know, Warhol, Kusama, Coons, Morakami, etc. Investment grade art. Uh there's a lot of uh data for it. It's like you can analyze it as an asset class. Like for instance, we publish one of the most widely used uh streams of data, current market value of everything of all pieces of art that have been sold at auction. So in the last 30 years, about 10 million uh assets all in all, and we mark them to market. So we tell you how much that asset is worth today.

We're going to package that up and make make it available as an oracle so that uh so that decentralized finance protocols like when you want to get a loan against your asset, there will be a data point. So if the LTV say 50% there will be a data point against which you can exe the protocol can execute that loan right. So uh is it going back to the question is it uh are the monkeys art or not? If they investment grade they're art it's a visual asset that's investment grade art. That's how the art world has always been. There are new media that come and go and those new media once they become established and investable and recognized they're called art. It's just the label that's attached to such

an object that is visual and of investment grade quality. I personally will not like will not classify it whether art or not but it like you said time time will tell if it's art or not but it um for certain that open extends the possibility of art like how uh you can um have like the the Gen Z or blockchain people can have a art community we where you can build up a culture based on some art, right? We we didn't have this possibility before

uh using this uh this technology or protocol. Now it's like every um um an AP holder, NFT holder, they they have a lot of events, they have a lot of like um alo like commercial activities, right? uh which only based on this this this concept of this this artworks which is really new and uh it can it can um extend really how the now day art uh artist community or art community um for possibility we can we can have now right so this is um yeah what I want to say when you I guess I think something

that's very interesting that you both said is that time will tell and how much time like at what point can you say like all right this is enough time has passed it's either acceptable or or not acceptable like what does that look like well to me that look because I've looked at lots of u stock chart looking things for artists and artworks if basically one of the components of our business is generating such kind of performer price um you know curves for the last 30 years for every piece of art as I said that's ever sold at auction and for artists and this is for artists. So if that curve is going up that means that the artist is

becoming more established and so if it reaches some kind of market capitalization that's non-trivial you know I don't know like the market capitalization of Andy Warhol is about$8 billion and that's pretty big you know like Basat would be about four or five billion dollars so it reaches kind of those those levels it's established art and there's just no other way to put it because it has, you know, it it walks like a duck. It quarks like a duck. So, it's it's got to be a duck. So, not to be confused with the duck chain, which we love. So, uh uh so yes, that's that's pretty much the only criteria, right?

It's an objective criteria and uh the the only problem with that is sometimes that curves goes like this, right? And so at any moment it can do that. Uh and for established artists, it pretty much never does. So, I guess it's a a known answer to your question. We don't know, right? The curve is going like this now. Well, I mean, it kind of went like that and then like this, but it hasn't gone to zero. So, we really don't know. Yeah. But but but the objective thing to monitor is is is that it's the market capitalization in this case of that collection. Yeah.

It take decades to to say uh if a artist can is established or not, right? Most artists I would say over 99% of artists they don't have a secondary second secondary market right once you even you pay like a couple of 10,000 for a painting probably in 10 years it's worthless you have no secondary marketplace to to sell it if they don't reach like the auction house uh or u and and I think the big driver of that I mean this chart is the output the input the big driver of that is uh cultural cultural penetration So, uh, you know, are the monkeys going to be like on on on various fashion items and like are they going to be on

mugs? Are they going to be everywhere? Like Warhol, Maryland is sort of everywhere. Murakami is on on on designer bags, etc., right? So, if the same thing is going to start happening to to this image and it's going to have this cultural penetration, it's going to be everywhere and people are going to get used to it, then it's by definition art. That's really interesting. Patrick Ping. Yeah. They they sell like in Walmart and Costco in in the US Pipenu like you heard it. Yeah. Piping of course. Yeah. Yeah. They are very commercialized successful and I'm I'm and I'm sorry on that. Just uh the last I know I I just caught myself that I was saying something that doesn't make sense. There is art and

then there's commercially successful art. We're just talking about commercially successful art. Now what is art is a philosophical question. Nobody knows the answer to that. It's whatever is whatever the artist calls art is art. So that's the definition of art. But commercially successful art is what I've been talking about so far. When we look at uh art on chain globally, as we're here in Switzerland and um I'm from the US, where where are we seeing the most adoption globally for art on chain? I would rather um say um not geographically but like um generation. So we we observe more gen Z um collecting art. We also have like a

um art uh collector who uh collects detail art and we want to like uh send them some fine art print as a gift. Uh but they refused. They said I don't have place to have this physical paintings. So you know there's a generation shift and they it can be in the US, in North America in in Asia like South Korea and Indonesia we observe really huge community of digital art then maybe um I I prefer to use a generation uh light to distinguish this than geographically. Yeah. Yeah. 14. I would completely agree. Generationally,

you know, people older certain number will just not do it really in the foreseeable future in I I think they can do it if they don't know what they're doing, right? It's like if the banks and other big guys, you know, bring them into the crypto world through all these web two, you know, on ramps through RWAS, like they're going to start owning um I don't know, stocks and bonds in a different way or gold or whatever in a in a tokenized way instead of in traditional way and then through that they're going to be like, okay, what other things can we own in the same way?

So, this is how it's going to happen for the older folks. But but we are very far from that. Very very far from that. like we're I don't know a decade away from that. So for now those that audience is not available. The only audience that's available is essentially web three audience. Uh and those of course tend to be younger and uh geographically you know it's like 60 70 80% Asia. Awesome. Well thank you both for the amazing panel. I learned a lot. So I really appreciate it and thank you all for listening. Thank you. Thank you. Thank you.