Digital Art space is booming on all cylinders.
To quote a prominent collector, blogger, maverick and pioneer matthew.cent.eth (@niftytime): “Buying #CryptoArt today is like buying Bitcoin in 2010.”
He continues: “Instead of spending 10,000 BTC on a pizza though, I bought a work of art that museums will kill for.”
The growth is literally striking — from USD 6,000 in June 2019 to USD 390,000 in June 2020. Only to 3.5x this figure to USD 1,400,000 in September.
I’ve written on the subject before and I will not get in to further specifics or examples. Instead I will explain the topic at hand as clearly as possible with a few question leads.
Why need an index?
Sales figures, number of items sold, average prices, secondary sales, marketplaces in comparison to galleries, figures for this year next year the other year..
The list goes on adequately to be confusing. An index is the solution to the complexity. It simplifies the underlying dynamics to a continuous numerical series starting from a base.
Thus a Digital Art Index is a shortcut to understand the general direction of the market over a time period and to communicate it easily with third parties, the press, lovers, confidantes, frenemies and the like.
What constitutes the Digital Art Index?
Digital Art Index gets its data from the blockchain through the great database that nonfungible.com provides. The index makes use of onchain transactions as recorded by the contract issuers. In this manner, when artist creates a contract with the index constituent contracts, then regardless of where the artwork is sold, Nonfungible tracks the transaction which (if within its specified criteria) the index will use.
Note that if certain marketplace makes credit card and/or other non Ethereum blockchain based transactions, they will not be tallied. Furthermore the index at the moment is restricted to cover the data from four major semi-curated galleries that are SuperRare, MakersPlace, KnownOrigin and AsyncArt. This method leaves out high selling individuals that sell both through these galleries but also directly. It also ignores major contracts such as Rarible that also rack up an important volume of digital art sales. However, as this is an index not a market value, its relative direction and monthly change should be broadly in line with market dynamics by covering these four galleries.
For clarity sake, I use the term semi-curated to mean artist access and secondary sales criteria are enforced by these galleries while artist content, pricing and promotion alongside collector modus operandi are not.
How is the Digital Art Index calculated?
The index is calculated as a weighted average of monthly indicators. Index base is 100 and the base month is January 2020. For each incremental month, USD sales and number of items sold are compared to the previous month to record a change in the index. At the same time, these different metrics are allocated different weights. In the current version, Sales gets 60% while number of items sold gets 40%. This way the index relies on market participation as well as on aggregate sales figures.
Who created the Digital Art Index?
The index was created by Hulki Okan Tabak on October 29, 2020 for the purposes stated in this article and by the methodology mentioned herein.
What will happen next?
I will publish monthly Digital Art Index figures for an unspecified period of time. Barring a personal issue, the index figure will be put up within couple of days following the announcement of monthly statistics on Nonfungible.
Meanwhile through time, feedback and usage; where possible the index will be improved. Eventually after some field testing, it makes most sense to integrate the index in to an automatic calculation in a website for longevity.
The potential shortcomings of the index can be (i) not enough contracts to create an index level representative sample, (ii) need for additional metrics the calculation and (iii) weighting needs adjustment. My personal opinion is that neither of these shortcomings change the usefulness, base level and directionality of the Digital Art Index. After all the aim is not accurately pinpoint who did what. On the contrary, the aim is to represent the complex totality in simple numerical fashion and with attention to internal & external consistency.
Current Index Chart
Digital Art Index for the month of November 2020 can be found here:
Data Table for the Index is presented below:
Contract Level Breakdown Tables are below:
I will not elaborate on the figures here, you can visit @hotabak on Twitter for the occasional comment on the performance of the digital art space.
Please note that I could have easily made errors in inputting data as there is no third party double checking support in this pro bono project. Any such errors are possible and unintentional.
As a final note the title of this article is a salute to Marillion’s He Knows You Know on the 1983 album Script for a Jester’s Tear.
This article will be published in English on the Medium and in Turkish on the BTCHaber.com website. Relative timing depends on a lot of factors but one will follow the other.
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Digital Art Index: You Know We Know What You Seem to Know Now was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.