The digital ecosystem for art exists because there is an inherent lack of capability to appreciate art at scale in the physical realm – it is nearly impossible to make an exact replica of the object of art.
We are in a twilight world which is seeing a great transformation. Our long-lasting ideas about the world are changing. The blockchain ecosystem, in particular, is realizing the value of digital manifestations of the physical world. When it comes to art and entertainment, it becomes even more pertinent.
The digital ecosystem for art exists because there is an inherent lack of capability to appreciate art at scale in the physical realm – it is nearly impossible to make an exact replica of the object of art. And it can be expensive when done meticulously. But in the digital world, one can make thousand copies of an artform such as an image or a music file in seconds with the same data bit by bit. Given this, how do we adopt art in the digital format and still maintain its ownership and/or intellectual property rights? Enter the world of non-fungible tokens (NFTs) – a blockchain enabled authentication system of ownership of an art form.
Jack Dorsey auctioned his first ever tweet which is visible to everyone though one individual proudly owns it now. Metakovan bought Beeple’s digital art for $69 million in early 2021 to make the world take notice of NFTs. Memes, a digital only piece of art, are now seeing the potential value in ownership and distribution. Amazing content is created digitally thanks to the proliferation and ubiquity of social media.
NFTs also make it easy to own art that is created globally. Earlier, Indian investors rarely had access to outside markets to collect pieces of art or history.
It is not a surprise that a strong marketplace has already risen now. NFTs transaction volume exceeded $2.5 billion globally in first half of 2021. So much has happened in 2021 that the question now is around how to ascertain fair value of an artform rather than if its physical or digital.
The appeal of art is definitely subjective. Its current valuation can be determined by a combination of factors including uniqueness, rarity, context, geography and even language. The purpose of acquisition, though, can be summarized into two categories – 1) as an investment and 2) as a symbol of taste or wealth.
The recent boom in NFTs selling for exorbitant prices can be attributed to the latter. A large set of crypto millionaires who adopted Bitcoin in early years and have a strong wealth portfolio are driving trade in NFTs as a means to put forward another new technology as well as to showcase their wealth. Thanks to the attention garnered, a set of new investors, who missed out on cryptocurrencies five years ago, are flocking to this space in the hopes of acquiring some quick wealth.
The ecosystem knows that this is not sustainable. Given the value of each NFT is subjective and unique, the NFT market is not liquid enough. Compared with Bitcoin and other cryptocurrencies which have a 24×7 marketplace with an indicative value for your portfolio, with NFTs, it is difficult to ascertain market valuation on daily basis and a sale is never assured. Hence it requires a lot more due diligence before an investment is made.
In India, given the amount of time people spend online daily creating content across languages, we can foresee a future where every poem, meme, song, painting etc. could be converted to a NFT representing a huge potential. NFT trade will likely boom with millions of micro transactions happening on an hourly basis facilitated by cryptocurrencies. As adoption grows and people grasp the implications of a digital artform, valuations are however likely to temper.
Therefore, we request new investors to be prudent before they invest their hard-earned life savings on NFTs. If we consider the cryptocurrency market as volatile, the NFT market is even more so.
Source: Business World
