Can the New Dog Stop Old Tricks?

March 2021

Whether NFTs are transitory or permanent, their rise to first place in discussions of art and investment begs the question: what would happen if we could eliminate forgery from traditional (tangible) art markets and might the underlying technology of NFTs play a role?

Giacomo, Researcher & Business Development Manager

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Key Takeaways:

NFTs can be embedded in anything digital: art, music, digital trading cards, memes and even sports highlight reels. The first NFT standard emerged in late 2017, but only in the last couple of weeks have they risen to prominence in the art world. Here at Hephaestus, we are not yet sure if NFTs are the digital analogue of tulipmania or an ambitious technology capable of transforming and disrupting the way art is created, distributed and collected. As an art authentication service we are particularly interested in how NFTs have solved the authenticity issues relating to digital art, and in doing so have attracted new audiences and a lot more money. In short, by eliminating forgery, NFTs have added liquidity and scarcity to the digital art market.

What is an NFT?

A non-fungible token, or “NFT” is to a digital artwork what a passport is to a passenger: a unique identifier. But an NFT is also more than a passport, it is the deed to a digital asset that conveys ownership. Sometimes NFTs convey more than ownership: for example, the band Kings of Leon sold NFTs whose owners each have a copy of the first release of their new album, as well as rights to future concert tickets. Currently, when a person acquires an NFT, the underlying asset is owned, but not the copyright. The copyright holder could still use, display, distribute or create copies of the work.


Embedding an NFT into a digital work of art simultaneously removes the question of authenticity and inserts an element of scarcity: now only one object out of many copies is certified original.  In art markets, this is especially important in countries like China and Vietnam, that do not enforce copyright laws, and where a veritable industry dedicated to producing art reproductions exist.

With due respect to Walter Benjamin’s framework, the “aura” of an original Beeple digital collage is indistinguishable from what emanates from its digital copy. However, what is distinguishable, in fact, unique, is the original work’s embedded NFT. Coded using a blockchain-type algorithm, a 40-digit sequence of letters and numbers that is registered simultaneously on digital ledgers throughout the world prevents imitation. As NFTs have moved to centre stage in the “attention economy”, and the question of authenticity is solved, important trends are apparent:  

  • many new participants enter the market and
  • prices improved.

In other words, eliminating forgery creates liquidity in the markets.


Four months ago, Metakovan (he goes by one name, like “Madonna”), head of the crypto-based investment firm, Metapurse, paid $2.2 million for a set of 20 works by an artist known as Beeple. Last week, Metakovan’s $69 million purchase of Beeple’s collage “Everydays: The First 5000 Days”, put the artist’s digital work on the cover of the Wall Street Journal and gave it coverage in most major newspapers throughout the world. According to the WSJ, Metakovan is relatively unknown in blue-chip art circles. Suddenly he is a top collector. NFT exchanges worldwide report a surge of trading, new accounts and participation in the collection and trading of art and many other collectibles featuring NFTs.

The Hybrid of Art and Science

That a digital work of creative expression, an intangible, could find its value by means of a rigorously applied scientific algorithm has ample precedent in the securities markets. Some of the most creative people working on the planet today are entrepreneurs, and their ability to raise capital (find value by selling ownership in their works) is a function of conforming to a strict set of protocols governing institutions like the NASDAQ and the London Stock Exchange. In fact the world’s most stringent protocols and rigorous enforcement are found in the US securities markets, which also happen to be the most liquid markets in the world.

The Trouble with Posterity

Traditional art markets are attracting greater scrutiny, at both the government and non-government level: On Oct 30, 2020 the US Treasury Department issued warnings citing the “lack of transparency and high-level of anonymity in art market transactions.” Meanwhile one of Netflix’s most popular documentaries is its recently released “Made You Look” about the Knoedler Art Gallery peddling $80 million worth of fake paintings attributed to Pollock, Rothko and De Kooning, all with the blessing of some of the art world’s “experts”.

By contrast, an NFT conveys key information about the work in which it is embedded: the date the work was created, when it was sold, for how much and to whom. In other words, all the data that accompany the initial issuance of shares on an exchange, but on a permanent basis.

Can a New Dog Stop Old Tricks?

NFTs work because they authenticate a work of art: an algorithm converts an asset’s information into a permanent unique identifier. That identifier is registered on digital registers throughout the world. The slightest change in the unique identifier’s information would generate a different identifier. This allows would-be buyers to ensure that an asset hasn’t been forged. It also allows the authentic work to trade freely, at nominal transaction costs, on online exchanges.

By performing these functions, NFTs perform the role of regulatory agency, exchange and authentication service, all in one. They point unmistakably to the benefits shared by all art market participants from the elimination of forgery: greater participation, prices and liquidity.

In other words, current practice keeps many art market participants away, makes the purchase and sale of art gratuitously expensive and reduces prices by lowering the number of potential bidders and by limiting trading hours to certain times and places. All the while, authentication scandals occur regularly. The entry of financial professionals with their forensic due diligence habits and digital natives who have a strong tendency to disintermediate middlemen, has brought the art markets to a tipping point.  

Hephaestus, the London and New York based art authentication service is dedicated to the eradication of forgery from the art markets. We firmly believe that NFTs have proven our case: eliminating art forgery, reliably and affordably, will bring more participants, higher prices and greater liquidity to tangible art works (traditional painting and sculpture). Hephaestus offers a complete suite of authentication solutions, from traditional technical analysis to machine learning detection, for collectors, museums and lovers of fine art everywhere.

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