NFT frenzy shows staying power with $16.8 million Sotheby's sale

The multipart auction and collaboration between the artist Pak, Sotheby’s, and online marketplace Nifty Gateway reveals some deep truths about what makes the market tick.

| Updated on: Aug 21 2022, 16:32 IST
(Representative image) A view of an artwork at the Superchief Gallery NFT in the Union Square neighborhood of Manhattan, New York City, U.S., April 7, 2021. REUTERS/Dan Fastenberg
(Representative image) A view of an artwork at the Superchief Gallery NFT in the Union Square neighborhood of Manhattan, New York City, U.S., April 7, 2021. REUTERS/Dan Fastenberg (REUTERS)
(Representative image) A view of an artwork at the Superchief Gallery NFT in the Union Square neighborhood of Manhattan, New York City, U.S., April 7, 2021. REUTERS/Dan Fastenberg
(Representative image) A view of an artwork at the Superchief Gallery NFT in the Union Square neighborhood of Manhattan, New York City, U.S., April 7, 2021. REUTERS/Dan Fastenberg (REUTERS)

In an NFT auction that was devoid of drama until its final hour, two artworks by the anonymous digital artist Pak sold for $2.8 million on Wednesday on the online marketplace Nifty Gateway. The works were part of a multi-faceted sale in partnership with the auction house Sotheby's which yielded $16.8 million in total.

NFTs, or non-fungible tokens, are commonly described as smart contracts, and are built on blockchain technology to serve as a digital form of authentication. A digital artwork can be replicated an infinite number of times; an NFT attached to one means that there's an official version and everything else is a copy.

To date, NFTs have been attached to a tweet that sold for $2.9 million, NBA-licensed clips of Lebron James that sold for $208,000, and a 96-year-old painting that sold for about $40,000. Most famously, a digital mosaic by the artist Beeple sold for $69.3 million at Christie's last month. By that comparison, the Pak sale largely underdelivered, yet it still represents a dazzling valuation for artworks that didn't exist just two weeks ago.

Other works in the sale included an open edition of an image of a cube, called Cube. On the first day, an NFT of one cube cost $500, an NFT of five cost $2,500, and so forth, up to a 1,000-cube NFT for $500,000. About 19,740 cubes across the various eight tiers sold during the first day's 15-minute sales window, yielding $9.87 million.

On the second day, the price for a single cube was doubled to $1,000; 3,268 sold across all eight levels yielding $3.3 million in the same amount of time. On the third day it was raised to $1,500, with 593 selling. In total, 3,080 unique buyers spent about $14 million on 23,598 cubes.

Critics have been comparing NFTs to the famous 17th century Dutch tulip mania, and indeed, in recent weeks, prices and sales volumes have slumped across various NFT marketplaces. In an interview with Bloomberg, even the Beeple artwork's buyer called the industry a “huge risk.”

While the Pak sale by some measures disappointed—there were no crazy records set, certainly, and the highest price for a Pak artwork was just 21% of what yet another $6.6 million Beeple artwork sold for back in February—the large volume of participants in the open edition, along with the million-dollar plus results for digital art, goes a long way to proving that the demand for NFTs hasn't subsided. 

The Pak Auction

The Pak bonanza on Nifty Gateway ran from April 12–14. In a twist, four of the works on offer weren't technically up for sale, and instead were structured to incentivize spending as much on other Pak artworks as possible. Think of them as digital versions of the cosmetics industry's “free gift with $50 purchase.”

For instance, a unique work called  The Cube (not to be confused with the open edition, Cube) is to be “given” to the collector who bought the most Cubes by the end of the three-day sale. Similarly, a work called Complexity was created in an edition of 100; one was also gifted to each of the top 100 individuals who bought the most cubes by the end of the sale.

The work Equilibrium, which is in an edition of four, was also structured as a gift, but there were more byzantine criteria: One of the edition was given to a person who solved a puzzle; one went to a collector who spent the most on any work by Pak they'd bought on the secondary market (i.e., not as part of the April 12–14 sale); one would be awarded to someone who posted the hashtag #PakWasHere to “the biggest social media audience”; and one would go to someone who publicly guessed the total amount the three-day sale would yield. 

The final of the “reserved” NFTs in the sale, The Builder, was created in an edition of 30, and distributed “to artists, builders, and creators who have paved the way for Pak and other NFT artists” as determined by Pak, a sort of “free if you can afford it” gift for NFT insiders.

Standalone Auction

Two NFTs that were up for sale as unique works. Because Nifty Gateway usually has a “scoreboard” of bidders beneath any given artwork, viewers could see what individual collectors were willing to pay, and in what intervals they were willing to pay it. In a Clubhouse chat hosted by Sotheby's during the last minutes of the sale, a participant claimed that the elongated bidding was itself an act of “performance art.”

The more expensive work, The Switch, depicts a geometric form in Pak's signature aesthetic, a high-definition black and white that's reminiscent of space photography. The work is so-named, the text informs us, because it's “developed to change form at a specific point of time in the future, known by Pak.”

Bidding began at $50, quickly leapt from $100 to $10,000 to $100,000, and quickly landed at $1,444,444, which, it turned out, became the winning bid. For the remaining two days of the auction no one else stepped in.

The second standalone work is called The Pixel, and is, quite literally, a single gray pixel. The explanation, provided by the website, is that “it is a token that signs the most basic unit of a digital image in a traditional global auction house. It is a tiny mark to carry digitally native art to a potential future history.”

Bidding was very different for The Pixel. It too started at $50, then moved to $5,555, then hopped up to $25,000, and eventually made its way, on the first day, to $1,111,333, where it also languished during the second day.

But with less than a minute left in the auction, a bidding war erupted between the collector Eric Young and someone with the username 33. For more than an hour (successful bids reset the auction countdown to five minutes) the price crept up in small increments until Young placed the winning bid, for $1,355,555. “One. Single. Pixel.” tweeted Pak after the sale.

Pak's Biggest Booster Is Pak

Throughout the sale, Pak was commenting on the bidding almost like a sportscaster, using various collector's usernames to create a horse-race like atmosphere. One tweet read “And @pablorfraile comes in defending the tiny pixel.” followed soon after by another, “In the meantime @illestrater_ takes position for The Switch and @etyoung shows his blade for The Pixel.” 

Pak also aggressively hyped the sale, re-tweeting fan testimonials (“@muratpak is Digital Da Vinci” and “What @muratpak is doing is historic and goes beyond NFTs” are two representative samples) and a YouTube video where the speaker implores viewers, “Please, do yourself and the NFT community a favor and get yourself a Cube.” Even Paris Hilton chimed in, using the #PakWasHere hashtag in a presumable attempt to win the “Influencer” NFT. 

This was not, in other words, a traditional auction where the artist stays above the fray. But then again, digital art attached to NFTs is not typical art.

For starters, Pak consigned the work to Sotheby's and Nifty Gateway, meaning the artist would directly reap the proceeds of the sale. And then there's the fact that NFTs are designed to give the artist a kickback every time the work sells on the secondary market, making the sale's incentives—most notably, the one where whoever spends the most on the secondary market gets a “free” NFT—gifts that keep on giving.

And that is at least partially what makes NFTs so unique: it doesn't matter if you're giving or getting, as long as the market rises, everyone wins.

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First Published Date: 15 Apr, 07:49 IST
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