Digital artwork backed by cryptographic tokens known as “NFTs” or non-fungible tokens are the latest buzz on Wall Street and in the media.
NFTs are making money. Earlier this year, there was a Christie’s auction of a piece of digital art for $69.3 million.
The artwork, called “Everydays: The First 5,000 Days,” was created by graphic designer Mike Winkelmann, known in the online art world as “Beeple.” The work is a collage of 5,000 pieces of digital art that Beeple has produced every day since 2007.
The auction was the first time Christie’s has listed an entirely digital piece of work in its 250-year history, Money Week reported.
Here are five things to know about the bearish case against NFTs.
Similar to cryptocurrency, NFTs are cryptographic tokens that are recorded on a blockchain and can be used to prove the authenticity, ownership, and provenance of anything – physical or non-physical, Money Week reported. This includes artwork, collectible cards, or real estate, among other items. “Non-fungible” means that the token is unique and cannot be duplicated or swapped for anything else. Still, it is difficult to figure out which NFT is the original and not a copy, say experts.
Only the NFT owner holds the contract stating their ownership rights.
The NFT boom might already be going bust. The average price of NFTs plummeted almost 70 percent from a peak of around $4,000 in mid-February to around $1,400 last week, according to recent figures published by Nonfungible.com.
“Looking specifically at the market for NFTs linked to art — considered to be more frothy than the markets for NFTs representing music and film — sales dipped from $16.7 million to $12.5 million” between April 11 and April 16, CNN reported.
“The hallmark of any digital work is that it can be replicated—perfectly, endlessly, and virtually without cost. But if you bundle the artwork with an NFT, then you have a way, some argue, of identifying the ‘authentic’ copy,” Slate reported.
But old-school art world notables aren’t convinced.
Renown artist David Hockney, the 83-year-old British painter, is skeptical of NFTs. “What is it that they’re owning? I don’t really know,” said Hockney, whose pop-art masterpiece “Portrait of an Artist (Pool With Two Figures)” briefly held the record ($90.3 million auction price in November 2018) for the price paid for the work of a living artist before a Jeff Koons’ sculpture called Rabbit sold for $91.1 million auction price in May 2019.
NFTs are the domain of “international crooks and swindlers,” according to Hockney.
The NFT can tell you if you have a copy, not if you have the original copy.
While some say NTFs make it easier to authenticate artwork, others believe they actually complicate matters because anyone can make an NFT of any digital artwork.
“Making an NFT doesn’t involve copying, distributing, or displaying the artwork itself, and so copyright law is not implicated. And in fact, many people have made NFTs of others’ artwork, and each one is owned by a different person,” Slate reported.
This means that NFTs can’t really distinguish the authentic copy.
Legendary hip-hop group Run DMC just dropped a limited-edition collection of artwork NFTs to celebrate the 35th Anniversary of their 1986 breakthrough “Raising Hell” album, Wersm reported.
The Run-DMC NFT will also pay tribute to their fallen DJ, the late Jam Master Jay. For the NFT, Run DMC partnered with artist Reena Tolentino (aka ‘RT’), to create the collection, and remake the band’s logo and vinyl album cover. The latter was also released as a separate NFT, 12ON12 RUN DMC.
Ja Rule banked $122,000 in March 2021 for a piece of Fyre Festival NFT artwork, profiting from a 2017 scandal over the music festival he co-founded with shady entertainment businessman Billy McFarland.
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So far, NFTs have been a windfall for many unknown artists.
“Artists who have never had a gallery show, let alone a museum retrospective, are suddenly raking in hundreds of thousands of dollars through the sale of their art—and are even collecting a portion of the resales thanks to the terms of the blockchain,” Artnet reported.
“The positive aspect around this frenzy of speculation is that more people are talking about art than ever before and it’s bringing new people into the art market, and creating new types of art,” Robert Norton, the chief executive and co-founder of NFT art company Verisart, said. “My only concern is that conversation is less about the art and more about the transaction.”
But while art world may be excited about NFTs, with the problem of authentication, investors seem to be waning on them.