The decaying orbit: a collector's journey

Digital art has a problem. Perhaps there's a solution somewhere out there.

• Traditional and digital art funnels vary in significant ways

• How and why collectors become fatigued

• Oversupply and waning demand are rampant

• A web3-native solution is necessary

A consistent stream of collectors must patronize the artists who consistently produce content to support a vibrant art market. In the traditional world, there is an established funnel through which collectors are connected to artists. Gallerists are responsible for marketing to collectors and nurturing a base of buyers who will usually support the releases the gallery distributes. A well-understood dichotomy exists between artist, collector, and gallerist, and it plays out in one of two ways.

Version 1: An artist approaches a gallerist, hoping their work is marketable to the gallery's existing collector base.

Version 2: A gallerist approaches an artist, hoping their collector base will help expand the gallery's reach.

In a perfect world, synergizing these shared desires would create a fruitful and long-term relationship between all three parties. However, traditional collectors and web3 collectors differ significantly.

Whereas a traditional collector might approach their portfolio based on the artist's historical provenance, genre, or notoriety, a Web3 art collector has less to go on in terms of general strategy. Below is how the average NFT collector approaches collecting.

Phase 1: Excitement

A collector finds a new world of art to consume and collect. Perhaps they come from a background in traditional collecting and see the benefits of holding immutable provenance, low-to-no-risk storage, and ultimate portability. Some fantastic visuals, generative capabilities, and all sorts of gamification usher them into the world of Web3. Their trigger finger is itchy, and they start scooping up all kinds of beautiful works. An ancillary benefit is that the artists begin to grant them recognition through their social channels. Now, the collector is seeing increased engagement and a newfound sense of popularity.

Phase 2: Disillusionment

The novelty begins to wear off for the collector as they realize they have spent several hundred (or thousand) dollars on artwork that likely has no resale value and that can generally not be displayed outside their mobile device or laptop screen. No worries; they still love the artwork, but now they must reassess their buying habits and approach their newfound hobby with more of a strategy.

Phase 3: Discovery

Now that a strategy is in place, the collector can focus on specific artists whose artwork resonates with them deeply. Once those individuals are identified, the collector begins acquiring works once again. They may even strike up a personal relationship with the artists they patronize. A new era of excitement begins—for a while, at least.

Phase 4: Inundation

The collector has acquired "enough" works to feel like they have an established collection from the artist. Perhaps the artist is selling their work for more money now, and the collector gets priced out. They remain in contact, but the level of repeat purchasing diminishes greatly, sometimes reaching an absolute halt.

Phase 5: Selectivity heat death

This phase is the end stage for most Web3 art collectors. They've spent as much as they are willing to spend on illiquid jpegs and are happy with their collection. They may pick up a piece here and there, but their selectiveness is not enough to support a thriving marketplace. They burn up in the atmosphere; their orbit has decayed to heat death.

The above issue is readily apparent in the metrics seen across all of the significant NFT Fine Art sales platforms in the crypto space over the past two years. Volumes have steadily dropped across the major platforms since 2021 with no sign of recovery.

Is this the platform's problem? No, the platforms are not galleries. They are a place to showcase your work and sell it. While they have some marketing capabilities and make an effort to support the artists who list their work, they intend to generate fees and not much else.

Lack of demand can be attributed to several factors, including macroeconomic trends (low liquidity environment, buyers are limited on discretionary cash), low ROI on digital assets (very few NFTs, especially Fine Art, have any resale value or ever will), or temporary waning interest in NFTs.

Something not often discussed throughout the digital art sphere is the immense supply of works. Innumerable artists (likely millions) vie for the pockets of mere thousands of art collectors who are all experiencing the decaying orbit problem described earlier.

Likewise, these artists push out immense amounts of content daily. Whether the art is viewed on social media or purchased is unimportant when considering how easy it is to consume. Artists feel pressured to push out excessive amounts of work because of the content constantly streaming to everyone's devices. This unfortunate reality creates a negative feedback loop. Rushed work, an oversupply of that work, and a lack of buyers to soak up that oversupply.

This vicious circle creates a tumultuous environment for artists attempting to make a living by producing artwork. In many cases, this environment becomes untenable and forces artists to find alternative means of income or, in some cases, leave the space entirely.

Recently, discussions have been propagating about the issues described throughout this post. There are several approaches to a solution, but they all lead to the same underlying truth. Web3 artists need a better way to monetize.

While there are numerous mechanisms through which an art market can be incentivized, there is no way to force demand for artwork. A solution needs to be web3-native, create a virtuous cycle of funding that enables artists to approach their work with the most thoughtfulness possible and remove unnecessary distractions from the artists (i.e., marketing, release management, etc.).

However, how this is achieved is the real discussion point.

Forming a DAO is one web3-native solution that can work but is ridden with potential pitfalls and caveats. Most DAOs now act as decentralized gallerists that support a set of artists and, in some cases, acquire works utilizing the DAO's treasury funds. While this model works on a small scale, the artists are not supported long-term or at scale.

Notwithstanding the apparent tribulations of operating under decentralized governance, the reality is that the decaying orbit problem will persist. There will still be a need for "new blood" constantly coming in to buy art, and without a constant stream of new artists, interest will wane. A continuous stream of new artists means the previous artists become neglected. This cycle is not virtuous and is incredibly difficult to maintain.

Without an alternative source of income to support the artists (i.e., pay them for their continued efforts), there's no scalable mechanism through which a DAO can support artists.

Take Nouns, for example. Recently, Seneca published this Cast

Farcaster

seneca on Warpcast

a dream: noun pulls in $1m+ / day, auto deploys a big chunk to rounds, all is routed to thousands of artists creating top tier work. the top 10-20% make enough to not have to work on anything else and live out the dream: make art, get paid.

Nouns' Treasury receives consistent and steady income from Nouns' sales daily. This is not equivalent to $1MM, but it is still enough to add to their growing war chest. A model like this would enable artists to work consistently on their craft worry-free. It would, however, also force them to create at least some content specific to the DAO branding (in this case, Nouns).

Patreon and the like have developed an excellent model for content creators to monetize their efforts by offering exclusive content and benefits to their subscribers. The pitfall is that a tiny percentage of content creators capture value on these platforms. In other words, creators still need a large audience to monetize. This difficulty arises from the fact that these platforms are individualistic by design. They reap the benefits of individual creators' platforms via fees and other rent-seeking mechanisms.

To resolve the excessive supply issue, a platform-wide fee could be charged to users who want access to the latest art from their favorite creators. Drip has done a tremendous job at achieving this model. Users can purchase or earn droplets they can send to creators as tips. Top tippers receive enhanced benefits in the form of art with increased rarity.

This model is more democratized and doesn't require the collector to purchase while providing the artist with some financial benefit and incentive to keep producing work for the platform. However, this model also dilutes each artist's portfolio, leaving collectors with immense numbers of virtually worthless NFTs in their wallets.

A combination of the DAO, subscription, and democratized distribution models could be built on top of Farcaster. The vision includes an art-specific client that enables token-gated access to the platform's artists and perhaps incurs some annual costs for the users. Beyond the jpegs and GIFs, the platform could enable musicians, videographers, animators, poets, and all artistry. Collectors pay for the platform, and the DAO distributes the funds to the artists equivalent to some key value metric. Further, using XMTP, a direct connection between artist and collector can be made. This wallet-to-wallet messaging system would enable private communications and re-marketing capabilities.

There are assuredly more features and ideas that can be applied to a platform like this, and it would be great to see more discussions surrounding this concept as a result of this post.

Ultimately, a Farcaster-native solution solves oversupply, funding, governance, distribution, and democratization issues. The question is, shall it be done?