The NFT art industry is poised to more than 10x in 2021 compared to 2020, with over $1.2B in transactions for these digital art pieces being done in the first half of 2021 alone, versus $65M in all of 2020. Despite this historic surge in popularity, critics are quick to call this simply the latest addition to the pandemic meme stocks, in the same vein as GameStop and Dogecoin, that have taken the internet by storm.
But like GameStop and Dogecoin, there is an army of fervent supporters that are hailing NFTs as the future of art, and a great leap forward in democratizing the art retail industry. And perhaps this democratization is part of the reason behind NFT’s massive popularity among millennials. In the digital art world, NFT (non-fungible tokens) are essentially digital tokens that are used to validate the authenticity of a piece. These tokens are hosted on the Ethereum blockchain and provide a high level of security, providing a unique identifier to each transaction placed on the blockchain, and verifying the authenticity of what is being bought. In brief, NFT transactions are safe, secure, and allow artists to connect directly with their customers in unprecedented ways, outside of the traditional brick and mortar art galleries.
So, what makes NFTs good investments? After all, even after paying, you’re not getting a physical piece to show for it. The art themselves are often also available online for anyone to download and share, which goes against all conventional reasoning behind scarcity and price appreciation. Despite this fact, NFTs do in fact offer the highest level of scarcity possible. Sole, exclusive ownership of an original digital art piece, backed by the blockchain. This means that although the whole internet can retweet, download and share a particular piece, there will only ever be one owner of the original, until they decide to sell. Think of it like Nike releasing only one pair of shoes in 2021 going to the highest bidder, while the rest are permitted to take pictures only. This is the kind of exclusivity that NFTs can offer. However, the space is highly volatile and delving into NFT art as investments should be reserved for the most risk tolerant of investors.
But with pieces like Beeple’s Everydays: The First 5000 Days, which is basically a collage of JPEG images, going for $69M USD at online auction, the upside is certainly very tantalizing, and early investors could stand to make historic gains if NFTs continue to make moves in revolutionizing the art industry.
By Joshua Jung