NFTs: The Art of the Digital Age
May 6, 2021. By Ryan McLaughlin:
NFT may sound like a semi-pro football league that Johnny Manziel would headline, but it is a new investment tool that is garnering a lot of attention, especially from young investors. NFT stands for “non-fungible token,” which is jargon for a unique form of media such as an image, song, GIF, or even a meme. Similar to art or trading cards, an NFT’s value is seen through the eyes of the beholder, and like crypto currencies, they are sold on a blockchain as a digital asset. In short, if Bitcoin is the gold of the digital age, then NFTs are the art of the digital age.
According to 101 Blockchains, several of these unique assets have already sold for millions of dollars in auctions. In March, an NFT known as “Everydays: The First 5000 Days” by the artist, Beeple, was sold for $63.3 million, which is nearly as much as Manet’s “Spring” is worth today! On that same day, two more NFTs each sold for over $7.5 million. Given these prices, it could be assumed that they are pieces of great beauty, however this too is held in the eye of the beholder. Two costly images titled “CryptoPunk #3100” and “CryptoPunk #7804” each depict a pixelated alien – one with a sweatband on its forehead, and the other wearing sunglasses and smoking a pipe…modern-day Picasso’s? Depends on the buyer.
Even social media posts can be sold as one of these “semi-hard” assets. The CEO and Founder of Twitter, Jack Dorsey, recently sold the first Tweet ever - his own – as an NFT for nearly $3 million. Artists in the music industry are also dipping their toes in NFT waters. Notable names in the music industry included Tory Lanez, Kings of Leon, and Grimes have sold (or plan on selling) songs, albums, and videos at NFT auctions. A little-known aspiring DJ from South Africa named Elon Musk even came out with a song and video about blockchains to be sold as a potential NFT… I can’t wait to see what he accomplishes in his career!
Given the nature of this new product category, there is still some confusion regarding NFTs and how they pertain to intellectual property (IP) rights. Nothing has yet been tested in the court of law; however, it is assumed that the IP will default to the author of the NFT, unless stated otherwise in a written contract. It can be assumed that, as it is with most art, the buyer will not obtain the right to reproduce or change the work upon purchase. This seems tricky because anybody can take a screenshot or audio recording nowadays, so there’s not much preventing the duplication of NFTs. As previously stated, no IP issues have been resolved court yet, leaving no case law to reference. Only time will tell what the reality of these situations will be.
There is undoubtedly a lot of uncertainty regarding NFTs at the current moment, but there is also a lot of potential. NFTs seem to be the art of the future in many ways but could also be the trading cards of the future as well. Athletes could potentially auction off highlights as new-age player cards; if this seems out of the realm, think about the possibility of Tom Brady or David Ortiz selling an NFT of their own in the Boston area- not unlikely that this token would sell quickly and at a good price. With college athletes potentially being able to make money off their own likeness soon, NFTs could be a way that they pay for their books and then some. If if these blockchain transactions continue to grow in popularity (and become a little easier to understand for the average investor), then there could be some serious investment considerations ahead… and maybe some legal action.
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Ryan McLaughlin is an economics student at the University of Wisconsin. He is interning at Centerpoint Advisors for the summer of 2021 and assisting with research, client service, and portfolio management support.