NFT, a new trendy asset?

A little history…

It is not only at the financial level that 2008 will remain a historic year. In addition to the great subprime crisis which spread to an entire sector and gave rise to multiple regulations, it was also at this time that Satoshi Nakamoto developed software to manage a database built in the form of blocks , the blockchain. This database gave birth to Bitcoin and was soon imitated, launching a wave of cryptocurrency births.

But this technology does not stop there…

Thus, by analogy with the first currencies, digital tokens appeared in 2012: ‘coloured coins’, then representing an object (from real life) to which is attached a (digital) identity, proof of ownership anchored in the robust bitcoin blockchain.

Two digital artists, Jennifer and Kevin McCoy, saw it as a boon for their work and sold their work ‘Quantum’ on the Ethereum blockchain in 2014. It is an octagon filled with circles, arcs and other forms producing a hypnotic fluorescent halo that can be easily viewed on the net[HM1] 1 courtesy of Sotheby’s. Quantum is considered to be the first NFT to date.

The birth of crypto art

We can consider that it was later, in June 2017, that Matt Hall and John Watkinson started the trend of crypto art with their artistic project ‘crypto punks’: pixelated characters numbering 10,000, some of which for which collectors are ready to shell out millions of euros, or rather thousands of Ethereum. Make no mistake, however simplistic this project may appear, it has also made it possible to define the standard for tracing and transferring NFTs, interfaced within the blockchain and today mainly used for NFT emissions. . In short: a small revolution! These 10,000 punks were algorithmically generated and initially offered, which contrasts with more traditional art forms. We should also note that as precursors, crypto punks do not conform exactly to the standard interfacing standard, which perhaps also makes them even more unique and justifies their price.

A guarantee of authenticity

Once the breach was opened, the artists did not fail to rush into it. We cannot speak of a new form of art: for more than 20 years, many artists have been using data storage and digital possibilities to develop their projects. But now, they have found a way to monetize their creations and above all to guarantee their authenticity, a real godsend when you know that the fight against counterfeits is centuries old with traditional art, and was unimaginable in the field until recently. digital where you can so easily copy and paste content! From a disc that only appears during certain hours of the day, to other works that interact with other sources of stimuli, or to new musical productions and collaborations, the NFTs reflect a complete artistic universe, and worthy of the name with more or less success depending on the case. Mike Winkelmann, whose artist name is none other than Beeple, is a person whose digital success is indisputable. Mike has a degree in computer science and has been the author for many years of visuals for the concerts of A. Grande, J. Bieber, K. Perry and many more. He has also worked for brands such as Apple, Nike, Vuitton or Samsung. Two months after his first research on NFTs, he puts a few works up for sale and raises 3.5 million dollars in one weekend! But the project that hit the headlines, ‘Everyday’, involved creating an image every day and posting it online, which he did continuously for 13 years! ‘Everyday, the first 5000 days’ a digital collage which compiles the first 5000 creations of this project was sold for 69.3 million dollars on March 11, 2021. A record: the third for a living artist, and the first for an NFT !

Quasimondo, Robert Alice project, Pak, Mad Dog Jones… many are the crypto-artists that we can appreciate thanks to the success of their NFTs!

NFT and traditional art

Such a success logically leaves no one indifferent, so much so that a recent exhibition by NFT represented very real works. Caravaggio, Michelangelo, Raphael, the famous Uffizi Gallery in Florence has allowed several masterpieces to be digitized, the reproductions of which have sometimes been sold for more than 100,000 euros. And here a fundamental ethical question arises: is it the end of contemplating a painting? Come to think of it, if the Mona Lisa multiplied in the four corners of the world, the millions of annual visitors to the Louvre would save money, but admit that the charm would no longer be there… And the reality is dangerously close to this scenario. I take Picasso’s ‘Girl with a Beret’ as an example, bought for $2.5 million and sold as NFT by a Swiss bank last year in increments of 5,000 Swiss francs for a total of 4 million, a 50% capital gain for the bank. The painting will spend the rest of its life in a high security facility awaiting loan to museums.

NFT and crypto-risk

The actors in the field are very enthusiastic: the Jefferies bank anticipates a growth of the NFT market up to 80 billion in 2025 and we are already at several dozen today. Let’s not forget, however, that these NFTs are based on the blockchain mechanism, and are traded in cryptocurrencies, which has many impacts.

And in this regard, if the robustness of encryption is foolproof, it entails a colossal energy and environmental cost. A reality that could suffer the pangs of regulation. Indeed, will governments accept that efforts to achieve climate goals are tarnished by mining farms that consume as much as a state to power a virtual universe? Investing therefore involves some risk.

Then, if the blockchain is robust today, it must remain so, and the system that surrounds it must accompany it. Cases of fraud surrounding cryptocurrencies are no longer so rare. And in this regard, an asset whose value is linked to a cryptocurrency can lose a lot of its value if the reliability of the latter is at stake. As proof of this, the chiliz blockchain which has experienced a vertiginous fall, bringing with it the many support tokens intended for fans of sports clubs. The shortfall is huge. We can’t imagine Ethereum experiencing the same fate, but let’s not lose sight of the fact that traditional currencies have experienced many youthful illnesses before we knew them as they are…

The status of a non-fungible token also remains unclear, the non-fungible nature means that this asset is exclusively digital. So it’s a kind of right, a digital certificate. Nevertheless, the American regulator is looking into the question of considering it as a security and regulating it as such. A point that is not without consequences, tax in particular.

Finally, since we are talking about securities, note that the craze that led sales on ‘Open sea’, the largest NFT platform, to increase from 8 million dollars in January 2021 to 5 billion in January 2022 reflects the same versatility as the financial markets: already in February transactions had fallen by half. In the absence of regulation, it is also difficult to determine the real depth of this market, a characteristic that the ‘traditional’ market also shares.

A phenomenon that will last?

In conclusion, it is very likely that the NFT phenomenon will continue, as it responds to a demand that was latent on the art market. It is no coincidence that the biggest auction houses create a specific division for NFTs. On the other hand, let’s not lose sight of the fact that regardless of the speed of development of connected trends, it takes time to integrate them into habits in a sustainable way. A deadline that sometimes includes surprises, hear risks. If the attraction of NFT responds to a passion, an interest in these captivating artistic projects, it will be able to satisfy its holder. If the transaction is only speculative, beware of the disappointed, the dazzling evolution has all the aspects of a bubble. In any case, we will never stop recommending the use of a professional in the sector, capable of sorting things out.

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NFT, a new trendy asset?

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