Sotheby’s Sold A Bankrupt Crypto Hedge Fund’s Collection Of Generative Art For More Than Double Its Highest Estimated Worth

After the final hammer Thursday night, Sotheby’s has sold a collection of 37 rare and high-value generative artworks for nearly $11 million, more than doubling the highest end of what the 279-year-old auction house had estimated the collection to be worth.

“Grails: Property from an Iconic Digital Art Collection Part II” was the second auction to liquidate a collection of hundreds of blue-chip generative artworks that once belonged to the notorious crypto hedge fund Three Arrows Capital (3AC), whose two founders fled to Bali when the fund declared bankruptcy last year.

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The centerpiece of the auction was undoubtedly Dmitri Cherniak’s Ringers #879 “The Goose,” which outperformed the art and auction worlds’ expectations when it sold for $6.2 million (including the buyers’ premium) to an online bidder — several other editions from the same series sold for less than $200,000 each only moments later.

The “Ringers” series, based on the seemingly infinite ways one can wrap a piece of string around a set of pegs, showcases Cherniak’s mastery of generative art techniques, which uses an algorithm to randomly assign variables to each artwork. The series features 1,000 unique editions created by varying the number of pegs, their location, size, colors, and wrap orientation.

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When Cherniak first minted the series in 2021, each edition cost just 0.1 ETH — around $200 at the time. This kind of astronomical appreciation of an artwork is nothing new. But because these artworks exist on the blockchain, smart contracts ensure that this appreciation is guaranteed to benefit the artist. Cherniak earns 7.5% of the sale price every time this particular artwork is transferred, meaning that this auction earned him around a half million dollars. Contrast this to artist Kerry James Marshall, who received no compensation when his painting “Past Times” was sold for $21 million at the very same auction house in 2018.

What is Generative Art?

“Generative art” refers to art made using a predetermined system of rules that often includes an element of chance. The practice goes back decades. Harold Cohen, who is considered one of the first generative artists, used a computer-controlled robot to create paintings in the 1960s. Most recently, “generative art” has been associated with computer-generated works like those made by pioneering visual artist Joshua Davis in the early 2000s, who used code to generate random variations of extraordinarily complex images (Davis was recently cited as a tremendous influence by the artist Beeple, whose “Everydays” series sold for $69.3 million).

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Artists like Cherniak, Tyler Hobbs, Kjetil Golid, Matt DesLauriers, Casey Reas, Hideki Tsukamoto, and more tap into the long tradition of generative artists and are credited with helping the medium overcome the pop-culture associations that dominate blockchain art to reassert its significance to the art community.

Tyler Hobbs is an Austin-based artist and a prominent figure in contemporary generative art. His Fidenza project, represented by six pieces in the auction, is a series of algorithmically-generated works featuring the artist’s signature “flow field” and vibrant colors. Kjetil Golid has been sharing his generative work with the public for about four years, showcasing his mastery of computational art and his ability to create mesmerizing and thought-provoking visual experiences. His Archetype series, of which the Grails collection features three works, began as an algorithm designed to generate potential partitions of a rectangle into smaller rectangles.

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Comments from Sotheby’s

“Collections are often representative of the time and the place from which they were formed, telling a unique story through their artworks,” said Michael Bouhanna, Head of Digital Art and NFTs at Sotheby’s. “This expansive collection marks an important moment in the rise of generative art on the blockchain in 2021, and was guided by the 3AC ethos of acquiring some of the highest quality and rarest works available on the market. Since that defining moment, when digital art and NFTs became a genuine pop culture phenomenon, generative art has continued to gain attention from a growing audience, including from major international institutions. The emergence of this collection marks a significant opportunity for collectors to celebrate the pioneering generative artists who helped bring the form to this wider audience, and who continue to push the form forward.”

Even as auction houses, including Sotheby’s, face declining prices for blue-chip physical artworks, some of the landmark digital artworks in the Grails collection have continued to grow in value. The first publicly available lots of the “Grails” collection included seven works by Hobbs, Larva Labs, Cherniak, and 0xDEAFBEEF, among others. At that auction, prices surpassed initial estimates, with sales totalling $2.4 million.

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Of course, there are still significant questions around how well these works will hold their value once the hype cycle dies down or the crypto market comes back to Earth. Several publications noted the prominence of young crypto money in the audience vs. experienced art collectors.

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And, there are the same questions around the significance of the works themselves as there were swirling around Duchamp’s “Fountain” and the other artists of the Dada movement in the early 20th century. Critics argue that generative art reduces the artist’s agency and creativity, as the final outcome is largely determined by the code rather than the artist’s intent or personal expression. This blurring of lines between human creation and algorithmic generation raises important discussions about the nature of art and the value placed on human artistic vision.

Regardless, this sale, and the sale of the remainder of the “Grails” collection will be one of the more exciting things to happen at Sotheby’s this year. The remainder of the “Grails: Property from an Iconic Digital Art Collection” will be sold via private sales and additional public auctions. You can find more information at Sotheby’s website.