In a whirlwind period of seven days, which began with Twitter founder Jack Dorsey proving that almost anything can be drawn – even his old tweets – and culminated on Thursday with a Christie’s art auction that raised a staggering $ 69.3 million bid for a Beeple work on display – more on an auction than pieces by George Seurat, Paul Gaugain or Salvador Dalí – some observers asked: Are non-flammable signs out of control?
Even before the deepening auction house catapulted artist Mike Winkelmann, or Beeple, into the rare company of Jeff Coons and David Hockney – ie living artists who could raise stratospheric prices for their works – 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 rumble written about it.”
Meanwhile, an NFT version of a deliberately burned Banksy painting sold for almost $ 400,000 on the OpenSea market on March 8, prompting Zavier Ellis, director of a London gallery, to ask The Telegraph of the United Kingdom to say: ‘I wonder if it’s a form of pyramid selling, where eventually someone will be burned. David Knowles, who runs an art consulting firm, Artelier, said that buying contemporary artwork is generally risky, but buying non-flammable tokens seems to be the “extreme end” of this.
It asks after such a week: Is the NFT market bubbling over, and if so, are people going to be hurt??
On the way to a fall?
“NFTs are an exciting innovation,” Fabian Schär, professor in the Department of Business Administration at the University of Basel, told Cointelegraph, “but that does not mean that every doodle is suddenly valuable just because it is made by an ERC-721 or ERC. -1155 token, ”adds:
“There are some interesting projects out there, and they’ll probably stay here, but the vast majority of NFTs will be completely worthless once the hype is over.”
“I would not say that things are out of control, but it seems that NFTs have become the current trend, and so many opportunists are jumping on the bandwagon in the hope of making money fast,” said Gary Bracey, co-founder and CEO of Terra Virtua, told Cointelegraph. “I fear that the oversaturation of mediocre products and newcomers will not bring anything innovative or different to the party.”
What can drive this speculation? Misha Libman, co-founder of the art marketplace Snark.art, told Cointelegraph: ‘Rising prices depend on governments pumping trillions of dollars into the world economy to counteract the damage caused by the pandemic, and this excess liquidity shows sight across the board. ”
But do bubbles usually cause damage when they burst? Answer Bracey: ‘I like to think that people are smarter than that and will not fall for any of the’ Emperor’s New Clothes’ screens. “The entire NFT community would be negatively affected if things went awry,” Libman suggested, adding:
“But I think it’s important to note that the current attention and investment in 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 blockchain technology.”
Blake Finucane, co-author of an opinion piece on NFT-based art entitled ‘Crypto art: A decentralized view’, told Cointelegraph: ‘A bubble is particularly difficult to avoid at NFTs because one of the conspicuous disadvantages of NFTs are the ability to buy, sell and trade it instantly, wherever you are in the world. Therefore, according to her: “Flipping is inevitable in a hot market where buying and selling is as easy as pressing a button.” Those who work in it in the short term, “just to turn whatever they buy”, run the biggest risk, she added.
Are buyers “blind” to NFTs?
Godin further writes in his post: “Buyers of NFTs may be blind to the fact that there is no restriction on supply.” One example he gave was that “in the case of art, there are a limited number of famous paintings and a limited amount of shelf space at Sotheby’s.”
Is this a valid critique? While Schär agrees that the NFT market is currently overheated, Schär disagrees with this review, noting that although someone can create an NFT, “it is not possible to make copies of a specific NFT. ” Regarding the specific examples cited in the report:
- ‘If I own physical baseball cards, I can not tell you how many copies of this rookie card exist. In addition, the cards are fairly easy to counterfeit. Both of these problems can be solved with NFTs. ‘
- As for the comparison to ‘famous paintings’:’ I agree that most NFTs are worth nothing. But that also applies to paintings, and that certainly does not mean that the concept of NFTs is fundamentally flawed. ‘
- As for the “shelf space” analogy: “There is really no reason why there can not be a virtual equivalent of ‘shelf space’.” Platforms like OpenSea can be used for compilation.
“I would completely disagree with the statement, as it does not understand the nature of digital collectibles,” Libman said, referring to Godin’s remark, adding: “In the art world, the use of publishing exists. for a long time, especially in photography and printmaking, and while an artist can certainly violate the trust of their collectors by selling more editions, the loss of reputation will weaken any future work. ‘
A destroyed 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 astonishing amount of electricity to create and trade. In response to this criticism, Giovanni Colavizza, assistant professor of digital humanities at the University of Amsterdam, told Cointelegraph that ‘technological innovation on this issue is already ahead’, adding: ‘Ethereum will soon turn to evidence of the game protocol which is much more environmentally friendly. ”
Farooq Anjum, associate professor at Harrisburg University of Science and Technology, told Cointelegraph that he was not sure the scolding of the use of energetic energy was valid. “Are we not spending an astonishing amount of dollars to protect the Mona Lisa or other valuable non-digital assets?”
Bracey admitted that the ecological problem bothered him significantly when he first became involved in blockchain, ‘but technology and efficiency have improved since then, and my understanding is that there are processes underway that will greatly address the gas / power issue. , especially with level two and the next Ethereum of the next generation. ”
Meanwhile, some asked if NFTs were just as many castles in the air. “Is it a bubble?” asks Mati Greenspan, founder of Quantum Economics, in his daily newsletter. “It may be, but in my humble opinion we’re just getting started.” He showed the NFT to a pixel-forming monkey that sold ‘only for 800 ETH (about $ 1.5 million), and here I’m using it as part of a newsletter without paying a penny, and even none do not violate rules. ‘
But it’s not about copying art, Greenspan continued: “What these artists do is rather related to the sale of signatures of their work, only the signature is digitally verifiable and limited in supply, which ensures the scarcity element that collectors miss.”
Colavizza told Cointelegraph that it is difficult to identify a bubble when one is actually in a bubble, adding: ‘In the short term, the growth of NFTs and cryptocurrencies will need some adjustment to a rapid boom. The volatility is likely to remain high. In the longer term, however, the market should grow significantly:
‘The innovations of crypto and NFTs have yet to materialize. We are still in the early days, as with the World Wide Web in the late 1990s. Was there a bubble then? Yes. Does this mean that these innovations will not be extremely successful and effective in the long run? I do not think so.”
Is there a proper use for an NFT?
Is there a proper use for NFTs other than mere speculation? “Absolutely,” Schär replied. “For artists, it’s a way to reach a wider audience and earn their money,” while providing collectors with ‘provable scarcity’.
Anjum added: “NFTs could potentially be used to address the issue of digital media ownership without a trusted third party,” although the issue is still unresolved, presumably because the market is insufficiently decentralized. “We are trying to run here even though we have not learned how to walk,” Anjum said.
Related: Storming the ‘last bastion’: anxiety and anger because NFTs claim high cultural status
Colavizza acknowledged that some “peculiar uses of NFTs” were recently displayed – he mentions the tweeted tweets – but adds that “we are already seeing a lot of serious creatives and creators who are able to direct their market for the first time” reach and earn their money. ”
“There are a multitude of ‘proper uses’ for NFTs,” Bracey added, “To be able to guarantee ownership, protect a limited version of a special collection, or anything that requires formal validation or certification. “We just scratch the surface.”
“Is it a bubble?” Libman asked. “Can be.” But it could also be about something that could fundamentally change the way digital content is created, sold and accessible, he said, adding: “It’s not a minor technological shift that will just blow over and return.”