On Monday, Visa said it bought a “CryptoPunk,” one of the thousands of NFT-based digital avatars, for nearly $150,000 in Ethereum. The purchase sparked debate online on the popularity and the madness of the NFT mania.
From the time of Leonardo DaVinci, the creator of the Mona Lisa and Salvator Mundi to the time of Michelangelo, Picasso, and Basquiat, people have desired fine art collections.
The masterpieces of these artists cost fortunes. Some have been bought for obscene amounts of money, a case in point being the Salvator Mundi by Leonardo Davinci, the world’s most expensive artwork to date which was bought by a Saudi prince for $450.3 million dollars at an auction in New York.
In some cases, certain artworks arguably cannot be bought. It would require the French Government to fall into a serious economic crisis before they will ever contemplate selling the Mona Lisa. The Mona Lisa’s gargantuan value to French tourism is why the painting is priceless. At least two million tourists travel to the Musée du Louvre in Paris strictly to see the painting every year and each tourist spends approximately $1,500 during their stay. With these figures, the Mona Lisa is worth at least $3.3 billion to the French economy annually.
The valuation of art principally lies in exclusivity or primarily in supply and demand. Rarity is the ne plus ultra when art is sold. However, the value lies in the eyes of more traditional and old-school folks from Baby Boomers to early Millennials. But it appears the late Millennials and Generation Z are redefining art and exclusivity with what they call NFTs.
So what are NFTs?
An NFT which stands for Non-fungible token is a unique digital asset designed to represent ownership of a virtual item. NFTs are scarce and this drives up their value. NFTs have often been compared to physical collectable items like works of art. The term “Non-fungible” more or less means that it is unique and can’t be replaced with something else. NFTs are a digital flex or symbol for a new class of consumers.
The gist is most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency that has its blockchain support for these NFTs, which store extra information that makes them work differently. It is possible that other blockchains can implement their own versions of NFTs.
As cryptocurrencies are a new asset class to traditional shares and stocks, it appears NFTs are the cryptocurrencies of fine art collecting. Finance is catching up to a new wave of assets, investments, and tech.
NFTs can really be anything digital (such as drawings, music, tweets), but a lot of the current excitement is around using the tech to sell digital art. The most expensive NFT sold to date is the Beeple NFT that fetched over $60 million at an auction.
NFTs are a growing industry and this transaction Visa just made has given this “asset class” some sort of legitimacy. On Monday, Visa said it bought a “CryptoPunk,” one of the thousands of NFT-based digital avatars, for nearly $150,000 in Ethereum. The purchase sparked debate online on the popularity and the madness of the NFT mania.
The entire NFT market is about $4 billion. There have been different NFT transactions that have taken place. One of the most popular ones was by Jack Dorsey, CEO of Twitter and Square who sold his first tweet as an NFT for over $2.9 million.
Although the above NFT is owned by Sina Estavi, the copyright and the intellectual property rights in the digital artwork itself still belong to Jack Dorsey. This makes it hard to distribute or otherwise commercialize the represented asset. Herein lies the skepticism, anyone can take a screenshot and claim he owns the asset, and internet users can still view the associated media online. Some critics say, “Why pay so much for a jpeg?” So is it really worth it? That’s debatable and depends on the rationale for purchase.
Cuy Sheffield, head of Crypto at Visa responded to the media about the purchase Visa made, “Our excitement about this project is less about any individual Punk and more about the CryptoPunk collection as a whole and what it represents—the beginnings of a new chapter for digital commerce. This is just the beginning. We’re eager to continue building our NFT collection and to support the diverse group of artists and creators working in this space.”
Conclusively, financial markets are evolving and institutions jumping into these assets bring credibility to their market. CoinDesk, a crypto-focused news site, reported that an hour after Visa’s announcement, 90 CryptoPunks were bought. By the early afternoon, 203 more of them were purchased. Just a matter of time to know if they are here to stay or these trends are just possible because of the bubble we live in.