NFTs See Budding Momentum in China’s Art Market, Yet Concerns Linger

Strapping on a VR headset, a young female participant warily enters a small glass maze. Immediately, in front of a gaping audience, she fumbles and gets lost while repeatedly knocking into the labyrinth’s tempered glass panels as she desperately figures a way out. If regular, opaque walls were an indication of isolation and loneliness, these transparent ones are meant to ridicule and taunt.

This installation, named “Do Androids Dream of Electric Cows,” was created by Hangzhou artist Chen Baoyang, whose work often explores the ontology of virtual reality (VR) through connecting art and technology.

“With the transparent maze, the metaphors of class and power hidden in digital VR technology are revealed through watching and being watched,” the 32-year-old artist told Pandaily.

Chen’s work, along with those of 30 other artists, was displayed at Beijing’s UCCA Lab between March 26 and April 4 before continuing their tour in Shanghai. The exhibition, called “Virtual Niche: Have You Ever Seen Memes in the Mirror?” and billed as the world’s first major physical crypto-art exhibition — seeks to bring NFTs offline to China’s mass audience.

NFTs’ Potential in China’s Art Space

NFTs, or non-fungible tokens, are enjoying a sudden upsurge in popularity in the West and have upended the cryptocurrency market and art worlds. NFTs are created, bought, and traded on blockchains, predominantly Ethereum, and refer to original pieces of electronic artwork and formalize ownership. To the industry, this provides digital artists a new way to monetize, market and protect their work. To the collector, the value resides in the ownership itself, and not in the ability to view the artwork.

NFTs first became popular in 2017 with CryptoKitties, a blockchain game in which players adopt, rear, and trade virtual cats, prompting Chinese net users to also start creating their own virtual felines. They were then catapulted to global attention in early March when digital artist Beeple, whose real name is Mike Winkelmann, sold his piece Everydays: the First 5000 Days for a record $69 million at Christie’s, making it the fourth-most expensive artwork by a living artist and the first purely non-fungible token to be sold by the famed auction house.

“It has been said that the Internet signifies the end of ownership. But blockchain is beginning to reshape the nature of ownership and asset transactions in the digital world. New business models are slowly unfolding, and the future of economy and law has arrived,” Si Xiao, Dean of Tencent Research Institute stated in a research paper published in April.

The craze has finally arrived in China, and the traditional art world is prepared to welcome an incredibly exciting and potentially explosive expansion.

Beyond galleries, discussions, videos and questions about NFTs sprung across forums and channels on social networking sites Douban and Weibo. There has been an increase in encryption art projects at the Chinese Academy of Fine Arts, as well as up-and-coming artists such as Baoyang, Ellwood (Chen Qiji) and Liu Jiaying.

There is also a growing virtual Chinese community named Dragon City on Decentraland, a virtual reality platform built on blockchain technology that allows users to create and sell their digital creations, and could eventually develop new markets for NFTs.

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“Personally, I see huge potential in China’s NFT scene, due to China’s huge advantages in high-tech talent training and market size. I believe that in the future, more and more Chinese artists will leapfrog into the international NFT space,” Sun Bohan, CEO of BlockCreateArt (BCA), Asia’s first crypto art trading platform, told Pandaily.

“At present, some NFT art trading platforms have emerged in China, but the market is still being explored. For BCA, we want to build a more open and inclusive platform for artists and collectors. We will play a role in discovering and cultivating emerging crypto artists, encouraging young artists to create, and giving young Chinese artists more opportunities to exhibit their work,” said Sun, who was also the curator of the UCCA Labs exhibit. At the same time, BCA recently announced the completion of a $2 million angel round led by Fenbushi Capital, signifying growing curiosity in the space from investors.

To produce the next Beeple, educating the public about crypto art and its value is the first step, Sun added. Beijing-based BCA is planning to establish its first physical crypto art gallery in the city in September, providing a permanent home for the works of crypto artists.

“There’s definitely an interest from the Chinese public in this new art form,” said Matt, a Beijing-based art teacher who attended the Virtual Niche exhibit on April 4.

“Not only have NFTs re-defined the concept of ownership and collectibles, they do not put a constrain on what the art actually looks like,” he added.

Artist Chen believes that through using blockchain technology as a medium for creating connections between the institutional art world and the crypto community, the industry overall can draw more buyers, sellers and artists.

“We’re seeing more and more young people, or so-called digital natives, willing to spend money on digital products, such as a rare skin or a special weapon in a video game, meaning that all these products have monetary value to them, and NFTs are offering a way for the broader audience to learn about the art world,” he added.

“Suddenly, art isn’t defined by what’s shown in galleries and museums. There are new art collectibles with funky, counter-cultural styles and exist on a digital space,” Chen said, adding that this in turn would attract more artists to create new work.

According to Chen, there are currently two main approaches for artists to create crypto art, the first being artwork that explores the theme of blockchain and cryptocurrency as a whole, and second, artwork that uses blockchain as a medium in artistic creation.

Vulnerabilities: Technology Capabilities, Environmental Impact and Laws

While these head-spinning prices attached to NFTs could trigger a revolution in China’s art space, shortcomings and existing concerns lurk behind the young fad.

Right now, due to technical limits, an artist’s actual digital artwork could not be stored on blockchains, which are too small to hold an entire image. Suggestions have been made to include the web address of an image, a mathematical compression of the work, or an extraction of the work.

“However, such ‘processed’ artworks lack digital language, which then excludes a large part of what the artist hopes to convey,” said Sun. “If we want to truly embrace and develop crypto art, we need to integrate and accept a more diverse creative language. It’s not just as simple as getting an artist’s work on the blockchain, but to help them tell their stories through the language of blockchain technology.”

On the other hand, the most common criticism of NFTs is that they are environmentally irresponsible, with the process of minting NFTs and subsequent transactions responsible for planet-heating carbon dioxide emissions of the Ethereum network.

However, NFT defenders like artist Chen contend that computing power is needed in any aspect of innovation, including other areas like artificial intelligence and machine learning.

“Even without crypto, we’ve entered a new digital age, where all aspects of our lives would require immense computing power,” Chen said.

At the same time, a lot of artists are investing in renewable energy and conservation projects to make their NFTs carbon-neutral or negative and offset emissions, including UK artist Celyn Bricker, who has partnered with an energy company that develops technology that sucks CO2 out of the atmosphere for his interactive installation After the Rain.

The NFT craze in China is also facing uncertain regulatory hurdles, which could be particularly intense as the country has been clamping down on the crypto space. In 2017, Beijing banned initial coin offerings (ICOs) and other token trades, as well as tightened regulations on cryptocurrency mining.

“Intellectual property is currently the most important intangible asset, but in the digital age, new intangible assets such as blockchain digital assets, virtual property and data are developing rapidly, and are becoming of growing importance,” Si said in the research paper.

“It is then necessary to establish appropriate property rights protection rules according to these assets’ different properties and characteristics, and it shouldn’t be a ‘one-size-fits-all’ legislation,” the dean added.

Despite these uncertainties, many are still confident that cryptocurrency is the wave of the future. As NFTs move from niche to mainstream, whether NFT art can maintain its moment in the Chinese sun hinges on the development of the next generation’s technology capabilities and the sustainability of the ecosystem in the long term. Either way, the creative possibilities are endless.