NFT Mania: innovation frontier
Would you pay $69million for the first purely digital work of art ever offered by a major auction house? That’s how much a Non-Fungible Token (NFT) titled ‘Everyday: The First 5000 Days’, created by Beeple or artist Mike Winkelmann who made one piece of digital art every day for 13 years, sold for at Christie’s in March this year. The buyer, Singapore-based blockchain entrepreneur Vignesh Sundaresan or ‘Metakovan’, described it to CNBC as “a significant piece of art history”. But others argue it is a JPEG file and a hyperlink – i.e. not worth the price tag.
Anastassia Dimmek commented:
The much-publicised sale of Beeple’s digital collage The First 5,000 Days certainly put non-fungible tokens (NFTs) on the map: but are they just another hype or here to stay? With brick-and-mortar galleries only just re-emerging from Covid-related lockdowns around the world, NFTs appeared to capture the spirit of the moment: able to be bought online, directly from artists, and offering seemingly unquestionable provenance and transactional security in a blockchain.
However, NFTs give rise to a myriad of unresolved legal issues: to start off with, the blockchain transaction is only as secure as the company hosting it; will that company still be around tomorrow? Quite what you buy also tends to vary from platform to platform but buying an NFT will not generally transfer ownership and does not give the buyer exclusive rights in the image. Authenticity and copyright concerns are also emerging, with some NFTs being minted fraudulently without the knowledge or consent of the artist who produced the underlying work. Not much thought appears as yet to have been given to the data protection and anti-money laundering compliance implications of transacting in NFTs using cryptocurrency. When things do go wrong, do not necessarily expect any contractual protections or easy and effective remedies. And then there are the tax implications; for example, a liability for capital gains tax may well arise at the point when an NFT is paid for by cryptocurrency.
Many will remember the last crypto bubble bursting a few years ago and there are some warning signs that history may well be repeating itself: at least for now, therefore, it appears prudent only to invest real world (fiat) money in NFTs if you are not only expecting investment gains but can also afford to lose your investment and are prepared to live with the legal uncertainties.
Read the full article in Citywealth here.