Investing in NFT art

Earlier this month, Wikipedia co-founder Jimmy Wales auctioned off a non-fungible token (NFT) of the first edit ever made on Wikipedia.

Other famous NFT’s that have been auctioned off include the first tweet by Twitter founder Jack Dorsey which was sold for $2.9 million (R46.23 million).

GIFs have also been auctioned off as NFTs. This year internet meme Nyan Cat turned 10, so to mark the occasion a one-of-a-kind edition of the GIF was put up for auction and sold for $500,000 (R7.9m).

But what exactly is an NFT, and should you invest in one?

NFT defined

An NFT is digital art. It’s collectible because it can’t be replicated – essentially because it has unique (fungible) properties.

Think of it like an original painting – like for example, Edvard Munch’s The Scream or Leonardo da Vinci’s Mona Lisa. While you can take a photo of these works of art or create a print, there’s nothing that can replace or alter the original.

But with a traditional painting, you’d need experts to verify that a painting is authentic. The beauty about an NFT is that an expert’s opinion is not necessary because this type of artwork is ‘tokenised’ to create a digital certificate of ownership.

In other words, owners of an NFT don’t have to worry too much about losing proof of ownership because, as with cryptocurrencies, the record of who owns the digital art is stored on a shared ledger known as a blockchain. These records can’t be forged because it’s managed by many computers around the world.

Ownership of NFT’s can be complex too as there can be smart contracts contained within them which could give artists a cut of any future sale of the token, so it’s important to know upfront what you’re buying.

Should you invest?

While NFT’s have certainly become popular and there’s a real buzz around them, considering that some have sold for so much money, the jury’s still out whether the ordinary man on the street should buy them.

They’re certainly becoming more accessible and can be accessed through online marketplaces such as Binance NFT Marketplace and Opensea. NFTs are also sold through auction houses like Christie’s.

However, they can sell for tens of thousands of rands and it’s certainly advisable not to throw your life savings into them as there’s no telling what the market will do or when it will stop being a fad.

A bubble?

There are certainly many sceptics of NFTs including digital artist Beeple (real name Mike Winkelmann) who sold a digital piece ‘The First 5000 Days’ for $69,346,250 through Christie’s.

Winkelmann told the BBC: ‘I actually do think there will be a bubble, to be quite honest. And I think we could be in that bubble right now.’

Meanwhile author David Gerard, who wrote Attack of the 50 Foot Blockchain, labelled people selling NFTs as ‘crypto-grifters’ and warned: ‘There are some artists absolutely making bank on this stuff…it’s just that you probably won’t.’

With such concerning comments, perhaps NFTs are best left to those who can afford them. If you do want to take a punt, it’s caveat emptor!