How NFTs changed the digital art market — and what remained after the boom

In the early 2020s, NFTs were one of the main ways to turn digital art into a full-fledged collectible and investment asset. The technology made it possible to verify who owned a digital work and its origin. Over time, however, interest in NFTs declined sharply, although the underlying idea of using blockchain for digital art retained its potential.

In the fall of 2025, auction house Christie's announced the closure of its digital art department, which had operated for about three years. For the NFT market, this was a notable event: just a few years earlier, NFTs had helped make digital works a popular object of collecting and investment.

A non-fungible token, or NFT, is a unique digital record on a blockchain linked to a specific object. That object can be an image, a video, a work of art, or a collectible.

Unlike cryptocurrencies such as Bitcoin, where one coin equals another, every NFT is unique.

The easiest way to think of an NFT is as a digital passport for work. It can record who created the object, who owned it, and how it passed from one owner to another. This information is stored on a blockchain, which makes it difficult to alter or forge without detection.

How digital art became a multibillion-dollar market

NFT popularity peaked between 2020 and 2022. In a short period of time, the technology moved beyond the crypto community and became part of mainstream culture. Artists, musicians, and major brands began issuing their own NFTs. Buyers, in turn, purchased them not only for collecting purposes but also in the hope of profiting from rising prices.

For example, McDonald's created an NFT featuring the McRib to mark the sandwich's 40th anniversary. At the same time, adidas launched the Into the Metaverse project, which gave token holders access to exclusive merchandise and virtual experiences. Dolce & Gabbana combined digital and physical items in its Collezione Genesi collection and later launched the #DGFamily NFT community, which provided access to special collections and events. Lamborghini also entered the market with its Space Time Memory project — a series of five NFTs linked to physical Space Key objects.

One of the defining events of this period was the sale of digital artist Beeple*'s work "Everydays: The First 5000 Days." In March 2021, Christie's sold it for $69 million. The transaction brought NFTs and digital art to the attention of a much wider audience.

* Beeple is the creative pseudonym of American digital artist Mike Winkelmann. He gained worldwide recognition for his Everydays project, for which he created a new digital artwork every day.

At the same time, a separate digital art market began to emerge. Platforms such as SuperRare, Foundation, and KnownOrigin let artists independently issue limited editions of their work and sell them directly to collectors.

For many digital artists, NFTs became a real way to earn money from their work. Previously, their creations could mostly only be published online, but now they could be sold as standalone digital objects. NFTs also made it possible to record the creator of a work and its ownership history.

Recognition came not only to Beeple but also to other digital artists such as XCOPY* and Pak*. Specialized NFT platforms effectively became the equivalent of traditional art galleries for such creators: they helped present their work to audiences and connect them with buyers.

* XCOPY is an anonymous digital artist from London and one of the pioneers of crypto art. The artist is known for short animated GIF works in a distinctive glitch style, featuring bright neon colors, visual distortions, and dark themes related to digital culture and dystopia.

* Pak is an anonymous digital artist who has worked with digital art for more than two decades and is known for experimenting with the form, scarcity, and value of NFTs. In 2021, The Fungible collection, created together with Sotheby's, generated around $16.8 million, while the Merge project later raised $91.8 million from nearly 29,000 buyers.

However, as NFTs grew in popularity, they increasingly transformed from works of art into investment assets. The prices of many tokens came to depend less on the value of the artwork itself and more on conditions in the cryptocurrency market and expectations of further price growth.

When NFT prices began falling rapidly after their sharp rise, it became clear that speculation had driven much of the market. Many people bought tokens mainly the resell them at a higher price, rather than because of sustained interest in digital art.

When the price of an NFT became more important than the image itself

Within the crypto community, NFTs developed somewhat differently than they did in the art world.

For artists and collectors, NFTs were primarily a way to sell and purchase digital works, such as Beeple's art. Among crypto traders, however, PFP collections — sets of images commonly used as profile pictures — became much more popular. The best-known examples included CryptoPunks*, Bored Ape Yacht Club*, and Pudgy Penguins*.

* CryptoPunks is one of the earliest and best-known NFT collections: 10,000 unique pixel-art characters released in 2017 on Ethereum.

* Bored Ape Yacht Club (BAYC) is a collection of 10,000 images of "bored apes," launched in 2021 by Yuga Labs. The NFTs served as both collectible avatars and passes to a private community with additional privileges.

* Pudgy Penguins is a collection of 8,888 images of cartoon penguins released in 2021. The project later evolved into an independent brand with its own community, merchandise, and physical toys.

Over time, such NFTs increasingly came to be viewed as speculative assets rather than works of art. They were even described as "futures on JPEGs": their prices depended mainly on demand, the collection's liquidity, market sentiment, and expectations of further growth.

This segment played a major role in shaping the general public's perception of NFTs. On marketplaces such as OpenSea and especially Blur, trading in collections increasingly resembled cryptocurrency trading. The platforms offered advanced analytics, automation, and trading bots, making active trading even easier.

At the same time, the speculative NFT market and the digital art market existed in parallel and overlapped only partially. Therefore, the collapse in NFT prices does not mean that the idea of using blockchain to verify the provenance of digital works and their ownership history was itself a failure.

The end of the boom: how NFTs lost their mass audience

By 2024, the NFT market had contracted significantly. Platforms recently valued at billions of dollars began losing users, and some later shut down. At the same time, prices fell sharply even for tokens from some of the best-known NFT collections.

Against this backdrop, many interpreted Christie's decision to close its dedicated digital art department as a sign that the era of the NFT boom had come to an end.

However, the auction house itself did not abandon digital art. Christie's said it would continue selling such works through its contemporary art department. Nevertheless, the decision demonstrated that NFTs were becoming increasingly difficult to treat as a separate and independent segment of the art market.

It is still too early to write NFTs off completely. By the end of 2025, the market showed the first signs of recovery. However, this new growth so far concerns mainly a relatively small circle of digital artists and collectors and differs greatly from the mass speculative frenzy of the early 2020s.

From ownership to utility: what could support the value of NFTs

The decline of the NFT market showed that simply owning a digital object is not enough for it to retain value over the long term.

For interest in NFTs to persist, a token needs to offer its owner something beyond proof of authenticity. This could include access to special services, exclusive content, private communities, or events.

This is why so-called utility NFTs* — tokens with additional practical uses — are receiving increasing attention.

* Utility NFT (from the English word utility — "usefulness," "practical function") is an NFT that provides its owner not only with proof of ownership of a digital object but also with additional practical value. This may include access to private content, services, events, communities, discounts, bonuses, special features, or participation in a particular project. The NFT therefore becomes more than simply a collectible object and instead serves as a kind of digital pass or key to specific opportunities.

Another area is phygital NFTs*, or "phygital" projects. In these projects, a real physical object is linked to a digital certificate, with information stored on a blockchain.

* Phygital NFT (from the English words physical + digital) is an NFT linked to a real physical object and supplemented by a digital record on a blockchain. Such an object may be a painting, an item of clothing, a piece of jewelry, a collectible product, or another physical item. In this case, the NFT can be used as a digital certificate of authenticity, record the provenance of the item and its ownership history, or confirm the connection between the token and a specific physical object. The phygital concept combines the advantages of a conventional physical item and blockchain technology: the buyer receives a tangible object, while information about it can be stored and transferred digitally.

The further development of NFTs will largely depend on how successfully the technology integrates into the established art market. Blockchain is increasingly being viewed not as a replacement for existing tools, but as a way to complement them and make them more convenient.

A similar approach is emerging in the financial sector, where blockchain is being used the tokenize securities.

The main technical problem with NFTs: the token exists, but the file does not

Despite their advantages, NFTs also have serious limitations.

A blockchain can indeed reliably store information about transactions and token ownership. However, the digital artwork itself is often stored not on the blockchain, but on a third-party server.

In such cases, the NFT contains only a link to the file. If the file is deleted or changed, or if the service hosting it stops operating, the token may no longer lead to the original work.

This problem is known as link rot. Because of it, one of the main promises of NFTs — maintaining a durable connection between a token and a digital object — cannot always be fulfilled.

NFTs and copyright: what exactly does the owner own?

Another issue with NFTs concerns copyright. Purchasing a token does not mean that the buyer automatically receives the rights to the image or other work associated with that NFT.

As a result, it is not always clear what the token holder is actually allowed to do: for example, whether they have the right to reproduce the work, use it commercially, or earn income from its use. Another question is how royalties should be paid when an NFT is subsequently resold.

At the same time, blockchain opened up new opportunities for digital artists. Creators gained the ability to sell their works directly to people around the world without necessarily relying on galleries or art dealers. This made it easier to enter the market and, in some cases, allowed artists to earn income not only from the initial sale but also from subsequent resales.

Cryptocurrencies and stablecoins naturally became common payment methods in this market. They let buyers and sellers transact directly, without traditional financial intermediaries and with less dependence on geographical restrictions.

What NFTs could become after the era of speculation

The direct connection between artists and buyers is also changing digital art itself.

An artist no longer necessarily has to create a single finished work. They can release entire collections or interactive works that change and evolve.

In such projects, blockchain can help not only verify the authenticity of a work but also preserve the history of its changes.

At the same time, the development of NFTs continues to be hindered by an oversupply of projects on the market and price manipulation, both of which are also characteristic of the cryptocurrency industry as a whole.

The future of NFTs, therefore, is likely to depend not on a return of the previous hype, but on whether the market can demonstrate the technology's real utility and earn lasting trust from buyers.