The Lure of Owning Something Unique
Although the new audience that Schachter speaks of rejects the world of traditional art, it’s clear that they share the same enthusiasm for owning a unique work of art – even though it may take a wholly digital form.
The driving force behind the CryptoPunk and wider NFT trend is the concept of ownership. Blockchain ensures that those who buy the works are legally the owners of the piece – even though their art can be copied and pasted many times by non-paying browsers.
Fundamentally, owning an NFT is different to owning the asset that it represents. Buying an NFT means that you’re purchasing a token on a blockchain – which is a digital ledger of transactions. While the token is unique, it’s usually linked to a reproducible asset.
For instance, let’s look at NBA Top Shot Moments, which are NFTs that represent a certain NBA highlight clip. The buyer of the highlight has the ownership rights of the NFT, and they can swap, sell or give away the token as they see fit – however, they can’t prevent others from accessing the highlight clips themselves, which are readily available on YouTube.
In buying an NFT like a CryptoPunk, much like in buying tulips at the height of the mania, ownership is aesthetic and sentiment based. Your NFT can go up or down in value, and believers in the potential of non-fungible tokens may see the artworks as a store of wealth, but there are no royalties to earn – your NFT simply belongs to you.
The Next Big Investment Opportunity?
As tulip mania took hold, the price of a single bulb reportedly climbed to the price of a large house in the Netherlands back in late 1636, before a massive market crash in early February of 1637.
Are there lessons to be learned here in buying NFTs after such a significant series of price hikes? Or will onlookers today live to regret failing to jump on the bandwagon as non-fungible tokens prepare for take-off?
It’s perhaps foolish to attempt to definitively answer these questions when discussing a cryptocurrency industry that’s built on dumbfounding skeptics. While NFTs are being sold for astronomical prices, their scarcity coupled with a market that’s constantly gaining new adopters means that there may be more room for NFT artists and collectors to maneuver in the future, but we may also be more likely to see non-fungible token marketplaces grow as the high-end of token prices also begin to relax.
The NFT industry’s current dependence on cryptocurrencies means that the industry is likely to grow as the native coin of each platform grows. As Maxim Manturov, head of investment research at Freedom Finance Europe, highlights, this could lead to trouble later on. “The crypto market lacks stability and can start being regulated any time, which actually already happened in China. In June, the Chinese government banned banks and payment systems from using Bitcoin, which led to a temporary collapse of the flagship crypto’s price.”
With an ever-broadening market of newcomers to the world of investing, we’re likely already seeing evidence of NFTs benefiting from an influx of individuals looking for new ways to hold their money in valuable assets. If such volumes continue, we could see further price appreciation. In this regard, whether NFTs continue their meteoric rise, or go the same way as the tulips, is wholly down to the people to decide.