“The mart, as everyone knows, is an excellent vehicle for maintaining fictitious price levels, because the public imagines that auction prices are necessarily real prices.”— Robert Hughes, 1984 New York Book Review
On March 11, 2021, Mike Winkelmann, a digital artist who goes by the pseudonym Beeple, put a digital work of art up for auction at Christie’s, one of the largest fine art auction houses in the fine art world. The title of the work was called “Daily Life: The First 5,000 Days” and was a collage of computer illustrations.
It was sold for a staggering $69 million.
Why so much money? This is a good question that is difficult to answer. From an aesthetic and visual point of view, Beeple’s work is not very original or interesting. New York The magazine’s art critic Jerry Saltz also tweeted about the work: “I was looking for the Beeple; just derivatives of sci-fi, Conan and Star Wars are rubbish in terms of imagery and imagination.” It’s not exactly a vote of confidence. It also cannot be said that Beeple’s work was the first digital work of art ever created. Digital artwork dates back to the 1990s, even earlier.
One of the reasons Beeple’s work sold so highly was because it included an NFT, or non-fungible token. NFT is an online digital format invented in 2014. An NFT is a digital certificate or digital file connected to a blockchain, essentially an online ledger. Blockchain technology also allows the use of cryptocurrencies such as Blockchain and Ethereum.
Part of what made the sale so great is that the fine art and digital media worlds have always had a tense relationship. This was especially true when artists or gallery dealers were trying to sell digital art, which in some cases could be entirely digital. Does the artist or gallery sell digital files? Or just site code? And why is it unique?
Photo courtesy of Nataworry Photography
However, in 2021, many in the visual arts world and beyond seem to be betting on NFTs and, by default, the cryptocurrency that NFTs are based on. This technology solves these and several other problems associated with digital media by allowing cryptocurrencies to verify the digital authenticity of works purchased online. NFT solves a “unique” problem.
By accident, design, or misunderstanding, the sale of Beeple’s digital products ushered in a brief golden age of securely buying and selling NFTs. It’s been a gold rush of sorts to buy NFTs: In December 2021, Artnews reported that digital artist Park had sold a group of NFTs for $91.8 million, possibly the highest price ever paid for a work by a living person. painter. In March of this year, the New York Times reported that $44 billion had been spent on the NFT. There was even a new museum exclusively dedicated to NFTs that opened this April in Seattle.
Digital art seemed to come of age with the advent of NFTs.
Then, in May and June 2022, cryptocurrency prices collapsed. According to many news outlets, the effects of this downturn have reverberated through the NFT markets. According to Reuters, NFT sales fell sharply in the third quarter of 2022 to $3.4 billion from $12.5 billion at the market’s peak in the first quarter of this year. Bloomberg reported that NFT trading volumes fell 97% from January this year, a record high. News outlets have also linked NFT price drops to a larger cryptocurrency crash. According to Bloomberg, “The disappearance of the NFT market is part of a wider destruction of the $2 trillion crypto sector.”
But it wasn’t the one Only the bad news was getting NFTs.
In mid-October, Bloomberg published a massive 40,000-word article in business week, written by financial writer Matt Levin, who attempted to demystify and explain cryptocurrencies as well as NFTs. But it can be said that both cryptocurrencies and NFTs have been criticized quite harshly in Levin’s story: for example, in the middle of the article, Levin refers to Esq. article discussing how some in crypto are trying to reimagine books as investment opportunities! According to Levin, is it? “The bad wording is that every web3 project is also a Ponzi.”
Levin also questions the subtle connection between the code you invest in on the blockchain when you buy NFTs and the true work of art. He writes, “But what does it mean to say that NFTs are digital art? Art does not live on the blockchain…. If you buy NFTs, what you have is a record on the blockchain that says you own a pointer to some kind of web server.” It’s like paying a museum for a Cezanne and they only give you a page from the museum’s catalog… or better yet, they only send you a museum wall label!
Speaking to Bloomberg TV, Pat Renier, Bloomberg Businessweek financial editor who edited Levin’s story, said there were other aspects of the NFT that should be skeptical: “I think we all noticed that there was enough shenanigans about it. [fine-art] market – creating inflated valuations -[which may give] people stop a lot before entering this space.” Perhaps he meant Puck or Beeple.
From a legal point of view, there are other exciting issues. “The intellectual property rights to this image of a monkey,” writes Levin, “definitely have nothing to do with blockchain. It is not uncommon for a person or company selling a series of NFTs to 1) own the IP rights to the monkey images and 2) promise to transfer those rights, or some of them, to individual NFT owners. But if it happens, then it will happen outside the blockchain; these promises are enforceable or non-enforceable under the ordinary legal system.” Basically, buying NFTs may not solve the problems that people expect from them.
For Renier, the rather chilling financial takeaway from the Matt Levine story is that many in the crypto world have created digital processes and applications that repeat the mistakes made during the 2008 economic crisis: “The people who build these structures are building things that are very similar what breaks down in traditional finance, and sometimes breaks down catastrophically.”
As such, NFT investors may want to be on the lookout: this may not just be a very harsh crypto winter they will have to endure, but a crypto Armageddon.
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