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How much does it cost to create NFT art

“As with buying property with any cryptocurrency, the old-fashioned deeds and recording process is the same,” said Robert W. Wood, a San Francisco-based tax lawyer. “In that sense, it is more of a gimmick than a fundamental change, at least for now.”

When Purchasing a Real Estate NFT, What Are You Really Buying?

NFTs are unique digital tokens (purchased with cryptocurrency) that securely confer sole ownership of a digital asset via the blockchain, where ownership can then be publicly tracked and easily sold, often for speculative price increases.

As cryptocurrency has exploded into the mainstream, luxury real estate has felt the effects, with developers looking to grab headlines by listing properties for Bitcoin and other digital currencies, and buyers looking to convert some of their valuable digital assets into real property. In recent months, real estate’s crypto craze has reached its inevitable next phase: The race to figure out how to buy and sell homes via non-fungible tokens, commonly known as NFTs.

For the uninitiated (or those who still find the concept a bit baffling), NFTs are unique digital tokens (purchased with cryptocurrency) that securely confer sole ownership of a digital asset via the blockchain, where ownership can then be publicly tracked and easily sold, often for speculative price increases. NFTs are most commonly used to buy and sell digital assets—such as digital art or music—but can also be used to trade ownership rights to physical objects, so long as the object’s title or ownership contract is somehow tied to the NFT. Theoretically, this could hold true for real estate as well, and crypto enthusiasts are eagerly eyeing the possibility of trading deeds and property titles at the touch of a button.

In May, TechCrunch founder Michael Arrington listed his apartment in Kiev, Ukraine, as a real estate-backed NFT via the real estate platform Propy, after initially purchasing the property using Ethereum in 2017. (An NFT that would transfer ownership of the property was listed at auction for a starting bid of $20,000, and sold for over $93,000. Propy has touted the sale as “the world’s first real estate NFT” and now features a form on its website for sellers interested in the option to “NFT your property.”) More recently, developer Prometheus sold two luxury homes in Portugal for Cardano cryptocurrency, and also made ownership available via NFT, “allowing future owners to resell the properties at the click of a button via Blockchain tech.”

Stateside, a California real estate broker attempted to auction a property as an NFT in April (the sale of the property was to be bundled with the NFT), but failed to attract a single bidder. (The minimum bid was set at $2 million, well over the home’s assessed market value.)

Even for a successful NFT property sale like the recent Prometheus deal, the transaction comes with a heavy amount of caveats, and some fundamental questions, such as:How can an NFT legally confer property ownership “at the touch of a button,” when legal transfer of a home generally involves slower processes such as the title transfer? And how can a buyer picking up a property on the blockchain guarantee the usual due diligence in order to protect themselves?

“Utility is the key for NFTs, being able to convey ownership of something through transfer of the NFT,” said New York City-based Compass agent Jason Haber. “Where we’re at now is that we’ll transfer the NFT, but also do the steps [involved in a traditional home sale]. So where’s the utility of the NFT besides, ‘That’s a really cool novelty?’”

In the case of the two Portugal homes, a key aspect of the deal was the agreement that Prometheus’s legal team will ensure property transfers and title deed registrations are handled in line with local laws until blockchain technology becomes a regular part of the legal process.

“As with buying property with any cryptocurrency, the old-fashioned deeds and recording process is the same,” said Robert W. Wood, a San Francisco-based tax lawyer. “In that sense, it is more of a gimmick than a fundamental change, at least for now.”

In short, buying an NFT of a property isn’t likely to mean much in the real world unless all the standard-issue paperwork, such as title transfers, is handled alongside the digital sale.

“An NFT is essentially a digital right to anything,” said Benjamin Goldburd, partner at New York City-based Goldburd McCone LLP. “An NFT to a property is essentially worthless unless it conveys that sort of ownership.”

Still, some digitally savvy buyers are itching for the opportunity to trade properties at the touch of a button, while sellers and developers are rushing to find feasible ways to make it happen. If you’re considering a real estate deal tied to an NFT, here are some key points to consider:

Tax and Title Transfer Headaches

The most glaring consideration for a buyer in an NFT property deal is whether your digital purchase will truly confer legal ownership of a home through all the traditional channels.

“What’s interesting right now is it’s a case where laws haven’t caught up with the technology,” Mr. Haber said. “Laws across the [U.S.], and state municipalities, would have to change how deeds get recorded. Right now, you go to the county clerk’s office, you don’t go to the blockchain.”

Additionally, buyers or sellers could run into legal concerns about who and what exactly is on the other end of their deal. For Prometheus’s NFT sale, the company reportedly developed protocols to conduct the deal while still complying with local Know Your Customer (KYC) laws. (Representatives for Prometheus did not respond to a request for comment for this story.)

“For a company to do this, they need to be mindful of securities regulations when issuing these NFTs,” said Max Dilendorf, a partner at New York City-based Dilendorf Law Firm. “The biggest priority [for a U.S. deal] is compliance with the U.S. Bank Secrecy act. You can’t be selling anything to anyone without knowing who they are, let alone real estate that will be traded on secondary markets.”

“There’s a lot to unpack. Just imagine I get an NFT of a property, what does it really mean,” Mr. Dilendorf continued. “What exactly do I own? What if the property has three mortgages and one of them defaults, what if the real estate taxes aren’t up to date? What if I’m sending payment to someone in North Korea or Iran or other sanctioned jurisdictions? No one is telling me this if I’m just buying a token.”

For buyers, this means a high level of due diligence, and for sellers or developers, it likely means extra work to handle the legal details while making the process feel “touch of a button” seamless for buyers.

“What’s going to happen for the foreseeable future is we’ll need to do double duty,” said Nicholas Chavez, a Corcoran agent who also owns Silicon Title, a tech company that utilizes blockchain to transfer real estate titles. “Meaning we’ll need to close title and escrow in the standard way, and also close it on the blockchain.”

In addition to the usual tax concerns that may come with trading properties for cryptocurrency, depending on how an NFT home sale is structured, the end result could potentially be a higher tax bill for buyers.

“To use an NFT to track ownership of a property, you’d have to wrap it in a legal entity, typically something like an LLC,” Mr. Goldburd said. “The NFT has to essentially convey just ownership through ownership of the U.S. entity. The problem with that is you run into tax issues, and may be trading convenience for a possibly larger tax and transfer bill.”

Mr. Wood added, “I always think it’s useful to remind people that if they are buying something with appreciated crypto, the act of buying something is also a sale of the crypto, for tax purposes, so they have tax to pay on the disposition of the appreciated crypto.”

Searching for Seamless Sales Method

Logistical and tax hurdles aside, crypto enthusiasts are still eager to find a way to make NFT home sales a workable reality, and see blockchain as a potentially safer, more efficient avenue for sensitive transactions like title transfers.

“The technology is there to do it, and to do it in a way that’s probably safer for consumers than the county clerk’s office,” Mr. Haber said. “You read all the time about people who run these scams where they sell buildings they don’t even own.”

Mr. Goldburd added, “The only way this is going to become normalized is when and if local land laws are amended to allow for NFTs to certify title. Which might be a great idea because it would probably ease a lot of the recording issues that happen at title companies, and possibly even make title insurance cheaper.”

Some buyers have already inquired about options to use NFTs as a way for investors to fractionalize and sell off pieces of a home’s ownership, Mr. Haber said. Elsewhere, Mr. Chavez’s firm is beta testing a sale of an NFT that would convey the right of first refusal to buy a property, giving the purchaser the option to buy the home at a set, agreed-upon price for a certain period of time.

“Buying an option on anything is a hedge against downside and a hope for an upside,” Mr. Chavez said. “So the price of the real estate and the time period of the option are the two key components of that contract.”

“Nobody is going to tell you they’ve got an ironclad foolproof plan [for NFT property sales],” Mr. Chavez added. “But I believe [eventually] all real estate is going to be transferred this way, period, end of sentence.”

By necessity, real estate as an industry will continue to be slower than other corners of the economy when it comes to adapting to cryptocurrency and NFT technology.

“We’re in the first inning of the technology,” Mr. Haber said. “What you’re seeing around the industry are canaries in the coal mine. Real estate tends to lag because it’s a highly regulated industry, which isn’t a bad thing. But it doesn’t mean that it’s not going to be disrupted, because it will.”

For now, structuring a real estate deal around an NFT primarily comes with a much more old-fashioned upside.

“We have seen over and over again that when a company announces that it will accept payments in crypto, people take notice,” Mr. Wood said. “I think it is a little intoxicating.”

Crypto Fantasy is a new NFT community where Fantasy Football meets NFTs. This drop of NFTs each comprise of a randomly generated team of 1 QB, 2 RBs, 2 WRs, 1 TE and 2 Flex spots. Every week each team is scored based on half-PPR fantasy football rules and the top 5 and bottom 5 scorers (no losers in this league!) will be airdropped a prize out of the ether generated from the minting process.

Find your best team

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How it works

Fantasy football is awesome. So are NFTs. So we launched Crypto Fantasy Football, a collection of 5056 mintable and randomized teams that consist of 1 quarterback, 2 running backs, 2 wide receivers, 1 tight end and 2 flex positions. It’s all the fun of fantasy without any of the work. No setting lineups or waiver wire pickups. Just enjoy the ride.

Each week, after all the games have been played, the top 5 and bottom 5 (because this sounds fun) scorers in half-PPR fantasy will be airdropped a share of the pot. In order to make the prize pool, each Team will cost .03 eth to mint and we are going to put 80% of those funds directly into the prize pool. We are also planning to include prop bets and other prizes as the season goes on.

Each Team is randomly generated from the pool of available fantasy players and will have a "draft grade" associated with it which we made based on the projected fantasy points of the players that are on the Team. Don’t put too much stock in that, though, because fantasy football is always a wild ride. Breakout players, good/ bad coaching decisions, injuries, suspensions, etc, will ultimately determine the actual value of your Team!

The fun doesn’t stop at the end of the season either. If you hold a Team at the beginning of next season you will be airdropped a new team for the new season! Every season we will release additional teams to mint to refuel the pot at a higher price so that the prizes don't get diluted. This means that minting a Team this year will be cheaper than next year, and so on and so forth for every season going forward.

How did you come up with the idea of minting your DNA?

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With her DNA now recorded in a permanent digital ledger, this work, titled Rachel Rossin’s Raw DNA (2021), comments on an impending future where wetware (living tissue)—as opposed to software or hardware—serves as the building blocks of technology. To hear more about her provocative new work, ARTnews spoke with Rossin by phone.

Would you say that you’re basically selling your DNA?

NFT doesn’t necessarily mean selling. I come from the old crypto world, where the focus is on contracts and the code—that’s what led me to do this in the first place. Of course, now, NFT are a synonymous with selling, I guess, but I’m not interested in that. If someone were to offer me a million dollars or something, I would be insane to not take it. But I feel strange putting a price tag on it.

Considering the massive amounts of capital flowing through the NFT space, maybe it’s not so unlikely that you do get an offer for a million dollars.

I feel like it’s unlikely.

How did you come up with the idea of minting your DNA?

During Covid and all the efforts to crack the vaccine, I got interested in organic computing. Organic computing is simply the idea that it’s possible to make computers out of wetware, living organisms. This already exists. In 1999, Georgia Tech made a calculator out of neurons that [scientists] took from a leech. I started doing some research, and I sequenced my genome. Understanding my genetic code and how it’s impacted my mental health, and learning about wetware, has made me really aware of where technology is heading: organic computing.

Where does the blockchain figure into this?

By putting my DNA sequence in the blockchain, I’m stating that I think we’re not fully prepared for the way our bodies and technology will intersect. Both our bodies and technology feel like these illegible black boxes that code runs through. Though they’re very different now, it’s all going to meet. Storage is also a part of it.

How so?

Digital technology can only be stored for 100 years, whereas DNA can be stored in ice for millennia. You can store 215 gigabytes in a strand of DNA. Blockchain is supposed to be about permanence, but it’s an illusion of permanence, especially compared to what is going on in our bodies.

So there’s some irony in the act of storing DNA in this inferior vessel.

Yeah, it’s kind of an eye roll. I want to be emotionally generous, but… It’s a sort of a laughable gesture. I thought it would be interesting to mint my DNA, but now of course NFTs are equated with selling, and that’s a whole different register. There’s a punch line there somewhere.

As someone in the crypto space for such a long time, are you surprised by how quickly this technology—NFTs, the blockchain—was used for such intense commodification of digital ephemera?

I am surprised. It feels like the entire conversation around this has been about the prices, which is frankly the least interesting part of making art. That sounds so privileged, because I know that this boom has provided so many incredible opportunities for people to actually make any money off their work. I have many friends for whom it’s changed their entire lives. I guess I’m just used to an internet that was very plastic, and I guess I’m still coming to terms with how crypto is changing that.

This is an extremely important point that I think is being lost, these are collector’s items, they are not property on the original itself.

Can copyright teach us anything about NFTs?

If you have been reading any technology and art news in the last week, you may have come across the newest hype in the world of distributed ledgers and cryptocurrencies, and it is the sudden rise of the non-fungible token (NFT). The breakthrough for this technology came in the shape of a cat. But not just any cat, an old meme cartoon rainbow cat, Nyan Cat (10 hours of Nyan goodness here). News services quickly picked up the fact that a unique digital copy of the meme had been sold for 300 ETH (just over 460k USD at today’s prices). A new crypto fad was born, with every day bringing up new reports about NFT art being sold. Grimes sold over $6 million USD worth of digital artworks, while Kings of Leon announced that their next album would be offered as an NFT.

But what is an NFT really? To understand them, we first need to discuss tokens. One of the most heralded uses of distributed ledger technologies is that of the tokenization of assets, where a token is a programmable digital unit of value that is recorded on a blockchain. There are various types of tokens, and they can represent anything: commodities, loyalty points, shares, coins, etc. The most popular token standard is found in the Ethereum infrastructure, with the deployment of tokens using a specific type of standard (ERC20) that sets out the rules for fungible tokens. Fungible goods are by definition exchangeable, it doesn’t matter what specific item you’re selling or buying. Commodities tend to be fungible, silver, gold, oil, grains. Conversely, non-fungible goods are those which are unique, so a specific silver necklace, or a golden statuette, or a painting. Non-fungible goods use a different token standard (ERC-721).

Despite the sudden hype, NFTs are not really a new development in the blockchain community. The first popular implementation of the concept came about with the collecting game called CryptoKitties, which are unique cats that are written into the Ethereum blockchain. The game became one of the most successful implementations of the non-fungible token standard, and became so popular that it eventually slowed down the Ethereum transaction ecosystem as people were obtaining and trading their kitties. Things stabilised, and while it has remained popular, the hype never reached the peak of 2017, while there are still rare unique kitties that fetch good prices.

For the most part of the intervening time, fungible tokens were the most prevalent use of tokens in Ethereum, but CryptoKitties had opened the door to the idea of unique digital assets, and a few websites started offering “unique” digitial artworks as non-fungible tokens. But then the current bubble in cryptocurrency happened, and NFTs also surged. In short, the increased price in most cryptocurrencies has lifted all elements of the blockchain environment, and that includes NFTs. The rising exchange rates means that any use of cryptocurrency to purchase digital artwork would also increase the price of the artwork. Nothing has changed since CryptoKitties, there’s just more money slushing around. So these newly minted cryptomillionaires started spending more money on digital assets in the shape of NFTs. When Nyan Cat was sold for such a large amount of money, the full hype was in effect.

The idea behind the NFT is that of scarcity, by making non-fungible digital works available for sale, the idea is that there is value in these items because they are unique. Everyone can still use Nyan Cat, but there is a unique digital version of the meme, this in theory makes it more valuable. It’s like trading cards, the more rare a card, the more value it has. As explained by the Cent project, which offers an NFT service for tweets:

“ Owning any digital content can be a financial investment, hold sentimental value, and create a relationship between collector and creator. Like an autograph on a baseball card, the NFT itself is the creator’s autograph on the content, making it scarce, unique, and valuable. “

This is an extremely important point that I think is being lost, these are collector’s items, they are not property on the original itself.

So if there is no ownership involved, what does copyright have to do with this? Strangely enough, some people are thinking about NFTs in copyright terms. There is a lot of confusion about what an NFT actually is, and just browsing any Twitter discussion of NFTs and copyright, there seems to be a belief that the NFT is somehow a digital title to the original, an actual claim of property. Instead, an NFT is more like a receipt that you own a signed version of something, not the actual thing itself.

This misconception may come from the fact that there is a belief that scarcity is built into copyright law, but nothing can be further from the truth. If we think about creative works subject to copyright protection in the terms of fungibility, then it is clear that copyright works are intended for the most part to be fungible, what is often called in copyright theory as non-rivalrousness. If I have a pie, I can eat the pie, and you can’t eat it. If I have a song in any format, my enjoyment of the song does not detract your own use and enjoyment of the song in any other way. The works are fungible, non-rivalrous.

However, there is also a non-fungible element to copyright works. In principle, some copyright works start life as a unique item, let’s say the first manuscript of a book typed by an author, or written in paper by hand (hence the name manuscript); the original music written by the composer; or an original sketch by a famous artist. These can be copied and published, hence the very nature of the existence of copyright protection, but these originals could have economic value on their own right as non-fungible items. Artists also create unique works of art all the time, let’s say a painting, a sculpture, a drawing, a photograph. These original items have value in their own as non-fungible items, but copyright gives the artist a number of exclusive rights on subsequent uses of their work, so a photographer can allow a photograph to be copied and published. A painter can make copies of their work, even if the non-fungible version is held in a museum.

There can also be an interaction between fungible and non-fungible elements in art: some artists create limited editions of their own work in the shape of limited edition lithographs, or in the shape of numbered editions.

From a copyright perspective, NFTs are no different. An NFT does not confer anyone a title of ownership on an original work, it is just a cryptographically signed receipt that you own a unique version of a work. The maker of Nyan Cat still owns Nyan Cat, the person who paid 300 ETH only owns a copy of that. Jack Dorsey is famously selling an NFT of his first tweet, but that doesn’t mean that the buyer will own the tweet, just a digitally signed screenshot of it. It’s unreal just how many people on Twitter are missing this very basic distinction, which serves to explain the hype surrounding NFTs. By the way, the people bidding for a copy of Jack’s first tweet tend to be a bunch of people with lasers in their Tweet avatars, a sure sign of a crypto bro, but I digress.

So NFTs are useless from a copyright perspective, as what is being sold is a digital version of the work, not the work itself. Crypto enthusiasts tend to throw around grandiose words such as personal sovereignty, but at least when it comes to NFTs, there’s not much there. While the idea behind the NFT is one of scarcity, it is only an illusory scarcity, nothing stops the creator of a digital asset that is turned into an NFT to create more copies of the work and sell these “unique” versions to the highest bidder. True, this would in principle dilute the value of the NFT, but if you already sold a copy, who cares? There’s nothing in the infrastructure of the Ethereum smart contracts that stops the creation of more “unique” versions of the same resource.

In many ways, this is similar to what is going on with the limited edition lithograph market, where some artists have been accused of re-issuing a work that had been sold before as a limited edition. This was already litigated in the US, where a photographer re-issued a limited print edition in a different size, and got sued because it was decreasing the value of the sold copies. The photographer won , and the judge decided that “although both the Limited Edition works and the Subsequent Edition works were produced from the same images, they are markedly different” (case Sobel v Eggleston). One can see a similar decision in this instance, where there is no indication that an NFT will be in any way unique, or not subject to future re-issues. In fact, I have spent the last couple of days browsing several NFT artwork portals, and I have already seen several “unique” artworks being offered in several different sites.

So much for scarcity.

But could NFTs be used as some sort of digital rights management, or even proof of purchase? This is something being claimed by Cent, the NFT tweet people, where they claim that an NFT can work in this way:

“What copyright enabled for the printing press, blockchain enables for digital content. It’s about creative ownership; controlling what you create. Guaranteed ownership doesn’t just entail IP security, it can bring more projects to life and incentivize collaboration. Blockchain makes licensing easy, calming insecurities for creators and collaborators.

Specifically, Non-Fungible Tokens are flourishing as ownership technology. NFTs enable:
• Indisputable rights and royalties on projects.
• Licensing contracts with guaranteed terms.
• Authenticity verification for any digital file.
Operating with these primitives in a frictionless p2p payments network changes the velocity of content that can be distributed. Anyone can purchase a license to distribute a piece of content. And the rest of us don’t need to pay the big-box distributors, as we can better satisfy our increasingly specific tastes and “buy directly” from the creators and curators of creative work, rather than scroll endlessly through libraries of irrelevant content.”

But one can’t use an NFT as proof of ownership! I could take a painting I don’t own, post it as an NFT, and it would not mean that I own the painting (edited to add: this is already happening). Garbage in, garbage out, just because there is an ownership claim written in the blockchain it doesn’t mean that it’s true (see the guy who owns the Mona Lisa). Moreover, people could be making claims about works that have dubious copyright status, take this digital art sold as an NFT, it’s part of the crypto-enthusiast bible, Elon Musk smoking a joint. Sort of reminds me of Jeff Koons and his many attempts to make 3D art out of photos.

So can we use NFTs as digital rights? How would that work? Sure, the hype is strong right now, but will it be sustainable for artists everywhere? The problem is again trying to generate scarcity when copyright works better with non-scarcity. The more popular a work is, the better. I can definitely see some uses for limited amount of time, until people wise up to the fact that they don’t actually own the work, just a digital receipt of the work.

I’m not saying that there won’t be some value in the NFT market, as someone who is a keen Pokémon Go player I am quite attached to my digital assets, namely Pokémon which exist only in my mobile phone. I played World of Warcraft for many years, and I would spend exorbitant amounts of time and resources to have access to a rare mount, or a unique piece of transmog gear. So I am no stranger to giving value to digital assets. But at the moment the NFT fad may be pushed by a misconception about the ownership status of the digital works. Lots of existing artwork being sold in NFT portals are nothing more than Bitcoin and libertarian propaganda.

So copyright theory may be able to teach us something about NFTs, and it is to be careful with what you buy, and the unique claims to those items. You may not be buying a unique item after all, just a receipt. I will finish with the amusing words of Twitter user @mcclure111 :

If you don’t get NFTs, look at it like this: They’re a receipt. You paid for a copy of a work of art and the NFT is a receipt.

If you’re feeling OK about NFTs, look at it like this: Imagine we accidentally designed a kind of receipt paper where every receipt burns a whole forest

— mcc (@mcclure111) February 28, 2021

ETA 1: Some people were bothered by this explanation, so here’s another one:

2000’s tech industry: what if anyone could share any file for free

2020’s tech industry: what if a JPEG cost ten thousand dollars

— Jules Glegg 🏳️‍⚧️ (@heyjulesfern) March 16, 2021

ETA 2: people are finding out the other problem with NFTs, transaction costs.

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And perhaps it is time now for the established fine art market to stop letting itself be wagged, and to set its own path and truly show how useful NFT’s and Blockchain can really be.

The Traditional Art Market Way

After all, digital art, digital fine art, has been successfully bought, sold and collected in limited editions, as unique, original artifacts for decades.

There was no need then, as there is no need now, to tie it to a digital token to make it valuable, appreciated and significant. And the artists who produce it, from Michal Rovner, to William Kentridge to Doug Aitken, remain superlative for who they are and what they produce. No technology is going to change that.

What it will change is how we own, manage, archive, collect, promote and buy and sell art, and there Blockchain and NFT’s are significant and disruptive.

And perhaps it is time now for the established fine art market to stop letting itself be wagged, and to set its own path and truly show how useful NFT’s and Blockchain can really be.

** This article is intended to be informational only, and does not constitute legal advice. Competent, specific legal advice from a suitable, licensed attorney, should always first be obtained before taking any action, and the information in this article should not be relied upon independently of that advice.

For the rich, art is an asset class like real estate, bonds or stocks. They need wealth planning around it. And so, auction houses changed to offer just that, offering collectors lines of credit and allowing them to borrow against the value of their collections. The result is that the prices for contemporary art keep going up, which attracts even more buyers, many of them drawn in by the potential for speculation and a better tax plan.

Yes, It’s Fine to Hate Modern Art

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Photo by TOLGA AKMEN/AFP via Getty Images

One of the artists who is absolutely the reason for this article, Damien Hirst, recently announced his own NFT, “ The Currency . ” Nothing unexpected here: Hirst will create 10,000 hand painted A4 spot paintings and, for each, a corresponding NFT. You pay $2,000 for the NFT and then have a year to decide whether you want to keep the NFT or the physical paper. Once you decide, the other will be destroyed.

The one thing that is surprising about all of this is that Damien Hirst got into NFTs this late. The crypto craze of 2020 and early 2021 is over, and it has dragged down non-fungible tokens (NFTs) with it too. NFTs saw the top of their hype at the beginning of this year, and for a while, it got so bad that lighting actual paintings on fire to then sell NFTs for a much higher price became a trend . (A company called Injective Protocol bought “Morons” by Banksy for $95,000, burned it live on Twitter and sold a digital version of this event as an NFT for $380,000.)

This is probably head-scratching for some of you, and it sure is for me. The idea is that NFTs are digital certificates on blockchain, a trace stored on blockchain that represents a digital copy of something. An NFT does not give you real ownership in a legally recognized way, hence there is a risk that the actual art behind the NFT could get sold separately, and so it makes sense to burn it to be on the safe side…right?

NFTs were really over-hyped earlier this year because of, well, blockchain. For a while, NFTs had won market approval. They had come to be recognized as the future of ownership because (your?) trace is stored on blockchain forever as opposed to within some central entity that keeps track of things. You bought an immutable record on blockchain of something, and no one can change it.

You can say that Damien Hirst is great and that he gets it, making technology part of his art. You could even say that he is damn clever, that he understands the controversy of valuable versus worthless that surrounds NFTs. He offloads the decision about that controversy on to people: Do you want the paper or a trace on blockchain saying you bought the paper (which then gets destroyed)?

Sure, but then I might say that there is this whole thing about Damien Hirst and money. Though the artist is now best known for his formaldehyde shark and severed cow heads , he was a leading figure behind the formation of the YBA (Young British Artists) movement in the 1980s, a largely undeniable part of which was due to his businessman personality and his understanding of what sells.

In 1988, Hirst organized an art show called Freeze that shocked and mesmerized the public, some of whom put it on par with Dada’s Cabaret Voltaire . An abandoned building in London Docklands was painstakingly (and not without injuries) transformed into an exhibition space occupied by odd items — a pile of crumpled metal by Sarah Lucas, a door painted by Gary Hume and light bulbs switching on and off by Angela Bulloch. At the entry to the exhibition was Mat Collishaw’s Bullet Hole — a photo collage on a lightbox which showed a head being fractured by a bullet. This was the age of low self-esteem, when kicking, screaming and vandalizing cultural symbols WAS art.

But kicking and screaming wouldn’t cut it. Freeze wasn’t interesting due to its shocking images but because the rich and famous came to visit. The high-class validated something outrageous. Working at a gallery, Hirst had the all-important art world connections. That and his salesmanship allowed him to attract the names that were needed—like the collector Charles Saatchi and curators of the greatest British galleries, Royal Academy’s Norman Rosenthal and Tate’s Sir Nicholas Serota—to make Freeze a sensation.

Damien Hirst is as much a businessman as he is an artist. And really, the only thing that is surprising about the news that Hirst has got into NFTs, is that it is this late in the game. NFTs are mostly a way to make someone pay millions for a digital footprint of pseudo-ownership of something that is available for free to everyone. The $2.9 million NFT of Jack Dorsey’s tweet is right here .

NFTs are absolutely perfect for the art world. Ever since art became modern, ever since old forms of art were considered to have lost their influence (like, making a Renaissance-style sculpture can no longer influence thinking of a modern man), there has been this low-effort conceptual teasing present in the art of artists pushing the envelope, testing how much is too much. Marcel Duchamp signed a urinal in 1917. Robert Rauschenberg erased a de Kooning drawing in 1953.

That envelope pushing eventually became about money. Salvador Dalí, an artist that was very openly fond of money, sold tens of thousands of signed blank sheets. Many after Dalí have done the same thing, escalating the joke until we got to bananas duct-taped to a gallery wall , which sold for $150,000 (several times). Selling worthless things to people for exorbitant amounts of money, while laughing in their faces for it, became integral to modern art.

This sort of makes sense. If you were a modern artist, the only more powerful and shocking thing than getting a conceptual joke accepted by an art gallery (Duchamp’s urinal in New York’s Grand Central Palace), is to have someone pay tons of money for it. That NEVER fails to make people interested, and oh, also, now you have everyone’s attention. Your artwork will be analyzed. It will have an impact.

There might be two issues with this:

  1. that person paying tons of money for the joke often does it for tax reasons, not for the love of art; and
  2. there is a hidden market mechanism behind the choice of which artist will have his jokes sold for the tons of money.

Look, here it is:

There has been a mutual interdependency between art and money for centuries. Major masterpieces of the Renaissance were commissioned by (and the Michelangelos and Da Vincis of the time were sponsored by) the new emergent class of Italian bankers. Dutch old masters have flexed their genre to the liking of the fast-growing rich class of merchants.

The rich liking art had practical reasons, too. In monarchies, the wealthy constantly feared a sudden change that would uproot their business and make them an enemy of the state. Should the worst come to pass, jewelry and art were two sources of wealth that they could take in a hurry to emigrate to a safer country.

That explains why Russian oligarchs and ultra-wealthy Chinese keep buying art like crazy. And historically, that is nothing new (perhaps, except for the sheer size of the wealth inflow). What changed is that auction houses began operating like financial boutiques. (Why is it that every financial innovation has a bad aftertaste of a fraud?) Sotheby’s and Christie’s recognized that promoting contemporary artworks (as opposed to old masters) brings in a never-ending inflow of inventory, the prices of which can be hyped up to the benefit of all.

For the rich, art is an asset class like real estate, bonds or stocks. They need wealth planning around it. And so, auction houses changed to offer just that, offering collectors lines of credit and allowing them to borrow against the value of their collections. The result is that the prices for contemporary art keep going up, which attracts even more buyers, many of them drawn in by the potential for speculation and a better tax plan.

It has been shown before that the ultra-wealthy pay less in taxes, and art is an important part of this. Collectors and their advisors have always found creative ways to use their artworks to defer paying taxes, like borrowing money against the value of their art (to lower their taxable income), the establishment of tax-exempt private museums (to then deduct full market value of their art donated to the museum, even if it is next to their living room) or storing art in tax freeports (to avoid customs or VAT on its buying and selling).

You can see how this well-oiled money mechanism could prioritize some artists over other s— marketers over idealists. I am not saying it always must be like that. Some new-found artist could become big just by making very good jokes, but in general, it helps if the they understand the collective psyche — what the market wants.

When Damien Hirst organized his own auction “ Beautiful Inside My Head Forever ” in 2008, it was the same morning that Lehman Brothers announced its collapse. The excesses of Hirst’s auction, filled with 1,500 guests eating foie gras on golden leaves felt like the absolute top — a place from which the world was looking into the inevitable abyss. Walking away from the auction with $172 million, Damien Hirst didn’t look so good. Flooding the market with hundreds of his artworks, Hirst’s value as an artist came under criticism. But a few years on, the prices resurged and all looked well. The wealthy kept holding hands under Hirst’s art because they had too much money in. The number one rule of the contemporary art market: Prices have to keep going up.

You know what? That is also the rule of (in fact the only rule of) NFTs. JPEGs, often not even created by a human, are bought to be flipped for extremely short-term profit. Bored Ape Yacht Club — a collection of 10,000 NFTs available on OpenSea—have sold and traded for upward of a $100 million. Each picture of an ape is generated by a program using 170 unique traits. Prices start at 8.4 ETH (approximately $21,000). Remember, these are records on blockchain representing digital pictures (created artificially) that anyone can download a perfect 100 percent copy of. There isn’t even any pretense about it.

Differentiating factors that drive cultural furver around NFTs are very likely going to be meta-data or meta-associative in nature. Like people buying a house once owned by a celebrity, this parasocial relationship will eventually extend to historical address ownership of an asset, like homes with historical past owners. Paris Hilton has an Instagram to show off her NFT art and Marc Cuban has a simple web platform for others to show off their NFT art. The fact is, culture will likely value an NFT well if it is widely known that a particular NFT was once owned by Snoop Dog.

Why does NFT art have value?

The recent explosion in interest of NFTs by predominantly new adopters of blockchain begs the question, why? What value beyond price drives new users? There have been many opinion pieces asking these same questions. How can a “rare digital picture of a cat” hold value if you can copy then save the underlying jpeg-file? Or even why would something unique have value in an illiquid market?

Essentially the argument is that intrinsic value is fundamentally irrational, NFT markets are irrational because they don’t have wildy accepted use-value. They are non-fungible, they, generally speaking, require sufficient user action to determine the initial price—much less continued price action when market liquidity is not guaranteed.

The argument that a uniquely coded MoonCat is not functionally different from a JPEG of the same cat—or another MoonCat with equally rare traits—is valid. Its “unique” quality has no use-value in the real world. A picture would suffice for any reasonable digital use it may have. Thus the value of MoonCat NFTs are irrational in nature because they don’t have any reasonable use. This is a correct assertion. But this is not taking into account the very real inarguable value that the macro-social landscape has agreed:

  • Mooncats are one of the very first NFT projects in the world.
  • Mooncats are cute.
  • Mooncats predate the ERC-721 standard in design.

So it comes back to the idea that a rare item is only one axis to judge value. Its timestamp, and cultural significance in Ethereum history add to the base value.

Most people apply emotionally-based intrinsic value on things regardless. Though rarity can have a play, a new Charizard Pokemon card will still fetch a good price simply because Pokemon is a beloved cultural phenomenon. Fans have collectively decided that Charizards hold more legitimacy and thus monetary value than other cards.

It’s important to accept that not everyone sees value in monetary terms. Art on your wall may just be some reproduction painting of the Mona Lisa to fill space, but many others want an original piece that they will likely never sell. They have a different system culturally by which they derive value—generally, most people make emotional decisions rather than rational—in contrast to profit maximizing.

In fact, the Mona Lisa only has monetary value through its cultural legitimacy and constant reproduction; its popularity is enough for someone to put a price on the original. Its intrinsic value extends far beyond itself because of its history and cultural significance. It is in the very fabric of cultural life for many people, largely western audiences. This mechanic can be applied to music. If someone sells their song as an NFT, the owner of the song is actually incentivized to both give away copies and market the song’s playing in the hope that it catches on in legitimacy within a cultural fabric.

Differentiating factors that drive cultural furver around NFTs are very likely going to be meta-data or meta-associative in nature. Like people buying a house once owned by a celebrity, this parasocial relationship will eventually extend to historical address ownership of an asset, like homes with historical past owners. Paris Hilton has an Instagram to show off her NFT art and Marc Cuban has a simple web platform for others to show off their NFT art. The fact is, culture will likely value an NFT well if it is widely known that a particular NFT was once owned by Snoop Dog.

What if that NFT happens to be an NBA Top Shot moment purchased because it reflects that celebrity’s court-side attendance to the game, watching the game-winning slam dunk? This idea of “owning a moment” reflects a monetary value, on-chain, valued by its meta-associations and culturally intrinsic significance. Its value is relative to the group of people interested in it and reflected externally via price, in a universal way that many audiences can interpret, only adding to its legitimacy.

Known artists typically cultivate fanbases. If an artist can cultivate enough fervent fans, they will often buy, collect and trade works amongst each other—referred to as the 1000 true fans theory. Zora’s platform is designed to specifically address this and provide tools for artists to further cultivate their community of fans. At the same time, they are incentivized to provide value for their fans, not necessarily being monetary in nature. This community acts as a market for the artist’s brand, incentivizing them to grow both the community and their brand. The game theory here is that mainstream culture changes over time and the bet is on an artist’s staying power in an internet space that is generally global and diverse.

Eventually some of this value can be reflected in a traditionally rational form like an index of its base value. An index is helpful as it can be used externally by a wider audience showing basic fluctuations in price and thus markers of legitimacy. Just like, for example, the value of a DAO governance token that is also reflected in its price in fungible form for use in DeFi. There are technical factors that can lever a price up or down, like supply or liquidity, but ultimately the social value—whether marketed or not—is tied to the density of its participant network of the index. More culturally-intrinsic value by a community = more incentive = more participation = more use value via the index.

Because art NFTs are generally intrinsic, there are opportunities for community-designs to include curation roles. Naturally over time, ancillary activities such as reviews, influencers and “tastemakers” will help to transmute a dynamic environment of “illiquid art” to rational on-chain value, pushing mainstream adoption of rare digital goods.

So why do NFTs have value? Because by design they mirror human’s inherent nature to assign personal value to things on a network many people can access. It’s a medium that generally non-math people understand.

If on-chain “markers” of historical moments and cultural legitimacy are future drivers of accessible sources of “useful value”, via NFTs—on a network with money-like properties, specifically Ethereum—then the future will be far less siloed, far more accessible and more dynamically connected. A world outside of existing socio-economic frameworks, globally.

Anyone should use an NFT to tokenize their “one-of-a-kind” work in theory.

How do NFTs work?

On a high level, most NFTs are part of the Ethereum blockchain. The blockchain also supports certain NFTs, which store additional information that enables them to work differently than, say, an ETH coin. Ethereum, like bitcoin and dogecoin, is a cryptocurrency, but the blockchain frequently accepts such non-fungible tokens (NFTs), which store additional information that enables them to function differently from an ETH coin, for example. It’s important to note that NFTs can be used in a variety of ways by other blockchains.

There are no physical items shared since NFTs are only usable in digital form.

Similar to crypto-currency, a blockchain (a digital record) acts as a public ledger to verify ownership status. Critics lament that these artificial inventions can be accessed and traded, but experts argue that this is close to how things work in the physical world. A copy of an existing work of art is not the same as the original. A “token” is sent to the buyer of an NFT, proving that they are the only ones who have the “original” work.

NFT staking basically is about holding NFT tokens in a cryptocurrency wallet which means supporting the security and operations of a blockchain network. In order to understand staking better, let us understand how PoS works.

What is NFT staking all about?

Faiver

Staking in the crypto world is the umbrella term used to denote the act of granting one crypto-assets to any cryptocurrency protocol and earn a reward in return. NFT as an asset is both unique and desirable and thus, becomes an important part of crypto staking.

NFT or Non-fungible tokens are digital assets representing almost anything that can be called digital artwork. NFTs with their unique identifying codes are one of a kind. As we talk about NFT being a non-fungible token, we can say that NFTs are essentially tokenized assets.

If w e talk about NFT as crypto assets, NFT can be staked in a platform that functions for its safekeeping and governance. Staking allows users to lock up their tokens by participating in securing the network and in return for securing the network, users get rewarded.

Staking of NFT tokens as an asset comes with the potential to create a form of passive income for the users. NFT stake creates liquidity and utility for NFTs and the earning of rewards is determined by various factors such as the asset’s capacity to develop passive income like royalties.

NFT staking basically is about holding NFT tokens in a cryptocurrency wallet which means supporting the security and operations of a blockchain network. In order to understand staking better, let us understand how PoS works.

PoS or Proof of Stake is a mechanism that allows owners to put up their tokens as collateral and transaction to be gathered into blocks that are linked together to create the blockchain. The idea is that participants can lock their stakes, and the protocol will award the ability to validate the next block to one of the participants. Token stakers typically gain increased ownership of the token over time as a result of network fees, freshly created tokens, or other compensation mechanisms.

Proof of Stake chains generates and validate new blocks through the staking mechanism. Validators engage in staking by locking up their coins so that they can be randomly selected by the protocol at predetermined intervals to form a block. Participants who stake more amount have a better chance of getting selected as the next block validator. And with the staking of tokens, the participant will be able to claim the clock and earn the fee rewards.

The idea of NFT staking is still fresh and needs many developments but comes with various opportunities for the users to create another income stream and keep their wallets funded.

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