March 2021 will forever be remembered as the month that NFTs went kaboom, bursting into the mainstream when Beeple’s Everydays: the First 5000 Days sold to crypto entrepreneur Metakovan for $69.3 million. Suddenly, the art world was noticing and, overnight, NFTs became the mostly hotly debated subject of the year.

From SNL to Snoop Dogg, NFTs quickly took popular culture by storm. Athletes and celebrities aped-in; some shilled and rug-pulled their fans. Others made genuine contributions to the space, like when Grammy award-winning producer Timbaland made NFTs of stems to his beats—buyers were given the rights to remix and profit from them. 

Now, most of that initial hype has collapsed, thanks in part to the cantankerous crypto market. Pieces once bought for millions now barely muster a couple hundred thousand at auction. The auction platforms are not doing much better: OpenSea, the largest of them all, laid off 20 percent of its staff in July 2022. Sales volume is significantly down. An extremely muted sale earlier this year of generative art (digital art made with autonomous software) at Phillips showed that collectors are no longer as keen.

As the NFT art market faces a recalibration, what will become of the market for digital and physical art—the so-called “phygital”?

Damien Hirst with The Currency artworks, 2021. Photographed by Prudence Cuming Associates Ltd. © Damien Hirst and Science Ltd. All rights reserved, DACS 2022.

Wait—What Is That? 

“Phygital”—a term that causes a collective groan from many working in the crypto space—is an art form and market that has mushroomed despite the wider market calamity in the sector. Art star Damien Hirst was one of the first to take NFTs to the realm of phygital with his project “Currency,” a referendum asking collectors what they valued more: a painting or a NFT. He offered anyone who bought one of his thousand NFTs released for the project to trade it in for a physical work, surmising to destroy the other. The results are in: collectors preferred the physical works. Next month, Hirst will have to burn 4,851 corresponding physical paintings of an original set of 10,000.

But the preference—with 5,149 collectors opting for physical work and 4,851 for the NFTs—shows that there is still a bit of uncertainty around what medium dominates. And this uncertainty about the direction of the NFT space is felt well beyond this mainstream, meaning that the new trend towards hybridized physical-digital art has been taken up by tens of thousands of other artists, too. 

The reasons are not only financial, but aesthetic, too. “Though the word ‘phygital’ sounds like a bad case of indigestion,” noted Artnet columnist Kenny Schachter. “Until dedicated devices devoted to the display of digital art improve, my voracious appetite to accumulate is more readily satiated with hybrid NFTs that have a physical component.” The market is never far behind: the artist, collector, and curator is organizing an exhibition and auction of phygital art in December at Kunsthaus Lempertz in Cologne. Appropriately, the sale is called “Blender.”

Courtesy of Tiffany & Co.

The Rematerialization of NFTs

If one looks to the top of the market, there are some signs that heavyweights are betting big on “phygital.” Yuga Labs announced a partnership with Tiffany’s & Co in August 2022. The sale, which consisted of 250 custom-made jeweled pendants, which were made available to punk holders, quickly sold out for $50,000 a pop. Noah Davis, the new brand lead for CryptoPunks at Yuga Labs, appears to be pivoting towards these types of partners. 

According to Shumon Basar, chief narrative officer and co-founder at the art startup and curatorial collective Zien, there may be new directions for art history, too. Basar told Artnet News that while he detests the term phygital, he believes some art created on the blockchain is capable of changing how we look at the organizational dynamics of art itself, as well as its capital flows. 

“64,000 years of art—from cave paintings to Picasso—have proven that when it comes to emotionally and intellectually moving encounters, sometimes a .JPEG is not enough,” Basar said. Zien, which was founded in 2020 with Peter Holsgrove and Zoe Nolan, is a WhatsApp channel dedicated to collecting contemporary art as “expanded NFTs”—in other words, “digital art with material presence,” according to Basar. After early experimental drops with artists such as Ed Fornieles, Eva Beresin, and Petra Cortright, Zien has recently relaunched with a new “season that will include Shezad Dawood and Jakob Kudsk Steensen.  

But, perhaps the tension between the plummeting crypto market and physical-meets-digital art is most clear in Polish-born, New York-based Agnieszka Kurant’s “Sentimentite” series, also produced in collaboration with Zien. The project consists of 100 NFTs shaped by a technology known as sentiment analysis, a software that is capable of looking into seismic historic events and mine them for data to be used as the substance of her art.

Kurant’s unique physical sculptures are made from 60 objects historically used as currencies, pulverized, then recast into physical sculptures, with buyers able to redeem an NFT for a physical work if they desire. The NFT, in this case, becomes a token holder or a receipt, and, crucially, as much a part of the work as the physical sculpture itself.

Agnieszka Kurant, Sentimentie, 2022. Courtesy Zien.

NFTs, Physical Art, and Crypto

A bigger question going forward is perhaps what the relationship will be between physical art, NFT technology, and crypto markets at the end of this current crypto winter. Crypto art pioneer and collector Ryan Zurrer, the owner of Human One, Beeple’s first phygital sculpture that consists of a constantly updating 4-screen sculpture of an astronaut walking infinitely into space, is betting big on the fact that the NFT market as a whole—phygital and purely digital work—is not going anywhere.

The physical astronaut is only a shell for the NFT, which according to Beeple is the actual work. Zurrer also has a collection, called 1or1.works, that consists of over 1000 NFTs across “guilds” including music, metaverse, gaming, fashion, and art.

He thinks NFTs will outlast the crypto bubble, which has already burst. “Although this seems like an absolutely unimaginable outcome,” Zurrer predicts, “I believe that NFTs will eventually flip the entire crypto market,” he told Artnet News. “The total value of NFTs could eventually be worth more than major cryptocurrencies, such as Bitcoin or Ethereum, combined.” (As a sort of foreshadowing, Zurrer had purchased the Beeple piece for $29.3 million in dollars, and not in crypto.)

Will NFTs go the way of beanie babies? Or will they become the bona fide currency of 21st century cultural production? The answer is probably somewhere in the middle. What is certain: artists of all stripes and genres will continue to use the technology at their disposal to inspire—and, hopefully, profit.