NFTs transforming the collectible art market
The One-Cent Magenta from British Guiana, the world’s most valuable stamp, was last week bought for $8.3 million by Stanley Gibbons, the oldest stamp dealer in the world. Having been issued temporarily in 1856 by a local postmaster at a time when the colony was cut off from London, the stamps are incredibly rare and routinely fetch very high prices. However, this purchase stunned many as it represented a considerable portion of the company’s market capitalization. The subsequent announcement that Stanley Gibbons had paid over the odds with a view to making the One-Cent Magenta available for anybody to own through fractional ownership and the creation of digital collections is the latest instance of a traditional house making the most of the boom in digital ownership.
In the past year, a meme has sold for $590,000 and a tweet for $2.9 million. The sale of the non-fungible tokens (NFTs) of these digital assets has heralded the advent of NFTs in the premier art market. Following the sale of an artwork by Mike Winkelmann — the digital artist known as Beeple — for $69 million this year, the artist who was selling prints of his work for no more than $100 until late last year was propelled to “among the top three most valuable living artists,” according to Christie’s, which sold the work. In utilizing his online fan base of millions, Winkelmann was able to make his own market for his work in a world that has previously been led by a handful of wealthy patrons and connoisseurs.
With the endorsement of Christie’s, the 250-year-old auction house that holds world records for the most expensive art sales, NFTs have exploded as a medium through which art can be bought and sold. They are increasingly being seen by many as the way digital art will be acquired and traded going forward. This development has been welcomed as a democratization of the art market in many respects. However, it is also likely to drive prices up. The recent escalation in prices is nothing compared to what NFTs will be worth at a later date, when their use has become more widespread and their application in the buying and selling of art more nuanced.
To many would-be collectors, the technology itself remains confusing. Whereas the valuation of art has traditionally been a difficult process to understand, with rarity, age, provenance, potential for asset maturation and size all playing a part, the essential problem of valuing an aesthetic piece that can mean different things to different people has made the NFT process far from straightforward. The advent of NFTs, however, is no different to a cinema ticket, which represents temporary ownership of a seat that is recorded in a booking leger, allowing for this process to be standardized somewhat.
Through their use of the blockchain, NFTs allow collectors to buy and sell ownership of unique digital items and also keep track of who owns them. Technically, an NFT can contain anything digital, including drawings, videos, GIFs, songs or items in video games. James Khazaei, a predominantly Dubai-based art collector and partner in a leading gallery, notes: “Their role in commoditizing digital art can also be extended for use in various forms such as one-of-a-kind works, like paintings and trading cards, and even new editions of existing artworks.” The inevitable complications that multiple or duplicate ownership can cause are mitigated by the blockchain, which keeps track of who has ownership of the file.
The access to ownership records is revolutionary in that, traditionally, the dealers and auction houses with access to such information were relatively few. The public record of NFT ownership allows the history of an artwork to be fully accessed, giving collectors more of a hold on pricing. But this is not without its perils, as the experience of the last few months has shown. The rise of NFTs has coincided with the worrying development of works of rather questionable artistic value being sold at incredibly unrealistic, hype-driven online auctions. And the relative ease with which the digital files that successful bidders win can be generated and copied has resulted in artists’ works being stolen and subsequently auctioned as authentic.
With the endorsement of Christie’s, non-fungible tokens have exploded as a medium through which art can be bought and sold.
Zaid M. Belbagi
The sale of the One-Cent Magenta has once again shown NFTs’ potential to revolutionize the trading of collectible items. Simultaneously, artists are concerned about the climate impact of art sales that rely on blockchain technology, which is notoriously energy inefficient by design. But those who are early to the space nevertheless think the tech is here to stay. Stefan Kaba-Ferreiro, managing partner of GHCO and a pioneer in the field, is optimistic, saying: “In their simplest form, NFTs will allow any retail investor to purchase a fraction of once-unattainable artwork, potentially also allowing museums to raise money by selling fractions of their collections. We will provide the tech bridge between museums and various exchanges such as the London Stock Exchange. This is the biggest news in the options market in a long time.”
- Zaid M. Belbagi is a political commentator, and an adviser to private clients between London and the Gulf Cooperation Council. Twitter: @Moulay_Zaid