What exactly are NFTs? According to CNBC, “NFTs, or non fungible tokens, are unique digital assets, including jpegs and video clips, that are represented by code recorded on the blockchain, a decentralized digital ledger that documents transactions.
April 13, 2021
According to CNBC, Mike Winkelmann (Also known as the artist Beeple) states that “I think that people don’t understand that when you buy, you have the token [or NFT]. You can display the token and show you own the token, but you don’t own the copyright” to the art that is represented by the token…” He continues on to say that “if you buy a [physical] painting, you just bought the painting,” Moreover “You did not buy the copyright to that picture. And so, it’s very similar with these tokens.” Think of this as owning a photo and just that. The NFT, whatever that may be, is not yours to own the copyright or make copyright decisions on.
According to many sources, such as the Verge, many investors actually believe that NFTs will be like collecting fine art. “NFTs have made the news in recent months because of the high dollar price tags being purchased for something that has no tangible value. One shocking example of this is the JPEG that sold for 69 million US dollars.” The file made by Mike Winkelman (Also known as Beeple) sold a JPG file titled Everydays- The First 5000 Days. According to the New York Times, this JPG is a collage of every image that the artist has posted online since 2007. The New York Times states that “Rebecca Riegelhaupt, a Christie’s spokeswoman, said 33 active bidders had contested the work, adding that the result was the third-highest auction price achieved for a living artist, after Jeff Koons and David Hockney.” Beeple joins the ranks of the highest-paid auction artist.
The New York Times also states that “Christie’s record-breaking auction was held at a moment when the mainstream art world has become transfixed by the fast-moving, speculative market for NFTs, which have recently achieved exceptional prices on specialist websites like Open Sea, Nifty Gateway, Super Rare and Makers Place.”
The New York Times continues to state that “Although their popularity has increased in recent months, NFTs are nothing new. In 2017, when the value of cryptocurrencies like Bitcoin and Ethereum first began to climb, there was a speculative craze for Dapper Labs’ CryptoKitties, blockchain-certified images of cats, the rarest of which sold for more than $100,000.” Some may think that selling images of cats on the internet is nonsense. But with high dollar price tags of cat photos fetching upwards of $100,000, this is no investment practice to ignore.
With such a rise in recent months in NFT popularity, could this be an investment bubble waiting to pop? According to the New York Times, “The price of cryptocurrencies collapsed in 2018, and with it the nascent market for NFTs.” There is some cause to be concerned with investing in NFTs. After all, this is an investment, and risk is always guaranteed.
However, The New York Times states that “In the art world, where the market for NFTs is more established, the current top-sellers are “CryptoPunks,” a cohort of 10,000 individual algorithm-created characters, 9,000 of which were given away in 2017 for trading and collecting on a dedicated Ether platform. Early the next year, the most sought-after “punks” were selling for about $13,500.” The New York Times interviewed the co-founder and states that “John Watkinson, the co-founder of CryptoPunks, said in an interview that he first noticed a resurgence of online interest last spring, during the early days of worldwide coronavirus lockdowns. “There was a showing-off factor,” Watkinson said. “Flashing what you have to other people in a virtual way was the only way to do it.” The interest in NFTs has continued to rise since last spring only further reiterating what John Watkinson, co-founder of CryptoPunks, saw.
With large companies such as Tesla, CryptoPunks, and Christie's Auction backing these investments, how could you lose? Like any investment, there are always risks. One unique risk to NFTs is that they are digital and susceptible to being associated with cybercrime.
According to the online art community, Hypoallergenic, “Michael Miraflor, who tweeted this weekend that his Nifty Gateway account had been compromised and his entire NFT collection cleared out in a matter of minutes. The hacker transferred Miraflor’s NFTs to another account and used his credit card on file to purchase more than $10,000 worth of Nifty’s daily “drop,” which they also transferred; then, they sold the stolen NFTs via the messaging app Discord.” This large investment was stolen out of Miraflor’s account without his or Nifty Gateway’s knowledge.
Hypoallergenic states that “Miraflor reported the fraudulent charges to his credit card company and was able to get his money back.” According to Nifty Gateway policy, any purchase made using their credit card is able to be refunded. Many other platforms like Foundation, super rare, and MakersPlace require the use of cryptocurrency according to Hypoallergenic.
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