How Paintings Could Have Become Part of the Digital Economy, but Didn't

In the autumn of 2025, the auction house Christie's announced the closure of its digital art division after three years of operation. The news marked a significant event for the non-fungible token (NFT) market, which in the early 2020s transformed digital artworks into full-fledged objects of collection and investment.

Non-fungible tokens (NFTs) are digital assets whose records are stored on a blockchain, confirming ownership and authenticity of the object. Unlike cryptocurrencies like Bitcoin, where each unit is interchangeable, each NFT is unique and linked to a specific digital object, whether it be a piece of art, a video, or a collectible item.

In simpler terms, an NFT acts as a digital passport for a work of art, containing the entire history of its existence in the market. Originally created for cryptocurrencies, blockchain technology securely protects these records from unnoticed substitution or forgery.

At the peak of popularity from 2020 to 2022, NFTs ceased to be a niche phenomenon and quickly entered mainstream culture. Artists, musicians, and major brands released their own tokens en masse, while collectors purchased them not only as works of art but also as speculative assets.

One of the most notable events of that time was the sale of a work by digital artist Beeple titled "Everydays: The First 5000 Days." In March 2021, Christie's sold it for $69 million, drawing the attention of the general public to the digital art market for the first time.

A market for digital art in the conventional sense quickly formed. Curatorial platforms like SuperRare, Foundation, or KnownOrigin allowed artists to independently release limited collections of works and sell them directly to collectors. For many digital creators, NFTs became a monetization tool for the first time, rather than just a way to publish works online. It was in this part of the market that the idea of confirming authorship and provenance of works proved to be the most in demand.

Alongside Beeple, digital artists like XCOPY and Pak gained widespread recognition, and marketplaces became for digital art what traditional galleries are for offline authors.

At the same time, NFTs increasingly blurred the line between art and investment. The technology promised to change the perception of digital ownership, but the value of tokens quickly became dependent primarily on the situation in the cryptocurrency market. When prices first soared and then plummeted just as rapidly, it became clear that the NFT market was largely sustained by speculative demand rather than stable interest from collectors.

"Futures on JPEGs"

Within the crypto community, the NFT market developed according to its own rules. While in the art world NFTs were primarily associated with digital artworks like Beeple's piece, among crypto traders, the so-called PFP collections with avatars, such as CryptoPunks, Bored Ape Yacht Club, or Pudgy Penguins, gained the most popularity.

For many market participants, such NFTs quickly turned into a kind of "futures on JPEGs." Their value was determined not by artistic merit but by liquidity, market sentiment, and expectations of further growth. Gradually, this segment began to shape the mass perception of NFTs. On platforms like OpenSea and especially Blur, collections were traded almost like cryptocurrencies, and the marketplaces themselves encouraged active trading by offering advanced analytics, automation tools, and trading bots.

This speculative narrative existed alongside the digital art market and only partially intersected with it. Therefore, the subsequent collapse of the market does not mean that the very idea of using blockchain to confirm the provenance and ownership of digital works has proven to be unviable.

Market Correction

By 2024, the NFT market has significantly contracted. Platforms that were recently valued in billions of dollars have begun to rapidly lose users, and some have even closed down entirely. At the same time, the prices of tokens from the most well-known collections have plummeted.

Against this backdrop, Christie's decision to close its digital art division was perceived by many as a symbolic milestone. Although the auction house stated that it would continue to sell digital works through its contemporary art division, analysts saw this as a rejection of the idea that the NFT market could exist as a standalone segment.

However, it is still premature to speak of a complete decline of NFTs; by the end of 2025, there were discussions about the first signs of market recovery. Nevertheless, the new growth is currently limited to a narrow circle of digital artists and collectors and is far from the speculative frenzy that drove the market a few years ago.

Technologies and Long-Term Value
The collapse of the NFT market has once again raised the question of what determines the long-term value of digital art and whether it even exists. A mere digital image or collectible object has proven insufficient to maintain interest in the market. To remain in demand, NFTs must offer owners not only proof of authenticity but also practical value, such as access to services, exclusive content, or closed communities.

This explains the growing interest in so-called utility NFTs. Artists and platforms are increasingly experimenting with tokens that provide access to additional opportunities, from exclusive content and closed events to collaborative projects. Another direction has been phygital projects that combine physical objects with digital certificates on the blockchain.

The further development of NFTs will largely depend on how organically the technology can integrate into the existing art market system. Blockchain is increasingly seen not as a replacement for existing mechanisms but as a way to make them more efficient. A similar path is currently being followed in the financial market, where blockchain is gradually being implemented through the tokenization of securities.

Problems and Prospects
Despite promises to provide reliable proof of authenticity through blockchain, NFT technology has faced a number of practical limitations. The blockchain stores the history of transactions, but not always the digital artwork itself. In many cases, an NFT contains only a link to a file hosted outside the blockchain. If it is deleted, altered, or the service hosting it becomes unavailable, the token loses its connection to the artwork. This phenomenon is known as link rot and calls into question one of the main advantages of NFTs, namely their durability.

The legal status of NFTs also raises many questions. Owning a token does not automatically confer copyright on the associated work. This leads to disputes over whether such works can be reproduced and how royalties should be regulated upon resale.

For digital creators, blockchain has opened up the opportunity to sell works directly to a global audience, bypassing galleries and art dealers. This has lowered the entry barrier to the market and allowed artists to earn income from subsequent resales. Additionally, cryptocurrencies and stablecoins have become the natural means of payment, enabling transactions directly without financial intermediaries and geographical restrictions.

This model of direct interaction between the creator and collector is gradually changing the very approach to digital art. Instead of a single finished piece, artists can create evolving collections or interactive works that change over time, with blockchain serving both as a means of verifying their authenticity and as a unique archive of changes.

The development of the market is still hindered by its oversaturation and instances of price manipulation, which are characteristic of the cryptocurrency market as a whole. Therefore, the future of NFTs will largely depend on whether the market can find a balance between technological capabilities and consumer trust.