Arcc Insights: Is The Rise of Blockchain and NFTs An Artist’s Curse or Blessing? feat. ArtWallStreet

The rise of blockchain technology has made a huge impact globally with only a handful of professionals truly understanding the mechanics of how it works and the possible innovations that can be built upon the revolutionary technology.

Little did people also realize that the art industry actually played a pivotal role in unveiling the true potential of what industries can create with blockchain, through the emergence of non-fungible tokens (NFTs).

But, is every major stakeholder embracing a decentralized ecosystem established by blockchain? Are NFTs a bubble that could burst in time like what some believe it to be? Where will blockchain end up down the line globally and what does it really mean for the future of artists?

Join one of our partners, Arun Sugumaran, Founder & CEO of ArtWallSt and Cleve Yap from Arcc Spaces to find out more in this very informative episode of Arcc Insights.

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Cleve: Welcome to the show. how’s your morning been so far?

Arun: Oh it’s been good. Just doing our daily catch-up and excited to be here so thanks for having me here to share more about ArtWallStreet and the industry in general.

Cleve: That’s some good progress to hear.

Arun: Definitely.

Cleve: So, I believe your company is actually no ordinary platform for artists here but a rather forward-thinking one because it seems to revolve around blockchain tech so probably you might want to start to share with us more on what ArtWallStreet is and its mission?

Arun: Sure. Thanks for the kind introduction and you know, ArtWallStreet is a de-fi investment platform for physical art and collectibles so that’s our main point of differentiation. I mean, our focus is on physical art and collectibles. I think

you would have heard a lot of news and hype around the digital scene, digital arts and collectibles over the last you know, six to eight months and we’re really excited about that but our focus is on the physical side of art.

So, our main mission is to make physical art and collectibles more accessible to everyone. Traditionally, that asset class has been fairly inaccessible and only affordable. But, it’s only afforded by high net worth individuals and the men on the street or the mass affluent have no access to these art collectibles. So, our mission is to change that by leveraging blockchain technology.

Cleve: Yeah, That’s good to hear because I believe there are not only just high net worth individuals who are looking into art but also common people like us. We all might have a high interest in art out there and I think it’s really good to hear that people like you and your team are actually trying to do something to get themselves more exposed to this.

Arun: Yeah, exactly. I’m not sure if you’re aware but the art and collectibles industry in terms of its market size is not really well defined. But, we know it’s huge. So, some bank reports claim that it’s worth US$2,000,000,000,000 worldwide but only 3 to 4% of that is traded every year through traditional auction houses and private sales. So like what you said, the man on the street would not go to invest in expensive art or vintage cars for example, or expensive jewellery.

So, I think our mission is to change that. I think it’s an asset class that has been kind of shut to the mass affluent and the middle income segment and I think there’s a big opportunity there for us to change that.

Cleve: Yeah. Even for myself, I think I might I might take this chance as well to see what else I can collect in the future.

Arun: Sounds great.

Cleve: And you might want to elaborate more in a nutshell on how ArtWallStreet works actually?

Arun: So what we do on the supply side is that, we onboard artists from emerging artists to established artists, and we onboard their artwork on our platform. We then give them the opportunity to “tokenize” the artwork, meaning that we convert them into NFTs (non-fungible tokens) and we enable those artwork to be listed on the platform and be auctioned off to anyone on the platform.

On the demand side, we’re working with the mass affluent segment. So, that’s concerning the middle income to mid-high income market. Think of the target market as anyone who’s invested in stocks. You know, we have many apps out there that enable you to invest in the equity markets right? We are kind of parallel to that but our platform is focusing on art and collectibles. So, we enable you and the masses to invest in art collectibles, similar to how people are investing in stocks right now.

Cleve: OK, that sounds like there’s a lot of new terms over there but I guess we’ll get down there (chuckles). We’ll trickle down there. So, according to you, how is the art industry changing and how would it be like in the post-COVID world according to your opinion?

Arun: I think that’s a good question. I think even during pre-COVID times, there was a lot of innovation in the art space so during the pre-COVID period, there was you know AR (augmented reality) tech, VR (virtual reality) tech, online galleries using those technologies and I think what has happened was during the pandemic, some of these technologies have been accelerated in adoption so obviously, you know people are not traveling and you can’t be in person in physical spaces due to restrictions.

So, there has been an acceleration of the adoption of digital solutions during the COVID period, which is now almost 1½ years. Time flies. I think post-COVID if there is such a term, COVID-19 is becoming endemic as we all know. I think the velocity of adoption will continue so you would see auction houses, artists, and other service providers adopting tech. For example, the big auction houses that are already auctioning off digital art, dealing with cryptocurrencies, who are already setting up virtual galleries and virtual auctions.

So you know, we have COVID-19 to thank for that If you have anything to thank COVID for (chuckles), and i think post-COVID, that’s what’s going to happen. I think people will continue to be on that velocity of adapting solutions so that they’re more connected to an audience and to maybe other artists.

Cleve: I guess it’s a sign of growth whereby because of COVID-19, a lot of people, companies or any stakeholders in the art industry, they’re also forced to adapt right? That’s what we’re seeing right now?

Arun: Correct. I mean, you see that with hawkers, our nation’s pride. You know,

I’ve personally seen a lot of them adopting more digital solutions so I take my wallet out less now. I don’t like coins so it’s easier to go and buy your kopi (coffee) in the morning without using coins. So yeah, i mean that was accelerated during COVID-19. I literally saw that happening at the market near where I live. I was like.. Oh wow, there are more and more vendors using digital payments. So, I think even with other segments and other verticals, zoom calls are a thing now. It’s almost a norm now. That wasn’t something that we thought about 18/20 months ago.

In the art world, I think similar changes are happening, where artists are trying to grow their online presence and exploring more tools. They are starting to learn more about what’s happening in the digital art space, which is great. I mean.. I think it’s all accelerated by COVID-19.

Cleve: Yeah.. Speaking about hawkers, at times I do forget about my wallet and my phone will save me (chuckles). It’s a great phenomenon to embrace as well.

Arun: Exactly.

Cleve: Actually, there seems to be a lot of ground covered today about the rise of blockchain in the art industry, and I think today we will need you to further elaborate on the technology of blockchain and the rise of NFTs for us like what you mentioned just now. So, how are these developments going to change the industry, or like what some people think is actually a bubble that is going to burst in time to come or not?

Arun: Yeah. So, I think there are a few aspects to that question. We’ll start with what is blockchain technology. I can’t claim to be the best expert in the world. I mean I do understand the space but in simple terms, it’s a distributed ledger or what you call a distributed database. Data is recorded in this distributed ledger database by some form of consensus mechanism so no single person can record data. In simple terms, it’s based on consensus and that’s how transactions are recorded on the blockchain.

Blockchain has been around for a very long period of time now. The biggest challenge that blockchain and the projects have faced is adoption. The audience or customers or even big enterprises have a hard time understanding blockchain. But, that has changed in the last 18 months thanks to a few companies that have made it a bit more accessible. How so? They’re riding on consumer behavior.

I don’t know when you’re growing up you remember collecting all kinds of different collectibles? For example, during my time when I was growing up, kids were crazy about Dragon Ball cards. They were crazy about some soccer trading cards or whether it was Hong Kong stars.. Whether you get Andy Lau on a card and you collect that. Or, whether it’s Magic cards. People collect that, trade and they’ll sell it. Some will say “okay I want $20 for this.” and then as a ten-year-old kid, you’re thinking about $20 back then in the late 80s or 90s, that’s crazy. You’ll be like “why the hell would you spend that kind of money?” and it’s the same conversation that we’re having today about collectibles. Instead of physical, there are digital collectibles now on the rise. Part of that is art. Part of that are also things like collectible kittens. I’m not sure if you heard of Crypto Kitties?

Cleve: Oh, i think it’s like some kind of game right?

Arun: Well, Crypto Kitties is kind of like a collectible platform where you can create unique kittens. So, you breed kittens and when you breed two kittens, a unique kitten is created and people start trading these unique kittens. I mean.. it’s a cute factor. People understand why it’s unique because a token represents this unique asset. So, that token is basically an NFT.

An NFT is basically a token that represents a digital asset or an asset in the real world. So people started understanding that like “okay I get it now, you can trade this unique digital item as it’s one of a kind online. It’s represented by a digital identity or a token” and people started realizing “okay that’s what blockchain technology is”.

It gets more adopted now and then you know you have NBA top shot. I’m not sure if you’ve heard of it but it’s an amazing platform. Basically, in the past people used to collect NBA cards like how I trade NBA cards with you. Now, you have highlight clips or highlight reels. Videos that you can actually trade. So, you own the videos. Maybe the LA Lakers or the Chicago Bulls or whoever you support, and there might be a very exciting play. Whether it’s a three-point shot or whether you’re laying up or it’s an amazing slam dunk and there’s a highlight reel for particular players of particular teams, and that becomes a unique highlight reel. They release what they call it drops. You can open a digital packet, you won’t know what it is, and then when you open it, you’ll realize what highlight reel you have and then you start trading that with people, and that’s enabled by an NFT as well.

So, I think what’s happening with blockchain now or the great thing that’s happening is that it’s something that people are starting to understand. Something that is led by NFTs. So, you know NFTs are enabled by a blockchain but I think blockchain has now received more spotlight thanks to NFTs and digital art in the last eight months. Therefore, what’s going to be exciting is I think there’ll be more solutions built on blockchain. I mean.. You’re seeing banks now looking at adoption. They’ve been looking at blockchain for the longest time but you know they’re now kind of implementing a lot of those plans that they had and you’re going to see that more in enterprises and SMEs as well.

Cleve: It seems like we are all looking at blockchain as the next web era whereby it’s equivalent to how much the internet back in the day actually made such a huge impact globally.

Arun: That’s right.

Cleve: Ok. Talking about the digital forms of art, I’ve done some research before this podcast. I’ve seen a lot of digital forms of NFTs going around the market yeah. They’re actually sold with very high prices online as well so, to be honest personally I’m actually quite surprised that there are actually people buying something with a presence that can only be felt on the internet. So, a few of them that I saw was something like the CEO of Twitter’s very first tweet to be sold at such a high price and there was a very cute cat with some rainbow stripes in the form of a GIF, also sold at very high prices. So, I was wondering how does an artist actually determine the right type of audience to sell their art pieces?

Arun: Yeah, so this is a bit of a philosophical question like how do you value something right? You know, if you go on Carousell today, you’re going to find all kinds of interesting items for sale right? Someone just showed me a screenshot yesterday about a BTS meal from McDonald’s on sale for $2500. So, to me I’m sorry. You know, I admire the Korean entertainment industry, I really do. But, you know the BTS meal is really just chicken nuggets with special sauces and purple boxes and I apologize to all the BTS fans but why is that worth $2500?

So, back to that question now. OK, the CEO of Twitter tweeting his first tweet. I mean, that might be more valuable than a BTS meal in context right? Perception-wise, if you think about the value of that is probably worth more than Chicken McNuggets. But, going back to the history of art and how it’s evolved, typically art increases in value over time and there are a few factors that affect the value of art. One is the scarcity, how unique it is, and of course, liquidity. The market. Whether there’s enough money in the market to purchase art and collectibles and of course changing consumer trends right?

So, you said that you’re surprised by how recently there is this hype around digital art and how expensive some of these items are listed for and sold. You have to keep in mind a lot of these digital art forms are tokenized as NFTs so they are scarce. Firstly, there’s a promise of scarcity. It’s one of a kind, it’s unique on the internet, you buy it and it’s a digital asset that you own forever. Even if they’re copies, you have the certificate for it. Let’s call it a certificate.

So that’s scarcity there. There’s also liquidity. So, you must understand that there have been many early adopters of cryptocurrencies like 5, 6, 7, 8 years ago. These early adopters are now multi-millionaires in the crypto sphere, holders of cryptocurrency. So, as much as you wouldn’t be surprised, if a millionaire drives a Ferrari, you’ll be like “OK, I can’t believe you bought a Ferrari”. It’s like, yes it is a Ferrari, a car that is 100 times better than a Toyota Corolla, maybe 10 times. But, why is he paying that much money right? I think similarly when you have that much liquidity. It drives the price of digital art and NFTs as well.

You know, some people are also crypto evangelists or blockchain evangelists. They believe in this new form of assets and therefore, invest in it. Then lastly, you have consumer trends changing. If you compare with trends 20 years ago, It’s very different today like how you consume games today for example, versus 30 years ago. If you think about it from a form of entertainment, you’ll see a lot of serious gamers spending a lot of money on in-game purchases which to me, it blows my mind. They’re so committed to the game. For me, it’s a form of entertainment but it is questionable right? Like why are you spending that much money on a game?

So, while it’s a game, it’s not a collectible. It is still a digital asset now like in-game purchases are an asset right? Interestingly, NFTs are being used for that as well. But, that’s another topic and i think that’s what’s been driving the price up and the liquidity in digital art.

Cleve: I see.

Arun: Now, what’s left to see is whether this continues as a trend or whether it kind of normalizes and whether it’s going to be applied to other aspects. For example, like for ArtWallStreet, we believe that physical art and collectibles are the long-term game. It’s a proven asset class and we are using this technology to kind of establish ourselves in this asset class.

Cleve: By seeing how the industry flows right now, it makes me feel a little bit old (chuckles) because personally, I’m not someone who is into the digital art trend though. Like I mentioned, I’m still a physical person so a lot more art that I’ve actually appreciated comes in the physical form so yeah, I guess it’s just a change of how people perceive art nowadays.

Arun: Actually, that’s a very interesting point that you raised and you know recently, i was at an online tech conference hosted by a private bank dealing with high net-worths and they were talking to their clients about what’s been happening in tech, what’s the future looking like. They had one of the leading auction houses talk about NFTs and cryptocurrencies and the president of this auction house for APAC said that they’re starting to see crypto natives, holders of cryptocurrencies bidding on physical art as well.

Cleve: Oh.. OK, that’s interesting.

Arun: So, it’s not just that they’re looking at digital art. They’re starting to see a trend of crypto natives, holders of cryptocurrency purchasing physical fine art as well. I mean our hypothesis is that liquidity from the crypto world will move to the physical world in terms of assets.

Cleve: Oh, that’s really interesting to hear though.

Arun: Yeah, real estate or physical art or any other collectibles or even goods and services. So, i think that’s a trend that’s going to increase in velocity over time moving forward as well.

Cleve: I see. That’s very good to know. So, as we speak about a crypto-based marketplace which is also a decentralized form of e-commerce right? So, will the rise of these platforms actually affect the general market established by the financial system set by central banks? This is something I think the world is curious about.

Arun: I think the short answer is, they’ll coexist. You know, the centralized financial ecosystems will continue to contribute to society and they would have a very important role in the stability of countries, nations, and communities. So, I don’t think decentralized solutions are going to wipe out centralized solutions. I think they’re going to coexist. They might be applied in different forms and different contexts and I think there’s still some time for the world to start understanding what decentralized is and the benefits of that.

So, I feel that over the next 3 to 5 years there’s going to be leaps and bounds made moving forward with blockchain technology. Similarly, you would find centralized financial ecosystems adopting some of that technology or retaining some centralized solutions like some kind of a hybrid model. What that means for the consumer is that you’re going to have different options on the table. I think the consumer is the winner. So, if you feel like “OK, I don’t really want centralized solutions, it’s not in line with what I am as a person. I believe in decentralized open data and transparency”, yeah that might be a solution for you. Or, you might be more financially savvy. You might say “OK, you know what? I want to invest in crypto and I want to stake tokens, earn a yield on tokens because it’s giving me a higher yield than my local bank account”.

So, I think a lot of what’s going to happen, and this is just me crystal balling or forecasting it, I think there are going to be a lot of financial advisors down the road and service providers coming out of nowhere saying how do you invest or should it be part of your portfolio. Maybe banks would start offering that as part of their services. Yes, you can have you know your fiat savings and current account but maybe you want to have a crypto portfolio and this is what our experts think. So, banks might start hiring crypto researchers you know? You already have fund managers who manage crypto funds and so i think there’s going to be a coexistence between the two ecosystems which is very exciting for all of us moving forward.

Cleve: Interesting. So, you believe as the world moves forward it’s going to be more of an “each-to-its-own” kind of thing right?

Arun: Yeah, I would say each to its own drawing down from the best of both worlds.

I think the key is that you would have options so maybe you might have an AMEX card that gives you great miles and you will still buy a coffee with your AMEX card at one café. But, maybe there’s another cafe that accepts tokens, and every token that they accept automatically contributes some social cause. Whether it’s animal conservation or serving the underprivileged in society and “You know what? I resonate with this cafe for that, I want to pay in tokens because this café accepts those tokens”. You know what I mean?

So, as a consumer, you start relating to different things like when I talk about miles. Hopefully travel comes back. I mean.. I have faith that travel will come back (chuckles) but I think it’s going to be interesting even with travel. Imagine if you could start spending on crypto. You don’t have to go to money changers anymore right? It could be a universal token of identifiable value that does not depend on geography or the central bank system. Imagine if you travel and you just started paying in whatever particular cryptocurrency that is available for travelers at that point in a very widely accepted format. But, at the same time, you might still use your credit cards for other things. Maybe for your Spotify subscription or your Netflix subscription. So, this is what I mean.

You know, we’re in Singapore. I think Singaporeans always look for the best deals. i think there’s going to be some experts coming on forums saying “hey, you should get this card” or “you should get this wallet because it gives you the best outcome”, “maybe you should buy furniture with crypto here’s why.”, you know? So, I think it’s not too far off. I honestly think it’s a couple of years away. Maybe 2/3 years away or faster, and I’m personally excited about that how blockchain technology is going to be embedded in our lives or be a part of our fabric and part of society. There’s a lot of benefits to technology. The biggest hurdle like I’ve said at the start of the podcast is basically having mass or society-wide adoption of the technology and educating people about the benefits and that’s changing now, led by NFTs, digital art and that’s going to flow into other applications and verticals as well. So, I’m super excited to be in the space. It’s actually a privilege to be part of the evolution of this nascent market.

Cleve: I guess it’s good to see that because of emerging tech like blockchain, we have a lot more offerings that we can embrace through people marketing their own stuff their own way already. So, yeah it is exciting to see definitely.

OK, last question here. Would you like to provide some advice for artists today?

Arun: Yeah sure. I have many friends who are artists that are probably in a better position to give advice. I mean, I’m not an artist myself but i definitely appreciate art and the work that artists do. The main thing that I’d say is that technology is a tool and technology will evolve over time. i think there’ll be many amazing tools that’ll surface over the next few years. But, the key is that artists firstly have to remain true to themselves. They still have to build their identity, work on the quality of art, their identity, their story, and the quality of art makes a difference in price as well.

I ask any art appraiser and they benchmark you against different genres of art or different peers of art and if you’re a young artist, this advice probably goes out to more of you. I think the distraction would be to say technology is going to

transform my art. Yes, there are some tools that will do that but technology is not going to transform the quality of art, your brand, and your identity. So, I’d say the advice is to use technology to help you build that story, to help you build an identity, help you build your craft, and then think about tech and solutions that will increase or amplify your presence, whether it’s online or offline so that people can discover you. So, being discovered is key and for the audience to understand your story, connect with your story or art is also key. So, that still remains very very important.

If not, you know even in the digital art space you’re going to find lots of art that don’t get sold. It’s not valued very highly and that happens in the physical art space as well. Not every piece of art is worth a million dollars so the focus is really still focusing on your craft, identity, and the story that you’re telling or the brand as I call it. So, it’s a combination of developing your artistic skills as well as your business set of skills.

Cleve: That’s right.

Arun: I mean.. Some artists may not like this but you know art in itself is a business. You’re producing something that’s amazing. you’re like the manufacturer and art is a form of expression. It’s an identity. It’s a form of communication and it obviously personifies what the artist believes in. But at the same time, you need sustenance as an artist and for you to have a sustainable career. Hopefully, your art gets sold as well. Just like any other business, you have to learn how to sell and you need to learn how to connect with your audience and it’s just not just artistic skills but the business side of it and I would say maybe that’s kind of like the biggest weakness that many artists have. Like how do you sell my art?

Hopefully, these tools that come on board over the next few years could help these artists become better sellers of their art.

Cleve: Yeah, That’s good to hear. All right, so if you’re an artist you heard from the man himself. Arun, thanks for coming to join us for this podcast.

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