NFT – Digital "Art" is Making Millionaires. But for How Long?
If selling basic artwork for millions of dollars appeals to you then you may want to learn more about selling NFT’s (Non Fungible Tokens) But are NFT’s here to stay or just proof of an ever-growing economic hyper-bubble?
An NFT, or non-fungible token can be art, music, collectibles, even tweets. Jack Dorsey the founder of Twitter recently sold the NFT of his first tweet for 1 million. So an NFT is basically a digital representation of something.
At the moment the most popular NFT’s are digital artwork and some of these works are selling for obscene amounts. Everydays: the First 5000 Days by Beeple, which is a collection of his daily drawings over 5000 days sold for $69.3 million. Cryptopunk 7804 sold for 7.5 million, Cryptopunks 3100 for 7.1 million. Entrepreneur Justin Sun recently bought a clip art image of a rock for over $500k, influencers are shilling their own NFT’s making millions, even Visa dropped $150,000 on an NFT to add to its collection of historic artifacts. “Investors can also speculate on NFT’s at more manageable amounts of a couple of hundred dollars and you can occasionally snag free NFT’s when artists run promotions.
Billions in transactions of NFT’s are happening monthly so needless to say many “artists” including influencers are trying their hand at cashing in on this trend.
Anyone can create NFT’s and list them for sale, some auction websites are more selective than others and will only accept accomplished artists or those with a social following. Other marketplaces are open to anyone.
OpenSea, one of the more popular NFT online marketplaces recently raised 100m with a valuation of 1.5b, with a B. Yes, a new company that sells digital art is valued at one and a half billion. Sports Collectible NFT projects have just raised 930 million dollars in just one week with digital collectibles company Dapper labs reaching a 7.6 billion valuation.
Creating NFT’s is known as minting. It does cost money to mint your art, and some artists, many I expect will never sell their art or even make their money back. Depending on the price of Ethereum at the time, the most used crypto to conduct NFT transactions, your cost to list your first item could range between $150-$250 or more. You’ll also pay a commission when if and when your art sells of around 15%. To list an NFT the seller needs to have some ether, as all transactions are handled in crypto, mostly Ethereum, and the blockchain validates you are the exclusive owner of this unique piece. We wont get too deep into NFT creation. Its potentially just the ground floor for NFT’s so if you have talent you could potentially become one of the million dollar artists. Or you could waste a couple of hundred bucks.
But could NFT’s just be an elaborate Ponzi scheme or evidence of an overheated economy. Nobody knows for sure but most people have a highly emotional opinion one way or another.
There are essentially two ways this could go. NFT’s could create a digital art renaissance. Ongoing adoption of cryptos could drive widespread acceptance of digital art, and one day you could see people around the world hanging their Non Fungible Tokens proudly on their walls, at a price point they could afford.
The worst case scenario is the economy tanks taking with it many of these highly speculative “investments”.
South Sea Bubble of 1720. Speculation prior to the great depression in 1929. Tulip mania and collapse in the 1630’s. 4th century Diocletian destroyed the economy of Rome with inflation and poor policy decisions. The Medici scheme of 1494 and collapse of the banks. Spanish inflation in the 1600’s that destroyed the empire. Mississippi bubble of 1716,. Boom and bust has happened over and over again with very similar dynamics to what we see today.
Today we have gamestop, trillions in debt, insane valuations, investors flocking to virtually any startup that moves, millions going to dubious kickstarter campaigns, hundreds of crypto coins with influencers doing pump and dumps, and again reckless speculation in the markets, often from people who cant afford to lose the money. And once again, a general refusal to consider that history may repeat.
A correction will come again. And this one could be global. The question is, will cryptocurrencies, Bitcoin, and potentially even digital assets like NFT’s be the saviors of a collapsing archaic economy, or just a footnote historians will use to illustrate how naïve people were in the 2020’s.