In a seven-day hurricane that began with Twitter founder Jack Dorsey proving almost anything – even his old tweets – could be used as a token, culminating on Thursday with an art auction from Christie that got a jaw-dropping bid of 69.3 Raised millions of US dollars for a tokenized beeple Some observers asked: More than pieces by George Seurat, Paul Gaugain or Salvador Dalí at auction. Are non-fungible tokens out of control??
Even before the famous auction house catapulted the artist Mike Winkelmann, alias Beeple, into the rare company of Jeff Coons and David Hockney – i. H. Living artists, able to fetch stratospheric prices for their work – some questioned the sanity of the market. Marketing guru and author Seth Godin, for example, wrote in a blog post: “NFTs are a dangerous trap,” and the current mania is “an unregulated, opaque hubbub with” bubble “written on it.”
Meanwhile, on March 8, an NFT version of an intentionally burned Banksy painting was sold on the OpenSea market for nearly $ 400,000, leading Zavier Ellis, director of a London gallery, to tell Britain’s The Telegraph : “I wonder if this is a form of pyramid sales where someone is ultimately burned. David Knowles, who runs an art consultancy firm, Artelier, stated that buying contemporary artwork is generally risky, but buying non-fungible tokens appears to be the “extreme end” of that.
After such a week you have to ask: Is the NFT market bubbling and if so, people are getting hurt?
On the way to the fall?
“NFTs are an exciting innovation,” Fabian Schär, Professor of Economics at the University of Basel, told Cointelegraph. “That doesn’t mean, however, that every scribble is suddenly valuable just because it’s represented by an ERC-721 or ERC-1155 token,” adds:
“There are some interesting projects out there and they will likely stay here, but the vast majority of NFTs will be completely worthless when the hype is over.”
“I wouldn’t say things are getting out of hand, but NFTs seem to have become today’s trend and so many opportunists are jumping on the bandwagon in hopes of making money quickly,” said Gary Bracey, Co-Founder and CEO of Terra Virtua, said Cointelegraph. “I fear the oversaturation of mediocre products and newcomers who bring nothing innovative or different to the party.”
What could drive this speculation? Misha Libman, co-founder of the art market Snark.art, told Cointelegraph, “Rising prices are tied to governments pumping trillions of dollars into the global economy to counter the damage caused by the pandemic, and that excess liquidity is showing up all over the place World blackboard. ”
Do bubbles usually cause some damage when they burst? Bracey replied, “I would like to think that people are smarter and not fall for the gimmicks of the” emperor’s new clothes “.” The entire NFT community would be negatively affected if things were to burst, suggested Libman, adding:
“But I think it’s important to note that the current attention and investment that is flowing into the sector is also helping to build the much-needed infrastructure and tools that will make it easier and cheaper to build projects that use the blockchain – Use technology. “
Blake Finucane, co-author of a position paper on NFT-based art entitled “Crypto Art: A Decentralized View,” told Cointelegraph, “A bubble is particularly difficult to avoid in NFTs because one of the notable advantages of NFTs is the ability to do so is buy, sell and act instantly, no matter where in the world you are. “That’s why she says,” In a hot market where buying and selling are as easy as the push of a button, turning around is inevitable. ” Those in the short term – “just to spin what they buy” – are at the greatest risk, she added.
Are Buyers “Blind” To The Limits Of NFTs?
Godin continued in his post: “Buyers of NFTs may be blind to the fact that supply is unlimited.” One example he gave was, “In the case of art, Sotheby’s has a limited number of famous paintings and a limited amount of shelf space.”
Is that a valid criticism? While Schär agreed that the NFT market is currently overheating, he disagreed with this assessment, stating that while anyone can create an NFT “it is not possible to make copies of a particular NFT”. About the specific examples mentioned in the article:
- “If I have physical baseball cards, I can’t tell how many copies of that rookie card exist. In addition, the cards are quite easy to forge. Both problems can be solved with NFTs. “
- To compare the “famous paintings”: “I agree that most NFTs are completely worthless. The same goes for paintings, however, and that certainly doesn’t mean that the concept of NFTs is fundamentally flawed. “
- Regarding the “shelf space” analogy: “There’s really no reason why there can’t be a virtual equivalent to“ shelf space ”.” Platforms like OpenSea can be used for curation.
“I wouldn’t agree with that statement at all because it doesn’t understand the nature of digital collectibles,” Libman said, referring to Godin’s remark, adding, “The practice of editing has been around for a long time in the art world. Especially the Photography and in print, and while an artist can certainly violate the trust of his collectors by selling more editions, the loss of reputation would devalue any future work. “
A wasteful use of energy?
In his post, Godin also warned that “the rest of us will be paying for NFTs for a very long time. They use an amazing amount of electricity to generate and trade. “In response to this criticism, Giovanni Colavizza, Assistant Professor of Digital Humanities at the University of Amsterdam, told Cointelegraph that” technological innovations are already ahead of us on this issue, “adding,” Ethereum will soon become a proof of stake. Skipping the protocol is much more environmentally friendly. ”
Farooq Anjum, an associate professor at Harrisburg University of Science and Technology, told Cointelegraph that he was not sure whether the scolding about wasteful energy use was valid. “Aren’t we spending a staggering amount of money protecting the Mona Lisa or other valuable non-digital assets?”
Bracey admitted that the environmental issue had bothered him significantly when he started looking at blockchain. “Since then, technology and efficiency have improved, and I understand that processes are on the way that will largely address the gas / power problem with level two and the upcoming next-generation Ethereum. “
Meanwhile, some wondered if NFTs were just so many castles in the air. “Is that a bubble?” asked Mati Greenspan, founder of Quantum Economics, in his daily newsletter. “It could be, but in my humble opinion we are just getting started.” He showed the NFT for a pixelated monkey that “just sold for 800 ETH (about $ 1.5 million), and here I’m using it as part of a newsletter without paying a dime or breaking any rules.”
But it’s not about copying art, Greenspan continued: “These artists tend to sell signed prints of their work, only the autograph is digitally verifiable and limited to ensure the scarcity element desired by collectors.”
Colavizza told Cointelegraph that it is difficult to identify a bubble when one is actually in a bubble, adding, “In the short term, NFTs and cryptos growth needs to be adjusted after a rapid surge. Volatility is likely to remain high. “In the long term, however, the market should grow significantly:
“The innovations of crypto and NFT still have to be fully implemented. We are still in the early stages, like on the World Wide Web in the late 1990s. Was there a bubble back then? Yes. Does this mean that these innovations will not be extremely successful and powerful in the long run? I do not think so.”
Is there a proper use for an NFT?
Is there an appropriate use for NFTs then – beyond mere speculation? “Absolutely,” replied Schär. “For artists, it is a way to reach a wider audience and monetize their work,” while for collectors, it offers “demonstrable scarcity”.
Anjum added, “NFTs can potentially be used to address the issue of digital media ownership assignment without a trusted third party,” although this problem remains unsolved, presumably because the market is not sufficiently decentralized. “We’re trying to run here even though we haven’t learned to walk,” said Anjum.
Connected: Storming the “last bastion”: fear and anger when NFTs claim the status of a high culture
Colavizza acknowledged that some “special uses of NFTs” were recently indicated – he mentioned the tokenized tweets – but added that “we are already seeing many serious creators and creators able to direct their market for the first time achieve and monetize their work. ”
“There are a variety of ‘proper uses” for NFTs,” added Bracey, “being able to authenticate ownership, secure a limited release of a special collector’s item, or anything that requires formal validation or certification benefit from it. ” of NFTs. We’re just scratching the surface. “
“Is it a bubble?” asked Libman. “May be.” Or it could be something that can fundamentally change the way digital content is created, sold, and accessed.